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Back to SSG 06
Sub-contracted hulls to lower-cost shipyards arrive quite complete, like the ferry “Lote” at the Fiskerstrand yard
for completion for Fjord1 FSF in March 2006. Photo: Tor Arne Aasen
Norway: Oil-fuelled blessings
The Norwegian maritime technology cluster has been enjoying its own version of the global shipbuilding boom in 2005. Newbuilding projects of NOK 17 billion (EUR 2.15 billion) were concluded, basically driven by the high energy prices and the current expansion of the world’s oil exploration capacity. But the global boom has also benefited Norwegian builders like the Kleven Florø yard, which brought home orders for 40,000 DWT chemical tankers.
The year of 2005 leaves an order backlog of NOK 25.5 billion, which is roughly the worth of two years’ production. Last year the 30 active shipbuilding yards completed a total of 55 vessels (above 20 meters) of a total value of NOK 5.9 billion. This output is marginally up from the trough of 2004, when the production turnover was a mere 4.4 billion – barely half the annual production capacity. This severely reduced activity reflects the tough times and also on the adaptability of the industry.
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Norway has managed to retain a comparatively wide and diversified shipbuilding sector of about 30 – mostly small – shipyards, building most types of specialized vessels from 25-meter catamarans to 40,000 DWT tankers. These yards rely on a plethora of specialist sub-contractors brought in to perform certain stages of the building process. In the 1990s, steelwork and entire hulls were sub-contracted to Eastern Europe, and today also Polish and other contractors are working on site in Norway. Over the last 10 years, the workforce employed by the shipyards and the sub-contractors have decreased from some 16,000 to 9,000, roughly equally divided between the yards’ and the contractors’ workers.
A shipbuilding project, these days, is basically an exercise in project administration, where the outcome depends on the management and timing of all relevant contributors. Such a lean organization leaves a high flexibility and adaptability.
The adaptability point is seen by the fact that several shipyards were back in production in 2005 after a lull in deliveries since 2003. Most spectacular in this respect were the orders taken home by Kleven Florø for juice and chemical tankers, which will see the yard revert to shipbuilding after surviving on module fabrication. But also yards like Fiskerstrand and Karmsund Maritime have built up a strong order book after two years without a single delivery.
Important offshore sector
No doubt the Norwegian shipyards have prospered from the general shipbuilding boom and higher building prices worldwide. But they also seem to have retained a competitive edge in relation to Spanish and Polish shipyards, judging from ferry and fishing vessel contracts. This may have several reasons, such as the role of Norwegian design and technology suppliers, but also a leaner organization including the use of lower-cost sub-contractors.
During the year new orders for 89 vessels of NOK 17.2 billion (EUR 2.15 billion) were recorded, the highest order volume in 15 years; surpassed only by 2000 with the subsidy deadline. Not unexpectedly, the offshore market has been the driving factor with 76 per cent of the order value.
Disturbing
Traditionally, the Norwegian yards have had four main markets: specialized cargo ships (like tankers and ro-ro vessels), fishing vessels, passenger vessels and offshore. When one market looms so heavily as offshore, it is disturbing. But on the other hand, experience shows a certain cyclical nature within all these markets.
Now the offshore share is something of a twin-edged blessing; it shows a technology success with competitive products, but it also reflects the importance – and hence the dependence – of the offshore industry. However, this should be regarded more as an opportunity than a problem. In a global energy market Norwegian technology suppliers and shipbuilders should seek to develop their niche to meet global requirements.
Cause for optimism?
The shipyards are largely an integrated part in a wider maritime technology cluster with several strong areas. These include fast ferries and aluminium vessels, technologies for fishery as well as for cargo handling, offshore supply and support, subsea/ROV, navigation/positioning, etc. Well-known brands are found in each of these segments, closely related to research institutions and ship designers. The shipyards have obviously benefited from this technology edge.
Five years ago there were signs that the Norwegian yards were losing ground to Polish and Spanish competitors. Since then labour costs have continued to rise, and Norwegian workers enjoy today the highest wages per hour. On the other hand, as the OECD country with the lowest premium on academic education, Norway’s wage level for engineers and other white-collar labour is not excessive.
Paradoxically, perhaps, the open EU labour market offers cause for optimism for Norway’s shipbuilders, as it allows the yards to take on sub-contractors from Poland and the Baltic countries. If the Government continues to permit sub-contracting to such EU firms on national wage standards, this may maintain a reasonable competitive edge for Norwegian shipyards – to the benefit of the wider maritime-technology industry.
//Dag Bakka Jr
Latest update 18-10-2006 8:49
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