Prospects of investment quotas programme
As IAA PortNews is informed, the programme on construction of fishing and crab catching ships by local yards (so called keel quota programme) can be revised due to sanctions imposed on Russia. Import equipment including propulsion units, diesels and fishing devices account for an essential part in shipbuilding projects. USC confirms the work with customers on possible redesigning of ships so that they could be fitted with Russian equipment. Experts believe that the challenges of the programme’s first phase rule out the authorities’ plans for the second one.
In 2016, after almost a 40-years long period, Russian shipyards started implementing numerous orders for fishing and crab-catching ships. In line with the industry reform, fishing companies are obliged to buy newbuildings in the Russian Federation to get some quotas for catching bioresources. The largest backlogs of orders are those of Severnaya Verf, Admiralteiskie Verfi, Vyborg Shipyard and Kaliningrad Shipyard “Yantar” of the United Shipbuilding Corporation (USC) as well as Leningrad Shipyard “Pella” and Far East shipyards (PortNews’ special project Fishing season of shipbuilding ) tells more in Russian.
Thus, 16 shipyards of Russia, from Kaliningrad to Kamchatka, are involved in the programme on construction of fishing ships for ‘keel quotas’. Construction of 52 fishing ships and 38 crab catchers was foreseen by the first phase of the programme (according to the data of the Ministry of Industry and Trade as of December 2021). By the end of 2021, the shipyard delivered 6 fishing and 2 crab catching ships.
Four sources in the industry told IAA PortNews that the contracts of Russian Fishery Company awarded to Admiralteiskie Verfi shipyard (10 trawlers) and the contracts of Norebo awarded to Severnaya Verf shipyard (10 fishing ships) are at risk. The companies said yesterday that all the contracts were in force. “There are no cases of contract termination in the segment of fishing ships or other civil shipbuilding projects. The work with customers is underway on possible redesigning of ships for their fitting with Russian equipment”, said USC.
Sergey Nesvetov, Executive Director of the North West Fishing Consortium (NWFC), confirms the plans on building the remaining six ships at Vyborg Shipyard (two units have been delivered). However, he underlines the need to postpone the reform of the fishery industry which could be a real support of the business by the state.
“Amid the current unstable situation it is necessary to suspend or postpone the industry reform. Given the challenges which the market players faced at the first phase of investment quotas distribution as well as the high volatility of the international situation, preparation and implementation of the second phase should be suspended until expiry of the current agreements setting the quotas,” believes Sergey Nesvetov.
According to him, continuation or cancellation of the projects will depend on the results of investors’ estimation of how shipbuilding costs will increase with involvement of new equipment suppliers as well as how the construction time will be extended. Equipment replacement will cause postponement of the deadline by 1-2 years, while the equipment costs offered by alternative suppliers have already multiplied, he emphasized.
According to Aleksandr Solovyov, General Director of Vyborg Shipyard, 99% of import equipment under NWFC contracts has been purchased and delivered. Therefore, risks of nonfulfillment of contracts under the agreed cost and time is lower for those contracts. He partly attributes the availability of all equipment by 2022 to the delay of construction: contracts with the customers were signed back in 2016-2017 and the procurement was conducted in 2017-2018 when volatility was more reasonable.
Potential cancellation of contracts by the major industry players which had initiated the transition from the historical principle of quotas distribution to the tenders with obligations to have ships built by Russian shipyards confirms that the reform supported by Rosrybolovstvo (Russian Federal Fisheries Agency) has actually failed, says Aleksandr Savelyev, Head of the Information Agency for Fishery. He believes that it can entail both personnel decisions and structural transportation in the industry.
The total scope of investment quotas announced under the programme has reached RUB 215 billion including about RUB 190 billion earmarked for construction of ships, said Ilya Shestakov, head of Rosrybolovstvo.
A source told IAA PortNews that accelerated rates of import substitution reported earlier will be challenged. Obviously, the process of finding alternatives to diesels, propulsion units and cranes will take several years, a period for which the shipbuilding contracts are to be extended. However, the agency’s sources say the equipment can be supplied by Turkish, Indian and Chinese manufacturers although the price will depend on the contractors and it will certainly be raised.
As for fishing ships nearing completion, shipbuilders can face a rejection of foreign companies to execute commissioning, notes another industry representative, a source of IAA PortNews. That can be resolved through involvement of domestic specialists although with the loss of the warranty, he says.
In general, those interviewed by IAA PortNews mention a popular saying that “there are no violations the capital would reject if a 300-pct profit is expected” when speaking about a possible return of Wärtsilä and MAN to the market of Russia with an adjusted transparency and cost of cooperation with the Russian customers.
Despite experts’ concerns, all the civil shipbuilding contracts for the fishing sector are still in force. “All the ten contracts for construction of 10 trawlers are in force,” said Russian Fishery Company. “We are going to build all the ships”, Sergey Sennikov, Deputy Director of Norebo, told IAA PortNews when commenting on the situation.
Press center of Rosrybolovstvo emphasized that 37 fishing ships are under construction including 17 launched units. “As of today, taking into account the current situation with the international sanctions including suspension of equipment supplies, Rosrybolovstvo suggests looking into shifting the deadlines of shipbuilding projects for 2 years,” added the agency. The draft law on the second phase of the investment quotas programme is undergoing the approval procedure at the federal authorities, it said.
“Despite external challenges, implementation of programmes on construction of fishing ships is obviously crucial for the economic security of the company. We see that Russian air carriers with their stake on imported aircraft have almost lost their ability to work. To prevent this situation we should continue building our fleet. Otherwise, most of ships available today will reach average age of about 40 years by 2030. That is inadmissible age for operation. In the today’s circumstances, additional support of investors and shipyards is certainly needed from the side of the state,” says Aleksey Osintsev, President the Association of Fishing Ships Owners.
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