Damen PSV 3300

Norwegian shipowner World Wide Supply (WWS) has ordered another two PSV 3300 CD’s with Damen Shipyards. The two platform suppliers are added to the four that WWS announced to be built in December 2011. The extra vessels will be delivered end of 2013 and operated by Remøy Management AS.

Mr. Ståle Remøy, Managing Director of Remøy, says:

“We are glad we have been able to achieve another two ships from Damen of this modern design. With the special wave piercing bow and the extremely slim waterlines, these ships will have an increased operational window, higher transit speed, reduced fuel consumption and increased crew comfort. The living quarters are developed according to strict demands for noise reduction, which also improves comfort and safety for the crew. We have a lot of faith in these new vessels and are looking forward to service the offshore market.”

The PSV 3300 CD design, one of Damen’s new offshore support series, is developed to service oil and gas rigs safely and economically, especially in adverse weather conditions.

Jan van Os, Product Director Offshore, says:

“We’ve aimed for a ‘workhorse’, a PSV with excellent seakeeping qualities, low maintenance and in line with the latest Clean Design and Environmental Protection requirements of the major classification societies. Also, it should be an efficient vessel for the crew to operate and to live on when at sea. As to maintenance, it should be low. For example, we’ve reduced the number of angles to achieve this. This has resulted in long smooth lines, which has a positive effect on the durability of coatings, reduces the formation of rust etc.”

The PSV 3300 is designed according to Damen’s E3 principles: Environmentally friendly, Efficient in operation and Economically viable. Hull shape, coatings, the location of oil tanks, refrigerants, recovery of waste heat and engine emissions have all been thoroughly researched and (re-)designed accordingly in order to create cost efficient, emission friendly offshore supply vessel.

The hull structure of a semisubmersible, minus the topsides structure, image courtesy Drydocks World

DUBAI (Dow Jones)–Drydocks World, Dubai’s shipyard arm, is considering the sale of its entire Southeast Asian ship-building and repair operations in an effort to advance the restructuring of $2.2 billion of the company’s debt, three bankers familiar with the situation said.

The bankers said that auditors have conducted an analysis of the Asian assets and are currently reviewing a wide range of candidates interested in purchasing some or all of the operations. They said that Drydocks is preparing to draw up a shortlist of potential bidders, which include ship repair and ship building specialists.

“The company is pursuing a sale of the Southeast Asian business, there are plenty of candidates that have expressed an interest,” said one of the bankers familiar with the talks. Drydock’s Asian operations consist of four shipyards in Singapore and Indonesia, specializing in rig building, shipbuilding, repair and conversion.

In a statement, Drydocks didn’t comment specifically on whether it plans to sell its Southeast Asian business but said it “will continue to explore opportunities and seek to develop the best path forward to its operation.”

“The company has said and from inception that it will re align and rationalize its operation,” the Drydocks statement added.

Drydocks purchased the Southeast Asian assets in 2007 for about $2.2 billion, backed by financing from a wide syndicate of local and international banks. Drydocks, like a number of government controlled companies in Dubai, borrowed heavily to purchase assets just before the onset of the global financial crisis in 2008. Though its shipyard in Dubai has been thriving, the performance of the Asian businesses has been disappointing, bankers said.

Talks on restructuring the company’s debt have been underway since mid-2010, but progress has been slow. Last year, the Dubai government turned down a request that it provide a guarantee for the debt.

HSBC, Standard Chartered, Lloyds TSB, ING, DBS and Mashreq are the members of a coordinating committee leading the restructuring talks, one of the bankers said, while McKinsey is acting as an advisor to Drydocks.

Bankers said that the sale of the Southeast Asian assets would provide cash to help pay back the Drydocks debt, but it could also raise difficulties in that the company is likely to only get only a small fraction of what it originally paid for the assets in any sale.

The company and its bankers would need to discuss how to bridge the gap between what it can fetch for the Asian business and the original purchase price, the bankers said.

Moreover, valuing the Southeast Asian assets is complicated because potential bidders have signaled interest in different parts of the business. It is also hard to assess the value of the vessels that are currently under construction in the company’s Southeast Asian shipyards, they said.

But a sale of the Asian business, while far from certain, would mean the company’s focus will shift again to the Dubai-based shipyard, which is considered much more commercially viable and therefore could gain easier access to funding for now and once the debt restructuring talks are completed.

Drydocks is a ship-building and repair company based in Dubai and owned by Dubai World, which in turn is controlled by the government of Dubai. Dubai World finalized a $25 billion debt restructuring in 2011 that didn’t include Drydocks.

