The car carrier “Morning Champion” ready for launching at Gdynia Shipyard.

Burdened by high steel price and weak dollar

Measured in compensated gross tons (cgt), the Polish shipyard industry was the second largest in Europe at the end of 2004. The combined order book reached 2.2 million cgt, compared to Germany’s 2.7 million cgt. Reaching 87 vessels, almost half contracted during 2004, the Polish order book has doubled compared to 2002 and is today the largest since 1995.

The healthy order book has however not turned out to be the salvation the shipyard industry needed. After several years marked by political turmoil, restructuring initiatives, bankruptcies and being in the middle of a privatisation process, the industry is now burdened by high steel prices and a weak dollar.

Gdynia Shipyard’s income in 2004 totalled PLN 1,325 million. Despite this being 43 per cent better than in 2003, the yard’s net loss was PLN 110 million. The loss in 2003 was PLN 65 million higher. Szczecin Shipyard New reported almost identical income – PLN 1,337 million. Income rose 20 per cent compared with 2003, but the net loss was PLN 83 million, more than double the PLN 33 million loss in 2003.
The endlessly delayed introduction of the EU approved six per cent state subsidies for certain ship types, have not helped the current situation for the Polish shipyards.

Restructuring continues and a new company called Polish Shipyard Corporation (KPS), today the effective owner of the shipyards Szczecin Shipyard New and Gdynia Shipyard. The new company was organised by state-owned ARP (Industry Development Agency), one of the largest owners of KPS and the largest owner of Szczecin Shipyard New. The same has been done with Gdynia Shipyard’s shares. Other important companies in the shipbuilding sector, including manufacturers of ship’s equipment, will come under the KPS umbrella at the end of 2005 – also as a result of the State transferring its shares in these companies.

After consolidation and rationalisation, the sector will begin to be privatised as soon as possible. The goal is to save costs through consolidation – PLN 60 million in 2004 and PLN 100 million in 2005 and 2006.

A possible listing of KPS is also on the cards, but not until 2006. The privatisation process for Morska Shiprepair Yard in Swinoujscie, Shiprepair Yard Gryfia in Szczecin and Nauta Shiprepair Yard in Gdynia started last year. The ministry of privatisation wants each yard to find a strategic investor for at least ten per cent of its shares.

To reduce currency risks, the shipyard in Gdynia has begun to use the Euro as the currency in its contracts due to its greater stability. SSN in Szczecin also wants to minimise its currency risks and the goal is to have minimum 50 per cent of its contracts in Euros. Repair yards such as Remontowa began to sign “Euro contracts” on the day the Euro was introduced. The Euro has been the dominating currency in contracts for the last two years.

Another problem is that well trained and skilful welders are leaving the Polish shipyards for better-paid jobs abroad, e.g. in Germany and the Nordic countries. The situation is the same for all the Polish newbuilding yards. Companies working together with Szczecin Shipyard New (SSN) have lost more than 30 per cent of their welders. Personnel turnover at SSN is 50–100 persons a month. The job centre for the Szczecin region had 3,400 unemployed shipyard workers registered before 1 May (following the bankruptcy of the old Szczecin Shipyard) – today, it has only 210.

	“Suomigracht” was delivered by SSN in november 2004 to Splietghoff, and received the Ships of the Year award from Royal Institute of Naval Architechts.

Shipyards with growing order books are increasingly being forced to employ welders from Ukraine, Belorussia and Russia. The trade unions have no choice but to give their support. Sometimes, companies working together with the shipyards themselves find temporary jobs for their employees in the EU to give them a chance of earning more during a limited period and get them to return later on.

Gdynia Shipyard group
By the end of February, Gdynia Shipyard had 36 vessels of about 1,208 cgt in order, making it the largest order book in Europe and the 20th largest in the world.
Last year, the shipyard delivered nine vessels – including car carriers for 6,000 cars, container vessels with a capacity of 2,760–4,400 TEUs, multipurpose bulk carriers and a ro-lo vessel. Ray Car Carriers Ltd, one of Gdynia Shipyard’s largest customers, wants to acquire shares in the shipyard for PLN 56 million. The Israeli shipping company, registered on the Isle of Man, has bought the yard’s debts from Kredyt Bank with the intention of exchanging them for ten per cent of the Series D shares. Gdynia Shipyard has so far built nine car carriers for Ray Car Carriers Ltd. and has orders for a further 14 similar units.

Gdynia Shipyard is undergoing a general slimming process and organisational rationalisation with a number of new subsidiaries. These companies will work for Gdynia Shipyard but also sell their services outside the group. The shipyard’s core business, which includes hull construction and assembly, will remain unchanged. Although the year ended with a loss, financial stability has improved. Last year, shipyard workers at Gdynia Shipyard have been paid without any delays for the first time in a couple of years.

Gdansk Shipyard, part of the Gdynia Shipyard Group had four vessels of about 80,000 cgt in order by the end of last year. One of the four 48,000 DWT open hatch bulk carriers has been delivered early this year to Gearbulk Ltd.
Szczecin Shipyard New

The next largest shipyard in Poland, SSN – Szczecin Shipyard New – in Szczecin, had 38 vessels of close to 836,000 cgt in order by the end of last year. In cgt terms, the SSN orderbook was the third largest in Europe and the 28th largest in the world.

