Mikhail Pershin: It takes Krasnoye Sormovo half a year to build a serial dry cargo carrier

This year’s order portfolio of Krasnoye Sormovo, one of the oldest shipyards in Russia, has been curtailed by at least 5 ships particularly due to STLC’s rejection of the option under an agreement for construction of dry cargo carriers signed earlier. Does that mean cutting jobs in the Nizhny Novgorod Region or parting with contractors? General Director of the shipyard Mikhail Pershin tells about that in his interview with IAA PortNews.

Krasnoye Sormovo, a shipyard of United Shipbuilding Corporation, has successfully completed its production programme of 2020. The shipyard’s order portfolio for 2021 is almost ready but it is not sufficient for a full loading of the company’s facilities able to build up to twelve ships per year.

The milestone event of 2020 for the shipyard and the entire shipbuilding industry of Russia was the completion of the Mustai Karim liner of Project PV300 designed by Marine Engineering Bureau. The passenger ship was built under a tripartite contract with captive company Mashpromleasing acting as a customer and shipping company Vodohod as a lessee. In 2020, the shipyard delivered ten dry cargo ships of MEB’s RSD59 design built under the contract with STLC (State Transport Leasing Company). Eight ships were delivered to shipping company Pola Rise and two ships to Alfa. The launching of the Vladimir Latyshev, the third ship in a series of nine units intended for Alfa LLC, started the implementation of this year’s delivery programme. In 2021, Alfa will take the delivery of seven ships of the mentioned design. By the beginning of this year, the shipyard has built and delivered 22 dry cargo carriers of Project RSD59 thus holding the leadership in construction of such ships among domestic shipyards.

In 2020, Krasnoye Sormovo emarked on construction of fishing ships for the first time in its history.

- Mr Pershin, your shipyard is considered to be the best civil shipbuilding company in Russia. What, in your opinion, is its main achievement by today: the number of delivered ships or, perhaps, the construction term/quality balance?

-  Despite the challenging situation related to the coronavirus we fulfilled our shipbuilding programme of 2020 having delivered 10 dry cargo carriers of Project RSD59 and cruise liner of Project PV300, the first ship of this kind built over a 60-year period. Production volumes of the past year were the highest over the post-soviet time. We had never had such a shipbuilding programme before.

We used to build cargo ships earlier but the scope of construction was not as large. In 2018 we delivered 7 ships, in 2019 - 8 ships. As for construction of passenger ships, we have not had such an experience.

We are really proud of construction time offered by our shipyard. The Mustai Karim, the challenging project, was delivered to Vodohod slightly beyond the schedule while it is the first passenger ship in Russia!

Dry cargo carriers for Pola Rise LLC, the entire series, were delivered ahead of schedule. Each vessel was delivered one month and a half before the deadline.

We have reached the rate of work ensuring the delivery of dry cargo carriers 6 months from the steel cutting beginning versus the period of 9 months needed when we started building the series. Of course, we do not take into account an internavigation period. Our shy is located on the Volga river and we can only deliver ships during the navigation season lasting for 6 months.

- USC management has frequently praised the shipyard for modernization of its production facilities. What has been done in this respect?

- Our investment programme has been approved by USC, our managing company. It supports technological development of our facilities allowing to ensure record high construction rates.
We have invested over RUB 200 million in upgrading and equipment modernization. We plan the same scope of investments for the year of 2021.

It should be noted that we are active in implementing a lean production system. It is also a contribution into reduction of terms and costs.

- According to your summarizing release, the company has almost completed development of its order portfolio for 2021. Could you please say which ships have been contracted apart from 5 crab catchers?

- In the segment of dry cargo carriers, in September 2019 we signed an option with STLC for 20 ships. Nine of them have been built with the decision for the remaining 11 units being frequently postponed. Singing of the shipbuilding contract is still held over and the plans of STLC unfortunately do not include such a signing in the first half of 2021.

Thus, today our portfolio numbers only 7 firm orders for RSD59 ships with the deliveries to Alfa up to 2022 while we are able to build up to 12 cargo ships per year!

Yes, in 2020 we started building a series of five КСП01 crab catchers for the companies of North West Fishing Consortium. It is also a new part of our shipbuilding programme. The first ship is to be delivered in 2023 with the entire series to be completed by November 2024.

Unfortunately, working design documentation has not been fully developed yet since the customer asked to introduce some amendments into the design having obtained the experience of operating the first ship built in Turkey. Marine Engineering Bureau is revising the design but it needs certain time.  

Of course, crab catching ships ensure regular loading of our assembling facilities but it only makes about 70% of their capacity.

The contracted dry cargo carriers will ensure loading of hull production workshops by about 60%.  Thus the facility supposed to ensure the highest revenues will still stay idle if we do not build any additional freight ships.

- What about passenger ships?

-  New contracts for passenger ships are still under negotiations. No orders have been secures yet. It is not to be an order for 2021 since no design document have been approved so far for new passenger vessels.

- Is MEB the only designer you work with?

- It is for quite some time. Dredging ships are an exception with the design provided by  Damen.

I would like to emphasize, that the mechanism of interaction with MEB has been successfully polished. We have nothing to be seriously unsatisfied. Together with the designer were are primarily focused on customers’ expectations. That is very important.

- Let’s return to your order portfolio for 2021. What was the reason for STLC to reject the option agreement of 2019?

- Temporary impracticability. Having addressed STLC on behalf of our company and on behalf of the Nizhny Novgorod Region Governor we got the following answer:  amid the general economic situation in the country and the pandemic, the decision on signing of shipbuilding contracts is postponed till the second quarter of 2021. Yet, it is not a guarantee of contract signing.

- Do you negotiate with other financial institutions apart from the major industry customers, STLC and Mashpromleasing, which announced its plans to finance the construction of passenger ships?

- When we were rejected by our key customers we held some negotiations with other financial institutions but they have no experience in ship leasing segment. So, there is neither negative or positive decision in this respect so far. We have been in those negotiations for two months already.

- Mr Pershin, if you fail to secure additional loading of Krasnoye Sormovo, what implications are expected? Will you curtail the investment programme or cut jobs?

- First of all, we will have to stop signing contract agreements which means that some 500 people in the Nizhny Novgorod Region will lose jobs and budget revenues will decrease. We will have to minimize our development programmes as well.

Interviewed by Nadezhda Malysheva

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