The rise of Asian shipyards and growing investment in refurbishment were two major trends debated in conference sessions at Cruise Shipping Miami 2014 on 12 and 13 March.
In the Newbuilding Outlook session on Wednesday 12 March, participants discussed how the European order book would be affected by increasing activity among Asian yards in the sector.
The percentage of ships built in Europe was as high as 97% by gross tonnage, said Jean-Bernard Raoust, president, Barry Rogliani Salles. “We may see some surprises from Chinese yards, especially for small ships, although it is financially difficult for Asian yards to compete in this market as they prefer series contracts, and contractual terms for cruise ships are very severe compared to commercial vessels. The initial cost to build a first ship is dramatically high.” He noted that the STX Group, despite being a specialist in cruise ships in Europe, had not brought this knowledge to bear in cruise ship construction in Korea. On the subject of overcapacity in European yards as owners order fewer ships, “we need to ask whether there is one shipyard too many in Europe,” said Raoust.
Kevin Douglas, VP technical projects, newbuilding at Royal Caribbean Cruises Ltd, addressed the debate over whether to build prototypes or sister ships. “The benefits of sister ships are the shorter delivery time, known costs, economies of scale and operational standardisation. The disadvantage is that there is limited opportunity for improvement.”
He said the long lead time for new design work put pressure on shipyards and added to the cost. “We are committed to making every new ship 15-20% more efficient than the last. Energy efficiencies are easier to incorporate in a newbuild when you have a clean sheet of paper. Safety is an issue too. Can we make existing ship as safe as a newbuild? The answer is no.”
On the subject of yards in Asia, Douglas said: “Nearly all the cruise companies have had discussions in the Far East, but there are cultural differences. We apply just-in-time design for our cruise ships. A big thing not understood in the region is reference ships. We can very quickly order based on the reference ship and most shipyards in Europe understand this very well. They know they can evolve the design to match pricing. In the Far East this is not something they have experience of and it is one of the barriers to entry.”
Olli Jantunen, head of naval architecture for STX Finland, said STX Europe currently held 33% of the cruise ship market, followed by Fincantieri with 30% and Meyer Werft with 19%. Regarding the potential for Asian yards to take up some of the market share, he said: “The average total cost of labour in China is cheaper than in Japan and Korea, but the yearly cost increase of labour is very high in China, at about 13%. Competition is very strong and it is very difficult to get into the market. Cruise shipbuilding is different to cargo shipbuilding; it takes ten years at least to learn how to build the ships and one can question whether cruise shipbuilding is really a prosperous market for Asian yards to enter.”
Greg Walton, VP, RTKL Associates, discussed how trends will affect naval architects as they design and develop interiors. “Schedules from inception of design of a vessel to delivery are now beginning to be shorter,” he said. “We are used to working with multiple architect teams and there is increased collaboration between owners, shipyards and architects.”
Walton said the ‘educated guest’ was now a major factor in ship design. “Design has become a big differentiator for the cruise industry. One of the first projects that used design as a marketing tool to attract guests was the Celebrity Solstice series. Design is now used as a way to increase onboard revenue.”
He said cruise lines must recognise who their future guests will be. “The demography of travellers is changing across the globe. Someone in their twenties today will have desires different to someone who is 40 today. Meeting their needs may mean removing the main dining room and theatre, as entertainment will play an entirely different role, moving away from the large purpose-built theatre that is used for just a couple of hours a day.”
Markus Aarnio, senior vice president of Foreship Ltd, said there was a major trend towards efficiency, especially optimising for speed. “Shipyards want to opt for trial speed but this is often the wrong way for shipowners. Also, it is important to optimise for real conditions. Ships are typically optimised to calm conditions but they should be optimised for waves.”
A panel addressing refurbishment, held on Thursday 13 March, looked at how the annual value of the cruise ship refurbishment sector is moving closer to that of the newbuild market as lines continue the trend of major makeovers every three to five years in a ship’s lifecycle. The benefits of drydocks lasting less than a month on average were weighed against several years of development required for a new vessel.
Christian Compton, senior director of corporate ship refit for Carnival Corporation & plc, managed the Carnival Sunshine conversion, the industry’s largest with a price tag of US$155 million. “Carnival Corporation had five major refits in 2013, with 12 more vessels having more than a regular drydock. The size and complexity of these projects is growing, with no increase in drydock time,” he said. The primary goals were improved energy efficiency and environmental compliance, as well as safety enhancements. “Refits and newbuilds are blending as we bring concepts from newbuilds onto existing vessels. We are also testing new concepts on refits then using them in newbuilds.”
Compton said: “We need to evolve and adapt. Spend is increasing at levels we hadn’t anticipated. We spend per day two to three times what we did less than ten years ago.” A key question for the future was: “Owners, shipyards, supplier networks – who will lead refits? Traditional work scopes are now broken into various categories out of a desire to reduce overall contractor risk. There were previously three types of contractors – basic refurbishment vendors, conversion outfitters for extensive works, and owner-supplied support teams. Work is now much more complex. Will shipyards and suppliers be able to manage? Management structures need to evolve to handle the interferences between disciplines at turnkey ship levels – future success will depend on new partnerships and total turnkey groups.”
Rüdiger Pallentin, managing director of Lloyd Werft Bremerhaven, quipped that the strategy of shipyards had changed: “In the past our aim was to make as much as possible right, now it is to make as little as possible wrong.” He said that as demand had grown for improvements such as exhaust gas cleaning and more efficient hull designs, “what has really changed is the subcontractors engaged by the owner; the amount of work shared between yards and owners. The amount of yard work is going down as the amount of owners’ work is going up. There are a lot of interfaces to be coordinated.”
Kelly Gonzalez, VP architectural design, newbuilding and fleet design for Royal Caribbean, said the company had undertaken 28 major revitalisations since 2003, 15 of them in the last 30 months. “We start thinking about revitalisations when we start planning our newbuilds,” she said. “As we go through the spiral of designing and building, we can feed back into future revitalisations and newbuilds.” In-service refits were a growing trend, she said. “With Mariner of the Seas, we undertook a four-phase retail installation while the ship was in service, increasing onboard efficiency. Understanding critical path components is also key.” Modularised galleys and prefabrication, along with flexibility to conduct work either at dockside or shoreside, helped reduce out of service days, she said. Royal Caribbean’s ‘Lean’ working method enabled identification of where energy was being wasted. Using this method, the company had doubled the volume of refit work it could complete in a day between the revitalisations of Splendour of the Seas in 2012 and Navigator of the Seas this year.
Päivi Haikkola, head of research and development at Deltamarin, said there was an urgent need for a reduction in costs and an increase in revenues. “The renewal circle is becoming faster, with ships renewed every three to five years,” said Haikkola. “In the past, secondhand ships were a good way to enter market, but today the big operators don’t want to give these still very sound ships to newcomers or competitors, so they refurbish rather than sell.
She added: “Ships have to become more energy efficient and refurbishments have to be able to increase revenues. We think refurbishments will therefore take an even deeper look into systems onboard, moving from the surface into the structures. This includes hydrodynamic changes to the ship’s hull, and major changes to machinery and systems to make vessels far more efficient and increase potential to bring in revenues.”