How to balance the interests of shipbuilders and their customers

The Federation Council hosted yet another hot discussion between representatives of the fishery and shipbuilding industries. Their reciprocal claims culminated with a suggestion that USC and the Ministry of Industry and Trade should present a definite plan of import substitution and with a conclusion that the measures undertaken so far lose their effect due to devaluation. Ship repair was also on the agenda.

During the online meeting chaired by the Federation Council member Andrey Kutepov, Aleksey Rakhmanov, President of United Shipbuilding Corporation, and Peotr Savchuk, Deputy Head of Rosrybolovstvo (Russian Federal Fisheries Agency), had yet another dispute on who is to blame and what is to be done.

According to Aleksey Rakhmanov, together with the state defence order “all the ships are needed simultaneously and the shipyard’s load should be taken into consideration in the future when placing the orders”. In this respect, he suggested “extending” implementation of contracts on construction of fishing ships.

“USC or any shipyard is not a supermarket where one can come and buy a product”, said Aleksey Rakhmanov (yet it should be noted that some foreign shipyards do build ships for stock).

Peotr Savchuk, Deputy Head of Rosrybolovstvo, says the Agency numbered 35 contracts on construction of crab catching ships. According to him, 15 ships will be built by the Far East shipyards including 8 units to be built by Nakhodka Shipyard, 5 – by Vostochnaya Shipyard and 2 – by Khabarovsk Shipyard. The ships are to be built between 2021 and 2025.

Apart from 43 fishing ships under construction, the shipyards in the Far East region are to build 8 vessels between 2023 and 2025 including one vessel made of composite material (35 meters long).

Besides, 10 small-size ships are to be built in the Far East.

“The shipyards are fully loaded… now it is time to take a close look at schedule compliance. Postponing the deadlines is not quite right”, said Peotr Savchuk.

According to the Rosrybolovstvo representative, the Agency is snowed under fishing companies’ complaints against Russian shipyards disrupting delivery deadlines. First of all, that undermines the economy of fishing companies which have to repay loans and cover other expenses.

“Vyborg Shipyard, Severnaya Verf and Pella (the latter is not a USC company) encounter delays of 6 to 9 months” resents Peotr Savchuk. At the same time, there is no ship equipment in Russia to ensure import substitution, he emphasized.

Aleksey Rakhmanov, said in his turn that “the delays should be normally attributed to the need to update design documentation which is the customers’ responsibility”. Once again, he repeated his old idea of the low-down trick played on fishing companies due to their decision to have Norwegian designs developed in compliance with Russian requirements. That takes much time.

Valery Ponomarev, member of the Council of the Federation representing the Kamchatka Territory, claims that the shipyard is responsible for the schedule disruption if Vyborg Shipyard director knew about such problems while signing the contract setting forth certain terms.

“The shipyard will certainly bear the responsibility but the customers providing non-compliant design document should share that responsibility”, shut back Aleksey Rakhmanov.

When speaking about insufficient local content of the ships under construction USC head underlined that such corporations as MAN, Wartsila, etc. manufacture thousands of engines being used today. At the same time. There are no large serial orders in Russia. Instead, lead ships based on much-vaunted Norwegian designs are ordered (and they already foresee foreign equipment – Ed.).

“Over a half of ships we have are serial units, - Peotr Savchuk disagreed again – Do 10 vessels make a series? 16 vessels? I think even four vessels is a series already.”

“Ten ships do not turn it into a success”, - believes Aleksey Rakhmanov. According to him, a crab catcher pays off within five years “under the worst-case scenario” while an engine manufacture will need 15 years if its output numbers hundreds or even thousands of units per year.

Looking into fishermen’s pockets displeased Valery Ponomarev who emphasized that USC President's estimation of a pay-back period for crab catchers does not take into account the burden of auction which is even more expensive. Neither does it regard a 20-pct fall of live crab prices in China. On the average, the cost recovery period is also 15 years, assured the senator.

Boris Kabakov, Director, Shipbuilding and Marine Facilities Department, Ministry of Industry and Trade, told in his turn about the audit of 500 Russian companies held by the Ministry and Import Substitution and Localization Center of CNII Kurs (read more about its activities >>>>). The audit resulted in designation of 6,000 items of equipment the can manufacture.

Boris Kabakov also told about the decision according to which enactment of RF Government’s Decree No 719 will be score based: the more materials and equipment of Russian origin the ship has the higher is its score. Having reached a certain level of local content the ship can be acknowledged as Russian product.

The Ministry believes it can contribute to successful phasing out of equipment imports.

Sergey Tyrtsev, First Deputy to the Minister for the Development of the Russian Far East and Arctic drew attention to the problem of ship repair which is in the focus of IAA PortNews’ dedicated project >>>> 

According to the official, the sector of ship repair also needs state support, at least through subsidies for development of infrastructure and modernization of technical facilities.

His also pointed to a solution of serial production issues: “In the Far East, we operate about 600 ships (fishing ships – Ed.) and they require regular repairs. That is the base for localization”.

Sergey Tyrtsev was supported by Konstantin Dolgov, member of the Council of the Federation, who marked no reference to ship repair support in the state programme on development of shipbuilding and equipment for offshore projects, which is a flaw in his opinion. The senator also said it would not be a bad idea to look into reconsideration of zero custom duty for imports of new ships. “Reasnable protectionism wouldn't go amiss”, said Konstantin Dolgov.

A sort of culmination of the hot discussion was the opinion expressed by Valery Ponomarev. According to him, the subsidies foreseen for the fishing fleet are not relevant enough since they will hardly cover the growth of ruble prices for ship equipment amid the weakening of national currency caused by the pandemic and oil crisis. In this respect, he suggested to hold a meeting in autumn when the economic situation becomes clearer.

Andrey Kutepov, Chairman of the meeting, asked USC and the Ministry of Industry and Trade to think of specific proposals on import substitution and localization in construction of fishing ships. Now, the question at issue is the ability of the state to balance the interests of shipbuilders and their customers with the progress in import substitution.

Vitaly Chernov