	Launching of “CCNI Punta Arenas” on a snowy day at Gdansk Shipyard.

Compared to the old Szczecin shipyard, SSN is completely reorganised with improved means to meet crises, often generated globally. In 2000, the old shipyard had total sales of USD 283 million and a workforce of 7,500. SSN will achieve sales of about USD 340 million in 2004 and the workforce has been reduced to 5,000. The number of employees not directly involved in production has been more than halved, from 1,749 to 850. Rationalization and new technology has reduced the lead-time in newbuilding projects by 40 days.

Poland’s purchase of 48 F-16 fighter aircraft from Lockheed Martin is tied to an offset deal from the Americans, which Szczecin New Shipyard (SNS) is now benefiting from. Last year, the shipyard received an order for two container carriers in accordance with the terms of the agreement. Now, the next order has been finalised. This order is for a further two 3,100 TEU container carriers to be built for a Cypriot ship operator – Neromar Shipping Corp of Cyprus. They will be delivered during the first half of 2008.

SSN also has close ties to the Vietnamese shipbuilding industry. The Ha Long shipyard in Viet Nam delivered the container carrier Vinashin Marier last year. Its design comes from Szczecin Shipyard New, SSN. Plating, steel profiles for the hull as well as ship’s equipment such as the main engine, winches, elevators, electrical equipment and toilet cabins also come from Poland.

In July, SSN won a contract to design two 110,000 DWT tankers and a further contract for 1,700 TEU container carriers could be in the offing. The Polish-Vietnamese collaboration is a natural process since the majority of the Vietnamese shipbuilding specialists were trained in Poland and can speak Polish. The Ha Long shipyard lies about 100 km from Haiphong in Ha Lang Bay and was built by Poles in the 1970s.

Remontowa group
Newbuildings, and particularly ferries has become an increasingly important sector for Remontowa Shipyard in Gdansk.

A significant newbuilding order won last year was a record contract worth EUR 60 million. The yard will build three ships for well-reputed Trinity House Lighthouse. Remontowa won the contract after a tough fight with eight respected European yards. The yard’s design office will be responsible for the design of all three ships. The first ship, which will be ready for delivery at the end of this year, is a 36 m long so-called intervention vessel, a combination of tug and rescue vessel. The second ship will be 84 m long and will be used for fairway maintenance.

Last year the shipyard received a number of orders for complex and comprehensive ship repair and conversion projects. One significant was the Rocknes, which, after the tragic accident in January last year when 18 seafarers lost their lives, is undergoing extensive repairs and the vessel will also be broadened by 1.5 metres to 26 metres. The order is worth around EUR 50 million and the vessel is expected to start sea trials in June.

Swedish ferry operator Stena Line has awarded Remontowa two major repair and conversion projects. The Stena Nautica arrived at the yard site in March last year after a collision with the coaster Joanna and left almost three months later after extensive repairs. Remontowa also won the conversion of the Stena Baltica. The conversion, with a price tag of more than USD 34 million, will be one of the most comprehensive conversions in the history of the shipping company. First and foremost, the Stena Baltica’s cargo capacity will be increased by the addition of new car decks. All the passenger areas will also be modernised. Passenger capacity will be cut from 1,850 to 1,250 passengers.

Other important conversion projects are the Fortum tankers Tervi and Palva. Royal Arctic Line’s Arina Arctica will also have a major refit at the shipyard, which soon will deliver the newbuilding Mary Arctica to the same Danish company.

A significant order for Northern Shipyard, part of the Remontowa group was two offshore vessels ordered by the US shipping company Tidewater Marine. According to Remontowa, the almost monopoly on offshore orders (both design and construction) enjoyed by Norwegian yards so far should now have been broken. The yard has also delivered two tugs to the Estonian tug shipping company AS PKL.

The order book also includes ferries for Shetland, one trawler/seiner for Norway and seven partly equipped hulls for Remontowa Shipyard in Gdansk plus fishing vessels for Danish and Dutch shipping companies.

Gryfia and Nauta
Gryfia Shipyard in Szczecin is to build five new coast guard vessels for Remøy Shipping and Remøy Management to be chartered by the Norwegian Coast Guard for 15 years. The 47-metre long vessels are priced at just over NOK 60 million (EUR 7.3 million) a piece and the first vessel is due for delivery next summer. The shipyard has also succeeded in breaking into the Norwegian fishing vessel market.
In tough competition with more than ten European yards, Gryfia won a contract to build a 62-metre long trawler for the Norwegian shipping company Knut W. Hamre. The vessel was delivered on 18 November. However, more than 90 per cent of the yard’s business consists of repairs. Gryfia is also building a 70-pax ferry for Norwegian Waves-IFT.

Last year, the Nauta Shiprepair Yard in Gdynia – which has started to heel after a major restructuring programme – delivered the Lysvik to DFDS Lys-Line after lengthening. The yard had previously also lengthened the sister vessels Lysblink and Lysbris, all built in India in 1998–2000, 27.10 metres to 129 metres thus increasing cargo capacity by 50 per cent.

All in all, Nauta has lengthened seven vessels for Lys-Lines. Nauta was also been awarded the contract to add 20.3 metres to the 119 metres long Gute. The ferry will also be thoroughly renovated.

//Leszek Szymanski