Finnish shipbuilding cluster risks putting its many eggs in one basket
The Naval Architect: March 2020
The Finnish shipbuilding cluster is focusing on passenger ships, which will provide it with a healthy workload for years to come, but also means exposure to risks in a specific sector. However, many suppliers and contractors also serve the wider shipbuilding and repair industry, which mitigates the risk.
Meyer Turku focuses solely on cruise ships, whereas Rauma Marine Contractors is building ferries and has also won the largest naval order in the country’s history, comprising four 3,900tonne displacement corvettes.
Helsinki Shipyard has built specialist ice breaking tonnage, but it is now focusing on two ice strengthened expedition cruise ships on order from Russian principals. These will be the first ships of this type to be built in Finland since 1992.
Following several years of high level of activity, ordering of cruise ships is likely to slow down, according to a report by Maritime Strategies International (MSI).
“MSI assumes that newbuilding contracting drops off further over the next four years before picking up again in 2024. This assumption stems partly from the fact that the sector is already heavily committed on the newbuilding front, and it will take some time for the industry to adjust and absorb the many ships scheduled to hit the water over the next four years,” the report said.
Newbuilding prices bottomed out in 2017 but have been on an upward trend since then. Based on MSI’s latest shipbuilding forecast, prices will be 4% to 5% higher on average this year compared to 2017, building towards a peak in 2023.
The cluster has specialised in passenger ship building and, to some degree, on ice strengthened tonnage, which is a necessity as building low value-added vessels is not possible in Europe anymore, said Elina Andersson, secretary general of Finnish Marine Industries, ceiling organisation of the maritime industry.
While Andersson acknowledged that this includes a risk, she pointed out that the situation is not black and white. At the moment, both the cruise ship and ferry sectors are investing heavily in newbuildings. This has provided the Finnish shipbuilding sector with good visibility regarding the future workload for years ahead.
Should the pace of ordering slowdown in the future, there would be time to adjust. “Refits and upgrades of cruise ships are a growing business, which is already providing a platform for growth for companies in the Finnish shipbuilding cluster,” Andersson pointed out. The world’s icebreaker fleets are ageing and Finnish yards are well positioned to capitalise on a potential upturn in the demand in this sector.
Many shipbuilding companies also sell their products to foreign yards, so they are not reliant on the domestic yards and their orders. “The sector has several legs to stand on, not just one. Quite often, the cyclical peaks and troughs do not occur at the same time in all sectors of shipbuilding. In addition, many companies also have customers in land-based industries,” Andersson stated.
If the present boom in passenger ship building comes to an end, Andersson noted that this would be felt in the Finnish shipbuilding cluster. In order to adjust in changing circumstances, it is vital that the cluster retains its skills and competences and focuses on R&D, she concluded.
While the effects of a downturn in the ordering of passenger tonnage might not affect the sector immediately as existing orderbooks are at a healthy level – Meyer Turku has work until 2025 – the economic impact of the business is felt widely outside the gates of the yards.
Shipbuilding is essentially an assembly industry and extensive supply chains are typical for these: Meyer Turku itself only employs about 20% of the people involved in the shipbuilding process, its deputy managing director, Tapani Pulli, said in the report compiled by the University of Turku and Meyer Turku.