Drydocks chairman Khamis Juma Buamim was quoted in December as saying that the company hopes to complete a deal on its debt restructuring by the end of March, and is considering joint ventures in Asia to improve the business.

But bankers said that a complete sale of the assets is now the company’s priority. “Establishing joint ventures is still the way forward in the scenario a sale doesn’t materialize,” said one of the bankers familiar with the talks.

-By Nicolas Parasie, The Wall Street Journal

Lightering operation – Eagle Virginia and Eagle Columbus, image courtesy AET

LEEVAC Shipyards was recently contracted by Houston-based AET Lightering Services to build two (2) 187 x 46 x 15 Lightering Support Vessels with a series of options for up to six (6) additional vessels. These vessels will primarily service the lightering activity of AET in the Gulf of Mexico, based out of the Port of Galveston. Delivery on these vessels began with the AET “Innovator” in October, 2011 and continued with the delivery of the AET “Excellence” in January, 2012. With the launching of the ”Partnership” it marks the third vessel launched in the series of Lightering Support Vessels.

LEEVAC is a world-class shipbuilder headquartered in Louisiana, and has been recognized as a quality new construction shipyard for over 45 years, “We are very excited about having this opportunity to build a relationship with AET” commented owner Christian Vaccari.

AET is a leading worldwide petroleum shipping company. “With a continuing focus on quality, we are currently investing in a new fleet of workboats and enhancing our shore side support facilities in Galveston. At AETwe are proud to command the largest share of the US Gulf lightering market and to enjoy the best on-time performance of any US Gulf operator, we look to LEEVAC to provide those workboats in the coming years” according to Bill Merritt, General Manager AET.

The contract was awarded by Guarapari Drilling BV, Netherlands, a subsidiary of Sete Brasil Participacoes SA, an entity formed by seven Brazilian finance investors including banks, Brazil’s four biggest pension funds and state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras.

“This is a very significant milestone as this order not only represents the first drillship that our group is building for Brazil but it is also the first project secured by our new shipyard in Aracruz,” Wong Weng Sun, president and chief executive of Sembcorp Marine, said in a statement to the Singapore Exchange.

“We believe this order will be the first of many orders in Sete Brasil’s ambitious drillship expansion program,” he added.

Sete Brasil was formed to put financing in place for Petrobras’ massive rig building program. Petrobras is seeking at least 21 new deepwater rigs, such as semisubmersible rigs and drillships, in order to develop the vast Brazilian pre-salt oil fields.

“A successful execution of the drillship contract could lead to more such contracts for Sembcorp Marine in the future, said Jason Saw, offshore & marine analyst at DMG & Partners.

He added that the contract price was around 30% higher than drillship prices from shipyards in South Korea, which “provides sufficient buffer to cater for the additional risk of building a drillship in Brazil.”

In December last year, Singapore-listed rival Keppel Corp. Ltd. (BN4.SG) secured a contract worth approximately US$809 million from a subsidiary of Sete Brasil, for the design and construction of a semisubmersible drilling rig.

The drillship in this contract, based on Sembcorp Marine’s proprietary Jurong Espadon drillship design, will feature a 40-meter wide main deck and will be able to operate at 10,000-feet water depth, drilling to depths of 40,000 feet. The vessel is scheduled for delivery in the second quarter of 2015.

At 0250 GMT, Sembcorp Marine’s share price was up 3.1% at S$5.00, their highest level since Aug. 5, 2011, becoming one of the top performers on Singapore’s benchmark Straits Times Index.

Estaleiro Jurong Aracruz, a wholly-owned shipyard of Jurong Shipyard, operates from a 82.5 hectare site. The shipyard is located in the Municipal of Aracruz, in the State of Espirito Santo, Brazil and about 80 km by road north of the capital of Vitoria.

In December 2011 Sembcorp Marine broke ground on its Estaleiro Jurong Aracruz ship yard, in the state of Espirito Santo in Brazil. The yard is scheduled for completion by end-2014, and gives Sembcorp Marine a production foothold in the country. Petrobras requires that locally produced content feature in its massive rig expansion plan.

-By Matthew Allen, Dow Jones Newswires; Sam Holmes contributed to this article

Geoje Shipyard, image courtesy Samsung Heavy Industries

SEOUL -(Dow Jones)- The world’s two biggest shipbuilders, Hyundai Heavy Industries Co. (009540.SE) and Samsung Heavy Industries Co. (010140.SE), reported worse-than-expected earnings for 2011 as sales of high-end ships fell and the cost of raw materials rose, and analysts expect the industry to continue to struggle in the first half of this year as the global economy stalls.

