Vladimir Shlyomin

T

he recent presentation of a $15-million Smile ocean yacht of the VIP-class has led to a splash of interest in the Russian shipbuilding. “Excellent ship that is close to a six-star hotel by the level of the interior design and comfort”, commented Dmitry Mironenkov, the general director of the Moscow Shipbuilding Plant. Indeed, Smile looks victorious: it is five meter longer than the president’s Pallada yacht! The ship has five decks with guest cabins, two saloons with a movie theater, a reception hall, a solarium with a lounge, an area for two hydrocycles, a Jacuzzi swimming pool. There are latest navigation system and satellite communications on board. The interior is done of mahogany of the special kind so as to emphasize once again: Russia’s most expensive and largest yacht has been built in Moscow.
At the same time, the magnificence of this Smile improperly contrasts with a rather dismal state of the Russian shipbuilding.
Just recently this industry was considered one of the world’s strongest. A third of the world military shipbuilding was concentrated there and, by civil shipbuilding, the country was in a dozen of leaders occupying dominating positions in building such ships as nuclear-powered ice-breakers, crafts with hydrofoils and air cushion, airfoil boats, etc. But in the last ten years the situation has changed radically. The Navy’s orders have been reduced 20 times and civil shipbuilding orders have gone down by more than 5 times.
The Russian shipbuilding industry includes 170 enterprises and organizations of different property forms, which employ more than 220,000 people. Its scientific and engineering potential is concentrated in 56 scientific research and experimental development organizations. However, only 20% to 25% of enterprises’ capacities are used while the process of the Russian fleet’s natural ageing goes on.
At the start of market reforms shipbuilders believed that the industry free of the centralized planning and state management would develop more actively by working up world market positions. But in real life everything turned out quite differently.
Having been oriented mostly on fulfilling military orders Russia’s shipbuilding industry failed to compete in building merchant ships. For example, more and more tankers, dry cargo ships are leaving shipways of Asian countries. Even Europeans are forced to yield their positions in this market. In the beginning Japan was their main rival but, later, all shipbuilders became pressed by South Korea, which developed colossal capacities and started building gigantic ships by furious pace while keeping low labor costs.
In contrast to other sectors of Russia’s industry, which also went through all stages of the structural crisis in the 1990s, shipbuilders also have to solve specific problems. Their products are sophisticated and expensive merchandise, costing from $10 million to $3 billion each; the process of building them takes no less than a year but sometimes it can go on for several years as well. Works are done in cooperation with dozens of allied enterprises. In the planned economy the shipbuilding was financed by the State. In market conditions the state functions could have been taken over by big customers. However, the privatization of sea transport was chaotic and, as a result, strong state steamship lines broke up into numerous private shipping companies, which were weak economically. As a rule, these ship owners do not have money to purchase new ships and they cannot obtain credits through pledging property because the country does not have a legal backing of pledges. That is why they have chosen to set up offshore companies in countries of the ‘convenient banner’ trying to transfer mortgaged ships under this ‘banner’ and obtain bank credits on their pledges. At the same time, they have to agree to placing orders with shipyards of a credit-providing country.
In the last three years the Russian shipbuilding industry has become the subject of authorities’ attention. In 2001 the president ordered to establish a Marine Board chaired by prime minister and soon he approved Russia’s marine doctrine till 2020. The doctrine provides for building ships, which could successfully compete by such indexes as reliability, universality and high speed. In other words, the document makes it necessary to build a qualitatively new fleet.
Here are just some general estimates of the needs to be met by 2010. In order to revive the Russian merchant fleet it is necessary to build 266 ships with the total deadweight of 7.7 million tons and cost of about $6.8 billion. The partial replenishment of the ice-breaking as well as other types of the sea servicing fleet will cost $1B. The fishery needs 550 big and medium-size catcher boats for different purposes and over 500 small catcher boats. All in all, the cost is to total about $2.5 billion. Besides, there should be 326 inland water ships with the total carrying capacity of over 1 million tons and cost of about $1.4 billion that are to be built, mainly, for the combined ‘river-sea’ sailing.
Since Russian enterprises cannot build ships with the deadweight of more than 70,000 tons, it is planned to start, above all, with modernizing St. Petersburg’s shipyards so as to build ships with the deadweight of over 100,000 tons. Besides, two major shipyards will become shipbuilding plants. One of them located in the town of Severodvinsk (the Archangelsk region) has already started building dry cargo ships with the deadweight of 396,000 tons.
The federal budget provides for increased expenses on shipbuilding. As for the government’s specific practical steps, it is worth mentioning its decisions to allocate funds for building a new nuclear-powered ice-breaker at the Baltic Shipyard and subsidize a part of interest rates on the Sberbank’s credits for building a series of dry cargo ships at the Severnaya Verf.
And the first results are already noticeable. At present, by its growth rates, the shipbuilding industry is developing 1.5 to 2 times faster than the country’s industry in general. The growth is achieved, mainly, through building ships for foreign customers. In the opinion of experts, in the nearest 10 to 15 years precisely the foreign market will become such a lifeline, which will keep Russian shipbuilders afloat and help them maintain the technological level.
