Oasis Order Provides a Welcomed Jolt to French Shipbuilding Industry

Dow Jones
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December 28, 2012

The RMS Queen Mary 2 under construction at Chantiers de l’Atlantique in 2003, when the yard was owned by Aker ASA.

By Mimosa Spencer and Nadya Masidlover

PARIS–A contract worth more than 1 billion euros (1.33 billion dollars) to build a 5,400-passenger cruise ship for Royal Caribbean Cruises Ltd. (RCL) won by the French unit of the shipbuilder STX Europe provides a welcome jolt for ship-building on France’s west coast, the government said Friday.

Finance Minister Pierre Moscovici said the deal would ensure long-term business for the ship-building industry in the French coastal city of Saint-Nazaire.

The deal provides a boost to STX France–in which the French state holds a 33.3% stake–after a two-year drought in orders, and comes as the French government struggles to boost the competitiveness of French companies against a backdrop of an unemployment rate running over 10%.

By itself, however, the contract won’t be enough to lift employment at the shipyard, known as Chantiers de l’Atlantique, or Atlantic shipyard, where the number of employees has been halved over the past decade, according to the chief executive of STX France, Laurent Castaing.

“The shipyard needs more than this to survive,” he said in a telephone interview Friday. “We are seeking other orders and there will be more before the end of 2013,” he added.

The yard, majority-owned by a unit of South Korea-based STX Shipbuilding Co., is the only one left in France capable of building large military ships such as aircraft carriers.

The country’s Strategic Investment Fund bought into the Chantiers de l’Atlantique in 2008 in a bid to protect what it considers a strategic interest for the country, after its former owner Aker Yards ASA–Europe’s biggest shipbuilder–was bought by the Korean company.

Mr. Castaing said that the government played a key role in the success of the Royal Caribbean Cruise’s bid, by accelerating the government’s export financing insurance and guarantee mechanism, cutting the administrative procedure to around three weeks, down from several months.

“If it had taken six months, I think that this contract would have escaped us,” he said.

Mr Castaing said the French shipyard got the contract after financing problems tripped up a bid from STX Europe’s Finnish operations, which had built two previous Oasis-class cruise ships, the world’s largest cruise ships, for Royal Caribbean. The two ships currently operate in the Caribbean with features such as spas, miniature golf courses and basketball courts.

The new ship will be the third vessel of its type for the cruise line operator, and is set for delivery in mid 2016.

The contract also includes an option for a fourth vessel of the same model at a similar price, for delivery in 2018, Royal Caribbean said in a statement late Thursday.

If the option is triggered, the French shipyard would be able to hire new staff, Mr Castaing said. The site currently has 4,000 workers, half of whom are employed by STX France and the remainder by subcontractors. In 2000, the Chantiers de l’Atlantique, as STX France was known at the time, had 4,000 employees, excluding subcontractors.

STX France has been working to diversify its business offering. The company also builds support structures for offshore wind farms and is bidding for contracts to supply specialized vessels to carry out offshore installation and maintenance for the energy industry.

 (c) 2012 Dow Jones & Company, Inc.

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