Hyundai Heavy said Thursday its fourth-quarter net profit slumped 91% to KRW71.3 billion ($64 million) from KRW826.7 billion a year earlier. Its full-year net profit fell 31% to KRW1.946 trillion.

Gains in the won led to foreign-exchange losses of KRW36 billion in the quarter, while the donation of KRW153 billion to a charity foundation also weighed, the firm said in a statement.

Operating profit declined 62% to KRW404.6 billion in the December quarter from KRW1.077 trillion, while sales were up 5.1% at KRW6.751 trillion from KRW6.423 trillion.

“In the past, the shipbuilding and non-shipbuilding industries would be buffers against each other as they had different business cycles,” said Yeom Dong-eun, an analyst at HMC Investment Securities. But this won’t be the case in the first half because of the continuing European debt crisis and a slowing Chinese economy, he said.

The company’s new orders rose 47% to $25.32 billion in 2011 from $17.2 billion, while sales were up 12% at KRW25.02 trillion from KRW22.408 trillion. For 2012, it is targeting a 21% increase in new orders to $30.55 billion and a 10% rise in sales to KRW27.573 trillion.

Hyundai’s full-year operating profit fell 27% to KRW2.613 trillion.

The Ulsan-based shipyard expects shipbuilding orders of $9.11 billion in 2012, a decline of 16% amid the euro zone’s debt worries, but it has targeted a 16% increase in orders for offshore facilities to $5.2 billion.

Hyundai also expects increased sales in its electrical systems and engine and machinery businesses this year as it is in talks over projects in major markets including the U.S. and Europe.

The firm has an accumulated order backlog of 161 ships valued at $22.5 billion to be delivered over the next two years. It said it would distribute KRW245.15 billion in year-end dividends in April.

Samsung Heavy’s 2011 net profit fell 12% as it has been building fewer high-end vessels because of conditions in the industry.

Net profit for the 12 months ended Dec. 31 fell to KRW863.9 billion from KRW976.5 billion. Full-year operating profit declined 20% to KRW1.102 trillion from KRW1.378 trillion, while sales were up 2.2% at KRW13.359 trillion from KRW13.071 trillion.

The company didn’t provide fourth-quarter results.

The Geojedo-based shipbuilder said it is aiming for a 12% increase in 2012 sales to KRW14.9 trillion as high-end offshore contracts secured over the past two years will be reflected in its results.

Earlier this year, Samsung Heavy said it had targeted shipbuilding and offshore-facility orders of $12.5 billion for 2012, less than last year’s $15 billion.

It said it would distribute KRW108.4 billion in year-end dividends.

Consolidated figures for the two firms are scheduled to be issued next month.

-By Kyong-Ae Choi, Dow Jones Newswires

Image courtesy Hyundai Heavy Industries Horizons

Analysts expect the downturn in global orders for capesize bulk carriers to continue through to 2012, which may intensify the race for survival for shipyards in China.

-By Alex Lee

After witnessing a brief recovery in the shipbuilding industry, South Korean shipyards are now bracing for hard times again. An initial burst of energy and optimism quickly slipped back into gloom in 2011 following continued concerns over the euro zone debt crisis as well as the slowing economic growth of the United States.

Though the current outlook of the global economy is uncertain, global industrial giant Hyundai Heavy Industries (HHI) seems to be relatively well positioned to overcome a prolonged downturn and maintain its No. 1 position in the shipbuilding sector. A high level of automation and cutting – edge production technologies help HHI deliver various types of ships with superb quality on time.

HHI’s latest push to diversify its vessel portfolio by building more sophisticated and environmentally friendly vessels is also paying off. Executives at the world’s biggest shipyard say the key is to maintain a superior technological edge over rivals and a strong will to change things at a time of fierce competition amid economic uncertainties. They say failure to innovate will cost even the world’s most efficient and successful shipyard.

“We must forget all the company has achieved in the past 30 years and try to build a new 30-year period,” said Kim Oi-hyun, HHI’s co-CEO and senior executive vice president in charge of the Shipbuilding Division. “What I am repeatedly saying to myself is that we should not become complacent. It is possible that we can fall from the top any time unless we change ourselves,” said Kim, a 36-year industrial veteran who has witnessed the ups and downs of the world’s shipbuilding industry.

“Forget the number one position in the industry. We should build our capability to better adapt ourselves to the rapidly changing business environment.”

Analysts say high steel prices, strong local currency, and the struggling shipping industry are major threats to South Korean shipbuilders even though they have seized nearly three-quarters of the world’s ship orders in the first half of this year.

