European ship repair – a cut-throat business

	Shuttle tanker “Tove Knutsen" alongside at the Remontowa yard. Current modifications will prolong the operating life of the vessel. The charter party with Navion has been extended for a three-year period.

Emphasis on quality, expertise and tight scheduling has helped bolster ship repairers in North West Europe, while yards in the Baltic – with a few exceptions – still rely on a competitive advantage in the region in pure steel work.

However, the market remains fiercely competitive and further consolidation is necessary in order to reduce overcapacity. After “Erika” and “Prestige” the regulatory regime is tightened considerably as the approach to ship standards through new conventions – or to amendments to existing ones – has hardened and owner will have to spend more money in the repair yards.

The forced phase-out of single-hull tankers will also have an effect, although it is hard to gauge at the moment. The ban on TBT antifouling paint on EU vessels was formally in force by 1 July last year, and will be enforced also for third flagged vessels entering EU ports from 1 January 2008. Less efficient anti-foulants will be used, which will spell more visits to the dry dock.

The North European ship repair market has always been competitive, but since the early 1990s more and more yards were starved of newbuilding orders and they were forced into the ship repair market to keep going. The intense, international competition for some of the big steel jobs only affects very few yards in North Europe. What matters to the repairers is the regional competition.

	Car/passenger ferry “Fjord Norway” arrives at the Orskov Yard in Frederikshavn in its old colours before conversion, refit and repainting to enter the fleet of Bergen ferry operator Fjord Line.

Increased near term demand
It is always risky to try to put numbers on the possible increase in ship repair demand in the years ahead. The present and the near term market is being bolstered a bit by repairs to single-hull 1970s and 1980s-built tanker tonnage in order to continue trading through to their phaseout date. When these vessels are scrapped, this demand will fall away.

By this time the average age of the tanker fleet will also be lower. However, the volume of repair needed on 1990s-built double-hull vessels is not fully realised as yet.

Extensive internal spaces are susceptible to corrosion and will need increased inspection. Whether or not this will translate into more docking time is a matter for some debate.

Experts can only agree that the most significant increase in demand from 2005 and onwards will come from the rapidly growing container fleet, as age increases. In this scenario it is expected that low cost facilities in the Baltic, East Mediterranean and the Black Sea will maintain their competitive pressure on the higher cost yards in North West Europe.

Because of the excess regional ship repair capacity any yard have gone further down the line to specialise and to develop niche markets.

Owners looking for the bargain
Drydocking and general repair expenses are among the most expensive parts of any ship’s lifetime operational costs. Therefore owners are always looking for the best price possible.

	“Fjord Norway” ready to leave Orskov Yard after refit and repainting in the spring of last year.

Labour and steel is the most important repair cost elements, except in specialised niche markets where delivery time plays an important role. The over-capacity allows the owner/operator to “shop around”.
In North Europe the traditional cheap areas are Poland, Russia, Estonia. Lithuania and Latvia. The term “cheap” generally applies to the general repair market. If extensive engineering and design is required for instance in a ship conversion, most of these yards are excluded.

But, as always, there are exceptions. The Polish yard Remontowa in Gdansk has proved capable of fairly complex conversion work, and is now one of the major players in the European conversion market.

Our illustrations show the Knutsen OAS tanker Tove Knutsen which is undergoing an extensive conversion at Remontowa. It involves 2,000 tonnes of steel work to install longitudinal bulkheads in the side cargo tanks as well as a new interior bottom above the existing bottom.

This conversion implies that cargo lines, valves and heating coils must be rearranged. To top it all up the vessel’s dynamic positioning system is upgraded to DP2 class.

This involves building a new auxiliary engine room with a new generator set producing 2.3 MW and to replace the forward tunnel thrusters with a new azimuth thruster. The ship’s electric and automation system is also being modified. All class papers are prepared by the yard’s own design office.

General repair/conversions
So, while drydocking will occur along a vessel’s trading route the conversion and general repair market appears to offer the biggest scope for specialisation.

Examples of yards to have found special niches are Orskov Yard, which converted the Fjord Norway and Fredericia, which did extensive, and technically complicated work on Color Traveller.

//Petter Arentz