(This is a guest post from the Dances With Bears.)
Russia’s Transport Minister Igor Levitin reported a huge number last month, which, if true, would mean that Russian shipbuilding is booming, and the yards will be full to overflowing for the decade to come.
At the last session of the Maritime Board, a policymaking committee of the Transport Ministry, Levitin announced that the order-book to the year 2020 for new vessels to be built at the domestic shipyards numbers two thousand, with the price-tag on the contracts totaling Rb1.5 trillion ($33 billion). Levitin’s claim appeared in Interfax and other media reports on March 30. It accompanied draft legislation for state budget support for the shipyards and shipbuilders, which has been drafted for the review of the Prime Ministry, before it goes to the State Duma for a vote.
Alexei Bezborodov, who heads Infranews, a leading Moscow maritime news service, told Fairplay the minister is exaggerating wildly. According to Bezborodov, just 120 vessels are currently contracted with 23 shipyards in Russia, with a delivery period of up to three years. Bezborodov’s tabulation of these orders is presented below. “Planning horizons for shipbuilding of more than three years don’t happen,” Bezborodov said, noting that total deadweight tonnage on order in the Russian yards at present is 981,000 dwt.
Russian shipyard construction capacity has reached its limit, and without frersh investment in manufacturing and technology, as well as confirmed orders for new ships, the yards cannot readily exceed this level, Bezborodov adds. “So, to fulfil the precepts of the Ministry of Transport, we need to triple current yard capacity — impossible!”
Vladimir Vityazev, a specialist at Zvyozdochka, the Star ship-repair works in Severodvinsk, told Fairplay that the current limitations on vessel size and yard capacity will not change in the short run. “The most advanced shipyard in Russia is the Admiralty Yards in St. Petersburg and the Northern Yard, also in St. Petersburg. A new shipbuilding area is under construction in the Far East. But even the major shipyards cannot produce a tanker of a large deadweight. So when Gazprom orders big tankers abroad, this is because they cannot order a similar ship here in Russia. They do, however, order smaller, specialised ships. For example, they placed an order at our shipyard for construction of a drifting drill platform.”
When Prime Minister Vladimir Putin discussed shipbuilding with Roman Trotsenko on February 18, the prospects for the Russian yards were optimistic, but the numbers modest. Trotsenko is a millionaire developer of commercial real estate and airports, and owner of the Moscow River Shipping Company. He was appointed to run the state-owned United Shipbuilding Corporation ( USC) after Alexander Buzakov was ousted late last year: http://johnhelmer.net/?p=2032
In Putin’s office in February, what Trotsenko had to boast about was, in retrospect, to Buzakov’s credit. Trotsenko told Putin: “I don’t think any sector has come in for so much attention on the part of the government in 2009 as shipbuilding. The five conferences that you presided over have yielded results. We see that the industry reported a 62% growth in 2009. There are several reasons for this growth, for example, several large vessels and drilling platforms were completed as scheduled. Nevertheless, this figure does give an idea of the potential for this sector to drive growth in the engineering industry in the future.” Trotsenko went on with his calculation of the shipyard order-book: “We have 118 ships and vessels in the works. The volume of USC’s foreign trade alone is $7.5 billion. December saw the signing of major contracts with Vietnam and Kuwait worth over $2.5 billion, which loads the capacity at the Admiralty Shipyards and the Khabarovsk Shipbuilding Plant.”
Among the financial measures discussed, Trotsenko said about Rb4 billion ($133 million) has been issued through USC to finance shipbuilding lease contracts on condition that the vessels have 60% Russian content, and are Russian flagged. Another Rb2.7 billion is budgeted for the leasing programme this year. New measures for tax and customs duty relief in shipbuilding zones are included in the draft legislation Levitin has introduced. They will cover new yard projects in the Far East; the Yantar yard in Kaliningrad; and a new southern shipbuilding zone on the Caspian.
Things would be much better, and the order-book fuller, Trotsenko told Putin, if Gazprom hadn’t postponed the Shtokman gasfield project in the Arctic, thereby delaying the order to build new gas tankers and drilling platforms at South Korean and Singaporean joint ventures at the new Chazhma Bay yard, on the Sea of Japan, and also at the Zvezda yard at nearby Bolshoy Kamen.
“I have to say that postponing the Shtokman field development by three years was bound to influence the business plans for the joint venture with Korea,” Trotsenko told Putin. “This naturally results in a delay in the building of gas tankers. We ask you to make a decision to optimise offshore development on condition that offshore fields are given to Russian companies which will order Russian ships and equipment.”
Putin agreed, but issued the qualification that has been killing the Russian shipyards since the collapse of the Soviet Union: “We will do it, but this work must be coordinated with sales volume, and the willingness of the market to absorb these volumes.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.