South Korea, which had no shipbuilding industry until the early 1970s, is now home to seven of the world’s ten largest shipbuilding companies. They are vying with each other and with competitors in China and elsewhere.

It was in 2000 that South Korea definitely wrested from Japan the title of ‘world’s largest shipbuilding nation’. But a burgeoning China has embarked on a path to surpass South Korea. Focusing on relatively low-tech containerships and bulk carriers, China replaced South Korea at the top of the table for new shipbuilding orders in 2010.

But in 2011, South Korea regained the top spot as shipowners ordered more drillships, liquefied natural gas (LNG) carriers, mega containerships and other complex vessels in which South Korean companies specialize in.

The industry has turned away from bulk carriers and tankers due to an oversupply of vessels that have depressed freight markets and bankrupted many shipping firms . These segments are dominated by Chinese shipbuilders but are at the lower end of the value scale.

The Baltic Exchange’s benchmark dry freight index measuring freight rates has plummeted, forcing shipowners to delay or cancel orders for dry bulk carriers and focus more on niche markets, such as drillships and LNG carriers. Analysts expect the downturn in global orders for capesize bulk carriers to continue through to 2012, which may intensify the race for survival for shipyards in China.

Propelled by the Chinese government’s desire to dominate the global shipbuilding industry by 2015, China-based suppliers have aggressively pushed to modernize their drydocks and close the technological gap with South Korean competitors in recent years. But HHI executives and analysts say it will take a long time for China to catch up or even surpass South Korea in production technologies of high-end vessels.

In the aftermath of the 2008 collapse of Lehman Brothers, HHI and other South Korean shipbuilders acutely felt the pain of a sharp decline in new orders as the global economy fell into a recession. In 2009, not a single order was placed with HHI. The Company had enjoyed an unprecedented shipbuilding boom in 2007 and 2008, with its sales and profits jumping to unprecedented levels. New orders began arriving at HHI from 2010 as the world economy took the path of recovery, but now that recovery appears to be struggling and 2012 will be another challenging year.

“Earlier this year the global shipbuilding industry seemed likely to recover at a rapid pace, but now it suddenly fell into difficulties. It’s really hard to predict how the next year will be,” said Kim Hyun-chul, chief business planning officer of the Shipbuilding Division. “Because of uncertainties in the world economy, shipowners are currently taking a wait-and-see attitude,” he added.

Image courtesy Hyundai Heavy Industries

Drillship Success
In the first nine months of 2011, Hyundai Heavy Industries won USD 10.03 billon in new shipbuilding orders, already surpassing its annual order target of USD 7.47 billion. In 2010, the Company won USD 4 billion in new orders. This is largely due to surging orders for drillships and other specialty vessels, and HHI is keen to further boost its competitiveness in those highvalue vessels in the coming years.

So far this year , HHI has been awarded orders for 10 drillships worth USD 5.5 billion, the largest number of deals for such ships the Company has won in a single year. A drillship is a maritime vessel that has been modified to drill oil and gas wells in deep water or for scientific drilling.

“The drillship sector was the savior of the shipbuilding division this year, ”said Kim Oi -hyun . HHI has turned its eyes to the drillship market in recent years and its first drillship was delivered only late last year, but it has quickly established itself as a new power, competing head-on with long-time rival Samsung Heavy Industries. SHI won its first drillship order in 1996 and has since clinched more than half of the contracts since 2005.

“Many people initially questioned whether we would be successful in the drillship sector because it was totally new to us, but we surprised the market by delivering a high-quality ship on time,” said Kim.

Analysts say in view of a large number of drillship contracts signed already this year, the market may see a slowdown in new orders for the time being.

Tougher Environmental Standards

Kim said HHI will continue to develop more environmentally friendly ships and engines, including those using LNG as a fuel. Shipowners are demanding not only more complex vessels but more fuel efficient and less polluting ships due to volatile oil prices and tougher environmental standards.

This year the UN’s International Maritime Organization agreed on energy efficiency design standards to substantially cut greenhouse emissions in new ships from 2013. With the environmental regulations set to become tougher, only companies with higher technological standards will be able to properly meet market needs, Kim said.

Kim attributes HHI’s success to a talented workforce committed to delivering high-quality ships in time and the Company’s close relationship with thousands of reliable parts suppliers and subcontractors in Ulsan. “We have a cluster of great suppliers around us and this is a huge advantage for us,” said Kim.