Russian warships, such as submarines, frigates, corvettes, fighting and patrol boats, are in the most demand by the world market. Russia leads the world export of submarines having an experience of supplying them to Navies of 14 countries and building in the post-WWII years over 50% of all submarines in the world. Today, Russian shipyards are building submarines of project-877 and project-636, which are recognized as one of the most low-noise , as well as the Amur export-designed submarine of the new generation. There are works underway on developing several modifications with air-independent energy plants, which will increase several times the autonomous sailing of diesel submarines. The Almaz Shipyard Company (St. Petersburg) has launched another storm-boat with air-cushion of the Zubr project. The largest boat of this type is already the third one built for Greece’s Navy. Having a 540 tons displacement it is 57 m long and 22.5 m wide. The boat can take on board 500 marines and three 50-ton tanks and it makes over 60 knots.
It goes without saying that another promising market for shipbuilders is the oil-and-gas industry. The rapid growth of Russian oil export shipments and high profitability of the oil business result in the heightened demand in this sector. Shipbuilders have started getting orders from oil companies more often than before.
The SevMash State Production Association is building a sea, ice-resistant stationary platform. Its two out of four caisson super blocks are already completed. In 2004 alone, over $300 million have been allocated to implement this project and the same amount is planned for the next year.
In the opinion of Nikolai Borisenko, the first deputy president of the company Rosneft, SevMash is Russia’s strongest enterprise of this specialization and that is why the company intends to place with it other orders as well.
The gas industry is also interested in this project. As Vladimir Vovk, the head of the Sea Operations Office at Gazprom JSC, said, as far back as ten years Gazprom adopted the program of constructing sea platforms and made large investments, including funds to modernize SevMash. The enterprise used these investments to buy equipment; it reconstructed the tank basin and created an advanced development base. "The decision turned out to be right. It is pleasing to see that the work was not done in vain", stated Vovk. "Now everyone realizes that the future of the Russian oil-and-gas production belongs to sea shelves", he added.
Oleg Mnakatsanyan, the general director of the state enterprise ArktikMorNefteGazRazvedka, reminded of the agreement, which was signed with leaders of SevMash as far back as 1999. Both sides reached an understanding that in case of obtaining a license to develop sections of shelves in the Barents Sea Gazprom would place 80% of orders with SevMash to build stationary platforms for producing oil and gas. Such a license was obtained in 2000. "Placing orders is done by ArktikShelfNefteGaz JSC but being a co-founder of this enterprise I can say that the unquestionable priority will be given to SevMash. Right now works on a conceptual design of a future platform are being done with all Russian and Western experience taken into consideration. I would like to add that nobody in the world has ever constructed platforms of the similar type", said Mnakatsanyan.
The reliable indicator of positive changes in the shipbuilding industry and its overcoming of depression is the behavior of steel companies.
For example, Severstal has doubled production of sheet for ships and got actively engaged in certifying the technology of making rolled products for construction of drilling platforms. Six certification organizations (Lloyd’s Register, American Bureau of Shipbuilding, Det Norske Veritas, Germanischer Lloyd, BureĐ°u Veritas, Russian Sea Sailing Register) have at once certified a mill-5000 steel of standard strength and a mill-2880 as well as a mill-2000 steel of increased strength. Besides, the Russian Sea Sailing Register has certified a mill-2800 steel of increased strength, improved weldability and with a guarantee of thickness-oriented properties.
"All in all, we have 37 certificates and we expect three more coming before the year’s end", said Alexander Stepanov, the technical director of Severstal. In his words, the company has done a lot so as to offer shipbuilders the high-quality products. It has made investments of about $40 million and established such important technological links as a section-straightening machine, ultrasonic flaw detection unit, controlled cooling unit. All this upgrades the technological potential of mill-5000 to make rolled products for the fuel-and-energy complex and the shipbuilding industry.
Taking into account the increase in defense orders Severstal has begun a mass-scale production of special ship steels for submarine and surface ship bodies. The Severnoye Machine-Building Enterprise (the town of Severodvinsk) has become one of the customers for these products. The placement of this order has been preceded by the shipment in January 2002 of a pilot batch of sheet shipbuilding steel with especially sophisticated complex of properties. This is a fundamentally new product of the Russian steel industry: the previous ones were made only at Ukraine’s enterprises built in the Soviet times. The technology of ship steels developed by specialists from Severstal together with the enterprise Prometey (St. Petersburg) is the low-expense one: alloy scrap received from discarded ships is used in melting. By estimates, Severstal’s supplies of steel of special grades under the state defense order for the Navy will average 5,000 to 6,000 tons a year.
Russia possesses unique opportunities to expand its sea presence. Three fourth of its borders are at sea, over 60% of its foreign trade turnover involve the use of seagoing crafts, the country is actively developing production of oil and gas on sea shelves. Analysts believe that taking into account such a combination of factors Russia should restore the shipbuilding as a leading sector of the national industry in a near future.


Quote:
"Sea-related activity has always been and remains profitable. The cost of freighting ships, which provide transportation of goods by sea, amounts to between $230 and $250 billion a year. The annual revenue from fish and seafood varies between $35 billion and $40 billion. No less profitable is production of oil and gas on sea shelf, which is estimated at $80 billion to $100 billion a year. These figures should be supplemented with the market of shipbuilding products, which is estimated at $70 billion to $80 billion a year".
Valentin Pashin, Director of the Academician A.Krylov TSNII, Russia’s State Scientific Center