STX Europe denies Korea move
By Robert Wright
Europe's largest shipbuilder says it will keep making its high-value cruise ships in its European yards, in spite of speculation that its new owner might move production to South Korea.
Torstein Dale Sjotveit, chief executive of STX Europe, was speaking as Korea's STX Shipbuilding comes close to taking 100 per cent ownership of the company, STX Europeknown until last year as Aker Yards.
STX Europe controls 15 shipyards, mainly around the Baltic and North Sea, and has a minority stake in three others.
It is one of three large builders of cruise ships and ferries, along with Germany's Meyer Werft and Italy's Fincantieri.
There had been concern when STX started buying Aker Yards' shares in October 2007 that it might take production of cruise ships - which often cost €1bn ($1.3bn) each - to South Korea.
Cruise ships are one of the few shipbuilding segments where Korea, the world's largest shipbuilding nation, is not dominant. STX's Korean and Chinese yards have far lower costs than STX Europe's facilities in Finland, Germany, Norway and France.
STX's bid valued the European company at about $1.4bn. However, Mr Sjotveit said STX had not only wanted its order book but its competence, assets and network of suppliers.
"They have bought a complete system," he said. "We have 600 different companies working to complete aspects of the vessel, 600 different companies working with us in a complete turnkey structure. No one would dream of trying to move that to Korea because that would not make business sense and probably would not succeed."
STX Europe's work on highly specialised, mostly one-off vessels such as cruise ships and offshore oil vessels would be ill-suited to the production-line methods of STX's Asian yards, Mr Sjotveit added.
"The efficiency in Korea and China for STX comes from building long series of ships, like 10 dry bulk ships or 10 container ships," he said.
The cruise ship industry was also unlikely to see the widespread cancellations of orders now expected in other shipping sectors, Mr Sjotveit said. Most orders were backed by guarantees that owners would pay for vessels. While owners in some other segments were struggling to raise financing for ships that had already been ordered, all the financing for most of STX Europe's orders was in place.
Mr Sjotveit also played down the impact on STX Europe of the falling earning power of the specialised offshore production vessels it builds. In the middle of last year, some specialised drill ships were able to earn about $600,000 a day, a figure now down to about $100,000.
Such falls were lengthening the time it took for vessels to pay for themselves, but not making them uneconomic, Mr Sjotveit said.
"They're going from a pay-down time of six months to three years," he said. "It's still very healthy out there."
Europe's largest shipbuilder says it will keep making its high-value cruise ships in its European yards, in spite of speculation that its new owner might move production to South Korea.
Torstein Dale Sjotveit, chief executive of STX Europe, was speaking as Korea's STX Shipbuilding comes close to taking 100 per cent ownership of the company, STX Europeknown until last year as Aker Yards.
STX Europe controls 15 shipyards, mainly around the Baltic and North Sea, and has a minority stake in three others.
It is one of three large builders of cruise ships and ferries, along with Germany's Meyer Werft and Italy's Fincantieri.
There had been concern when STX started buying Aker Yards' shares in October 2007 that it might take production of cruise ships - which often cost €1bn ($1.3bn) each - to South Korea.
Cruise ships are one of the few shipbuilding segments where Korea, the world's largest shipbuilding nation, is not dominant. STX's Korean and Chinese yards have far lower costs than STX Europe's facilities in Finland, Germany, Norway and France.
STX's bid valued the European company at about $1.4bn. However, Mr Sjotveit said STX had not only wanted its order book but its competence, assets and network of suppliers.
"They have bought a complete system," he said. "We have 600 different companies working to complete aspects of the vessel, 600 different companies working with us in a complete turnkey structure. No one would dream of trying to move that to Korea because that would not make business sense and probably would not succeed."
STX Europe's work on highly specialised, mostly one-off vessels such as cruise ships and offshore oil vessels would be ill-suited to the production-line methods of STX's Asian yards, Mr Sjotveit added.
"The efficiency in Korea and China for STX comes from building long series of ships, like 10 dry bulk ships or 10 container ships," he said.
The cruise ship industry was also unlikely to see the widespread cancellations of orders now expected in other shipping sectors, Mr Sjotveit said. Most orders were backed by guarantees that owners would pay for vessels. While owners in some other segments were struggling to raise financing for ships that had already been ordered, all the financing for most of STX Europe's orders was in place.
Mr Sjotveit also played down the impact on STX Europe of the falling earning power of the specialised offshore production vessels it builds. In the middle of last year, some specialised drill ships were able to earn about $600,000 a day, a figure now down to about $100,000.
Such falls were lengthening the time it took for vessels to pay for themselves, but not making them uneconomic, Mr Sjotveit said.
"They're going from a pay-down time of six months to three years," he said. "It's still very healthy out there."