Kim said the Company has no plan to expand its shipyards to meet rising orders for drillships and other special purpose vessels. HHI currently has order backlogs which would keep the shipyard busy for at least until the end of 2013.

Reprinted from the Hyundai Heavy Industries Horizons.  The writer is a journalist based in Seoul.

The secret of success – aiming to be No.1 and keeping a step ahead

JH: Yangzijiang Shipbuilding grew from a small shipyard into a group with several wholly owned or dominantly controlled shipbuilding enterprises and became a famous shipbuilding enterprise in both China and the rest of the world in the space of just ten years. In your opinion, what’s the secret of your company’s great success?

Ren Yuanlin: Yangzijiang Shipbuilding’s annual turnover was only about RMB 100 million in early 2000, and now the entire group is making an annual turnover of nearly RMB 30 billion. We could only build small river ships ten years ago, but now we have the capacity and capability to build post-Panamax bulk carriers, ultra large container vessels and VLCCs. We have achieved tremendous growth both in our corporate size and in financial terms within just ten years.

In my opinion, our success is based on the global transfer of manufacturing operations to China as a result of China’s reforms and opening-up, and also on Yangzijiang Shipbuilding keeping abreast with the world’s shipbuilding developments and remaining a step ahead of many other shipyards.

Firstly, we became the first shipbuilding enterprise to successfully restructure our operations in 2000. Secondly, we were one of the first to find our target market in Europe and America and grasp the opportunities. It was also good timing that American and European ship owners wanted to offer good ship newbuilding prices and we managed to build a stable and loyal client base. Thirdly, Yangzijiang Shipbuilding was the earliest listed shipbuilding enterprise in China and moved quickly into the fast track for capital expansion. We also keep a step ahead in building new shipyards and expanding our production capacity. We won a handful of orders before the financial crisis and plants that were built had already been put into operation and completed the run-in period. These great opportunities and the policy of “aiming to be No.1 and keeping a step ahead” have resulted in Yangzijiang Shipbuilding’s miraculous growth.

James Jin Huang, Deputy Regional Manager of DNV Maritime Greater China and Ren Yuanlin, Chairman of Yangzijang Shipbuilding. Photo: DNV

Core elements for corporate development – product positioning, talent management and capital operation

JH:  As an experienced and reputed manager of a shipbuilding enterprise in China who has the wisdom, courage and perseverance of modern entrepreneurs, and also based on your years of experience in the industry, what core elements do you think the Yangzijiang Group has when taking such huge strides in development?

Ren Yuanlin: The key to an enterprise’s success and development is the right product positioning. When the new Yangzijiang Shipyard had just come into operation and in the run-in period four years ago, we knew clearly that we had certain gaps in management experience, expertise, workmanship and labour quality compared to global leaders. Hence, we set a target of being strong in just one or two products, and the choice of products had to meet the market demand and be adapted to our own capabilities. To put it specifically, we chose 4,000 TEU-level container vessels as our leading product. This strategy has proven to be quite effective.

Another factor is staff recruitment and retainment. We have a unique incentive programme for staff management. We think that the fruits of corporate growth must be shared among our staff in order to fully explore our employees’ potential. We have distributed shares among our backbone staff through listing and outward investment and recruited a large number of technical experts and skilled workers that the Company was in urgent need of to build a stable team.

Moreover, it is quite important for the Company to resort to capital operation channels such as listing. This has an amplification effect and gives the Company funds to engage in technical reforms, expand its production capacity, build and develop its clients’ confidence and trust and attract talented employees. I think that these are three core elements for enterprise development.

JH:  You just mentioned that product positioning is quite important. Actually many other shipyards are also aware of this, but they often can’t find the right or steady position. As a corporate leader, you must have great insight into and experience of judging the market and making preparations with the entire team – such as through market surveys and the development of vessel types. In your opinion, how can we follow the market closely?

Ren Yuanlin: On the one hand, we need to make ample preparation in advance. On the other hand, we need to have a strong ability to adapt to market changes. When the market booms, the shipyard must focus on mainstream ship types and make them well designed and in longer series. When the market declines, we need to best meet the special requirements and expectations of our clients through customised products. Meanwhile, we need to continuously upgrade and optimise mature products to attract potential clients. In short, the enterprise must keep track of the market’s pulse.

To better tackle the market challenges – grasp the opportunities

JH:  What do you predict future shipbuilding market developments will be and what initiatives and efforts has Yangzijiang Shipbuilding taken to tackle the looming economic and market challenges and uncertainties and maintain and develop its position?

