Demand and capacity

Russia is in great need for fleet renovation, from nuclear-powered icebreakers to river ships. Newbuilding orders are being placed numerously due to state support measures but private shipyard tend to be driven out of the market.

We will focus on the North

Elaboration of the plans on Arctic shipbuilding continues. As Konstantin Knyazevsky, Deputy Director General of FSUE Atomflot, said at the international forum “Shipbuilding in the Arctic” at least six new icebreakers should be laid down to assist LNG transportation from the Gulf of Ob alone, not taking into consideration five icebreakers under construction at Vyborg Shipyard and Baltiysky Zavod. 

“A contract for construction of two 60MW icebreakers is under intense development as well as a project on construction of an LNG-powered icebreaker of 40MW, – said Konstantin Knyazevsky. – This icebreaker is supposed to operate on the seaway canal in the gulf of Ob. Since the width of one icebreaker is not sufficient we are planning the construction of four icebreakers to ensure their operation in pairs along the seaway canal.

As for the icebreakers being built by Vyborg Shipyard they are to be delivered in 2018. That was announced by Yevgeny Molodichenko, head of USC Department for Civil Shipbuilding in the North-Western Region of Russia. The Aleksandr Sannikov icebreaker is to be delivered to the customer late June – early July with the delivery of the Andrey Vilkitsky scheduled for October. The two 22 MW icebreakers of Project IBSV01 will be able to break through ice of up to 2 meters thick.

The first icebreaker of Project 22220, Arktika, is to be delivered by Baltiysky Zavod in the second half of 2019. The icebreaker is undergoing mooring trials. The Sibir and the Ural will be delivered in 2020 and in 2021 accordingly. Nuclear-powered 60MW icebreakers will assist vessels through ice of up to 2.8 meters thick.

According to Yevgeny Molodichenko, the delivery of all icebreakers of the series will not ensure round-the-year navigation on the Northern Sea Route, especially in the Eastern part of it, “Icebreakers of Project 22220 will not ensure navigation in spring and autumn periods as larger vessels are required here, the ones of Leader type. Its task is to escort vessels along a canal of about 50 meters wide in the ice of up to 4.3 meters thick. Since the icebreaker is needed by 2027  the construction should begin not later than in 2020. However, none of the Russian shipyards is able to build it today without undergoing a modernization”.

During his time as Deputy Prime Minister of Russia, Dmitry Rogozin said that at least 3 Leader-type icebreakers should be built in Russia.

USC President Aleksey Rakhmanov earlier told IAA PortNews that Severnaya Verf shipyard in Saint-Petersburg will be able to build ships and platforms of any required dimensions from spring 2019 when modernization and reconstruction of the shipyard is completed. According to him, the shipyard will be able to build 70x250 m units, which is enough for any defense and civil orders including offshore projects, helicopter carriers and Leader icebreaker. The scope of dredging works to be performed under the reconstruction programme is about 1,500 cbm.

In the segment of large Arctic ships USC will compete with the Zvezda Shipbuilding Complex being built in Bolshoy Kamen, Primorsky Territory, by a consortium of investors headed by Rosneft. A series of Aframax tankers powered by LNG is supposed to be built in the Far East starting from 2020.

The business is waiting for support

The need for modernization was announced by representatives of private shipbuilding companies. The problem is the following: such companies can embark on modernization in view of projects that will allow for a payback, yet there are no projects since the customers are not ready to award orders to shipyards that have not undergone modernization. It is easier and cheaper to commission it to European companies. 

This problem has already been brought up by representatives of the fishery community who were speaking about the risks of placing orders at domestic shipyards. According to them, non-compliance with schedules is quite normal there. 

When speaking at the “Shipbuilding in the Arctic” forum, Severnaya Verf Director Igor Norko emphasized that many of small private shipyards have no orders for construction of new ships.

“Apart from Sevmash and Zvezdochka there are five shipyards in the Arkhangelsk Region. They earn on repair having no newbuilding orders. If the situation does not change, shipbuilding in the region can disappear in five years. Both the capacity and the competence will be lost”, he said.

According to Igor Norko, it is much more difficult for non-USC companies to take a share of the market. Therefore, shipbuilders need state support, no less than the customers. 

It should be noted that a package of state support measures is being applied in Russia in the segment of shipping and shipbuilding. It includes subsidies to cover loan and leasing interest rates as well as ship utilization grants. Besides, the Federal Law “On introduction of amendments into the Merchant Shipping Code of the Russian Federation in the part related to short-sea shipping” came into effect on 1 February 2018. With the new law prepared by the Ministry of Transport, shipping and storage of oil, natural gas, gas condensate and coal produced in Russia or in territory under the jurisdiction of the Russian Federation, and loaded onto vessels in the water area of the Northern Sea Route can be only performed by vessels flying the state flag of the Russian Federation.

The Ministry of Industry and Trade is also drafting a law on priority use of vessels built in Russia as we wrote earlier >>>> 

In the fishing fleet segment, a campaign of providing investment quotas (‘keel quotas’) is in full swing. It is expected that the Investment Quotas 2018 campaign will result in signing of contracts with domestic shipyards for construction of about 50 fishing ships. Read more in our earlier article >>>> 

It is also important that orders are placed at independent shipyards as well. For example, OAO Pella has signed contracts to build six mid-size trawlers and one crab catcher.

Ship owners thus have all instruments and incentives needed to award the construction orders to domestic shipyards. However, the shipyards should meet the customers’ requirements, especially when it comes to construction time. Of course, companies affiliated with large corporations have more opportunities for maneuver and for attraction of financing. Yet, certain flexibility will let independent shipyards step in since the potential of fleet renovation is really huge while shipbuilding facilities are available to a lesser extent.

Mikhail Prynkov, Vitaly Chernov