Ren Yuanlin: I don’t expect the shipping market to recover within a short period. The recession caused by the financial crisis in 2008 isn’t over yet. Efforts made by governments to save the market haven’t changed the situation fundamentally. In the current post-crisis era, ship owners have surplus shipping capacity, shipyards have surplus production capacity, costs are increasing, and freight and ship prices are dropping.

Despite an expected slowdown in newbuild orders, Yangzijiang Shipbuilding has maintained and achieved profits above 20% in 1H2011. This was primarily due to Yangzijiang’s ability to retain shipbuilding orders secured before the financial crisis that command relatively higher margins than current newbuilding orders. Yangzijiang has not experienced any cancellations, even during the financial crisis back in 2008. It has a healthy order book, and the continuous execution of these orders ensures positive growth in both the margins and earnings throughout 2012 and even in 2013.

To stay ahead of the competition, Yangzijiang is taking steps to augment its shipbuilding capacity. This will come to fruition when the firm’s new yards in three locations in Jiangsu province become fully operational in 2013. Although expanding the scale might lead to lower profits on a single project, Yangzijiang’s overall profit-making ability will be safeguarded and strengthened.

In addition, we are focusing on designing and building larger and more technologically complex vessels with environmentally friendly and energy efficient features in order to better capture market opportunities and improve our operating margins.

We are also working on diversifying our product structure into the fields of offshore engineering, large steel construction, ship demolition and metal logistics services. These are also measures we are adopting to respond to the surplus shipbuilding capacity by partial transformation. Since ship scrapping and metal logistics could offset the growing cost of shipbuilding, we need to improve both the scale and strength of our ship scrapping and metal logistics operations within a short period. To put it briefly, we still regard the shipbuilding business as our core business and will further expand and develop it while also building a new corporate pattern that has offshore structures, large steel structures, ship scrapping and metal logistics as new pillars.

Shareholders and ship owners have the same interests

JH:  Yangzijiang Shipbuilding has both shareholders and public investors following the restructuring and listing. The Company also needs to deal with ship owners. These parties have apparently quite different interests, or even conflicting interests in certain concrete matters. How can you coordinate their expectations?

Ren Yuanlin: There is no doubt that maximising the interests of shareholders is the primary target of a public enterprise. This target must be fulfilled under the precondition that the interests of ship owners must be protected. Without orders from ship owners, it is impossible to maximise the interests of shareholders. Therefore, we must have a batch of ship owners with which we cooperate well and share benefits.

Container vessel owners were the first to be impacted by the global financial crisis in 2008. More than 80% of our orders were for container vessels. At that time, we were one of the few shipyards without any ship cancellations. We stuck to one principle: we are open to any discussion provided the owner doesn’t choose to cancel its ship. We provided a lot of support to ship owners, including adjusting the price, helping ship owners to obtain finance, accepting a change of ship type and long-term postponements and allowing ships to continue berthing at our shipyard after delivery. These measures helped our ship owners to get through difficult times. We received a lot of short-cycle orders in the subsequent rebound of the bulk carrier and container ship markets by making best use of our slots. Since some orders for high-value-added container vessels have been postponed for two to three years, we are still maintaining healthy growth in our profits for 2011 and estimate that this will continue in 2012, while many shipyards are making no profits or are suffering from a serious drop in profits. I think that the two targets of maximising the interests of shareholders and protecting the interests of ship owners are actually the same from a macroscopic perspective. In fact, through sincere cooperation with ship owners around the world, Yangzijiang Shipbuilding has become one of the few listed shipbuilding enterprises that are making great profits for their shareholders.

Adding value to the relations with classification societies

JH:  How do you think classification societies, including DNV, could offer better support and service to Yangzijiang Shipbuilding?

Ren Yuanlin: I do expect and appreciate more support from classification societies to Yangzijiang in developing and making ship designs and products that are competitive in the market and of high quality, and a lot of effort must of course be made to achieve and realise the above. As one of the good examples, I would like to take the opportunity to thank DNV again for its strong and valuable support to us in the ship development work. In addition, classification societies are more knowledgeable about future technology and the development of regulations, which is an area we would like more cooperation in.

Under the agreement, JFE’s Universal Shipbuilding Corp. and IHI’s IHI Marine United Inc. will merge, with Universal emerging as the surviving entity.

The two companies began tie-up talks in 2008, but the global economic downturn prompted them to review the details of a possible merger.

South Korean shipyards overtook their Japanese counterparts in 2000 in terms of annual shipbuilding as measured by gross tonnage.

Universal Shipbuilding was established in 2002 as a joint venture of Hitachi Zosen Corp. (7004.TO) and the former NKK Corp., which later merged with Kawasaki Steel to create JFE Holdings.

IHI Marine was created in 2002, though a spinoff of shipbuilding operations from IHI’s former entity Ishikawajima-Harima Heavy Industries Co.

-By Hiroyuki Kachi, Dow Jones Newswires

RA: Joe, thanks for the opportunity.  If you would, could you tell us a little bit about yourself?  What were some of the key career moves, or experiences you had that led you to your current position as President of one of the top shipbuilding companies in North America?

JR: Well, I’m a marine engineering graduate from the US Merchant Marine Academy at King’s Point.  Before that, I was enlisted in the US Navy as a nuclear Electrican’s Mate, so that gave me a good lead-in to go to the Academy.  The King’s Point experience really produces a well rounded background for the marine industry.  The military environment also familiarizes the graduate with the Navy  organization and the protocols, so you can fit in the commercial marine sector, or the defense sector, quite easily.  I sailed for several years after graduating and then came ashore and worked at Ingalls, starting in design engineering.   I ultimately ended up in the Program office for the LHD program where I learned about the non-engineering facets associated with shipbuilding.

I went back to the commercial industry at Alabama shipyard, (Atlantic Marine), where I became a program manager for the construction of two title 11 funded chemical tankers that were delivered to a Danish shipowner.  The first foreign ships built in the United States for export in 40 years.  These were the Danabrook tankers.  During my time at Alabama Shipyard, I got my MBA at Spring Hill College which obviously gave me some business acumen  along with my technical background.  I then moved to Jeffboat where I was the Vice President of Sales and Marketing.

This versatility across the spectrum of the business of shipbuilding from design, to construction, to programmatics, to sales, all came together to position me to first start as the Chief Operating Officer at Austal USA in October 2007, and then in August of 2008, President and COO.

RA: As someone who has clearly experienced a fair bit of success over your career, what’s your advice to young professionals as they begin their career in our industry?

JR:  My advice to anyone, including my own children, is the best investment you can make is investing in yourself.  You should never stop learning, and it’s important to get your education from the best possible institutions, with the best possible reputation, because that’s marketable, and that’s what you “sell” when you’re done.  It’s also important to make sure that you are challenging yourself in your job, and that you are always trying to do your best and expand your experience at what you are doing.  You need to focus on your job, and don’t wear your hunger for growth on your sleeve because that is an unattractive way to present yourself.  My focus has always been to do the best job I can, at the job that I am doing, for the job that I have.  And, I don’t spend a lot of time worrying where my next promotion is going to come from because good performance will be rewarded and will create opportunities.

USS Independence, LCS 2, image courtesy Austal USA

RA:  Austal’s trimaran littoral combat ship is a very cool looking ship, but clearly far different in design from the Marinette Marine version.  What was the biggest factor in pursuing a trimaran vice a monohull design?

JR: A multi-hulled high speed vessel has efficiencies that allow you to get higher speed with less installed ship’s horsepower, making the ship more efficient.  There is a reason why commercial high speed ferries are multi-hulled, and that is because they are driven by the economics of ship design.  That is what Austal is used to building, and that is what provides the most efficient hull design.  I’m not a naval architect, and it may be possible someone could come up with a mono-hulled design that could come up with towing-tank results that might rival a multi-hull, but I would like to see the results before I could accept that.

RA: Your ships are all aluminum from what I understand.  Where does the aluminum come from?

JR:  Alcoa is the principle supplier for our plate and we understand that a large amount of it is domestically sourced.  We use third party suppliers for our extruded panels and shapes.  When I say extruded panels, I mean sandwiched plate that has triangular vertical structure between the two plates to provide that inherent stiffness that you would otherwise have to weld stiffeners to.   It increases the efficiency in production.

RA: Global industry is pursuing more efficient supply chains and operations for both economical and environmental reasons, what are some of the ways that Austal is evolving to increase efficiency, and lessen the environmental impact of your operations?

JR:  Besides the inherent efficiencies built into the design of our hulls, the diesel engines we use are Tier II compliant, MTU 8000-series engines which are very efficient.

RA: But from a shipbuilding standpoint, do you have any unique processes in place that help increase the efficiency of your operations or reduce your carbon or waste footprint?

JR:  We’ve never been cited for any environmental infractions.  The one advantage of working with aluminum is that you don’t use plasma cutters, so you’re not cutting with a torch.  It’s all mechanical cutting.

So when we need to make all these different parts out of a plate of aluminum, we use a computer-controlled router table.  There’s no pollutants going into the air during this process.

RA: Mike Webster, the Chief Naval Architect on this project, mentioned you recycled all these aluminum shavings by sweeping it all up and melting it all down for reuse.  Is that right?

JR: Yes, we reclaim all our scrap and we have a third-party company who manages this recycling for us, and pays us for our scrap.  Additionally, 30% of the aluminum we use in our shipbuilding is actually from recycled products.

Image courtesy Austal USA

RA:  Welding aluminum is a unique skill, and one that was not prevalent in Mobile, Alabama before Austal moved to town.  How did you approach the task of assembling a skilled workforce to build your ships, and why were you ultimately successful?

JR:  Initially, Austal “seeded” the workforce with experienced welders from Australia.  That was in the very early days.   A lot of credit, in fact, needs to go to the state of Alabama.  Alabama has a program called AIDT, which stands for Alabama Industrial Development and Training, and what they will do is fund training for companies who are hiring people with a specific skillset.  AIDT has been a partner of Austal for probably 8 of the 12 years we have been in the United States.  They have since built a $16M maritime training center adjacent to our property  where we have two-thirds of that building for our unfettered use.  The state has also provided training reimbursement commitments to Austal of $32M against employment thresholds that we were meant to reach and maintain over a number of years.  In addition, the state has also provided construction and infrastructure grants of $10M to help us expand.  So the state has been a fantastic partner in helping us build up our work force.

The curriculum we’ve developed is done in our maritime training facility and pre-hire folks can go into the program, unpaid and on their own schedule, and in 6-weeks, they can test-out of the program to qualify to be hired at Austal.  The other thing is that there are a lot of maritime trades and a lot of shipyards on the US Gulf Coast and we were growing when other yards were contracting, so we were able to take steel welders and teach them the art of aluminum welding.  Those individuals with steel welding experience are well ahead of those who haven’t welded at all.

Image courtesy Austal USA

RA:  Shipbuilding in the United States has been on the decline for many years, however it seems to be plateauing a bit with the influx of foreign builders such as Austal, Fincantieri, and BAE Systems.  Why are these companies experiencing success where formerly American-owned builders have not succeeded?

JR:  It’s a two part answer.  First, commercial shipbuilding has been on the decay in the United States due to the differential in labor rates where ships are being built.  Looking at where ships are being built now… South Korea, China, Vietnam, Singapore… India may even get into it soon.  You can’t compete in a sophisticated industrialized market against countries that have lower labor rates and fewer regulatory requirements.  That’s the reality of it.

When it comes to Navy shipbuilding, it’s been a captive market here in the United States, and there aren’t many Navy shipbuilders to support that.  That’s a unique animal because it has a lot of oversight, it has a lot of documentation support governing requirements that burden the programs.  The emergence of foreign companies into the US I think is a manifestation of the fact that companies aligned with shipbuilding in those markets where commercial shipbuilding was able to be sustained have taken that experience and investment capital, and rolled it into the US to get a piece of the captive market that was Jones Act-restricted and/or US Navy.

The United States does not make it easy for foreign companies to build weaponry for them.  The Defense Security Service has requirements for the prevention of foreign ownership, control, or influence over classified programs.  So while a foreign company can invest in the US, and build their infrastructure, and stand up an organization, they are not allowed to tell that company how to operate.  And you can imagine how that would make you feel if you were putting money somewhere and running a business, but you were not allowed to tell them how to operate.  So it does create a hardship on foreign investors, but it does protect our national interests.

We think about a country like Australia, which is obviously very friendly to the United States and a close ally, so you’re less concerned about it, then you think well, there might be other countries that we wouldn’t want to be so closely aligned with, let alone build our Navy warships for us, even if they were here in the United States.

RA: How is the Eurozone crisis affecting your business?

JR: I guess the biggest risk is in currency exchange.  We’re looking at our hedging strategies on the Euro to make sure that we lock in the best rates.  We manage this so that we don’t get hurt by a big downside effect of currency exchange.  The other thing is that we do have some manufacturers that we buy from overseas, and we have to make sure that the health of their organizations is vibrant.  We have to keep an eye on our vendor base overseas.

RA:  A few southeast Asian shipbuilders such as (I think) HHI and Keppel FELS have diversified their businesses into the wind energy sector.  Do you see Austal making similar moves in the future?

JR: Yes.  In Perth actually, we just signed a contract to build a windfarm support vessels.

RA: But what about building the actual towers, nacelles, or possibly wind blades themselves?  Is that a market on Austal’s radar?

JR: There’s a possibility of that in the future, but we’re not actively pursuing that right now.

RA: I appreciate your time sir.