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Shipbuilders still facing headwinds

Jul 3, 2018 11:35 AM

Some signs of life amid a stubbornly soft market

Eastern Shipbuilding of Panama City, Fla., has stayed busy with new tug and towboat projects.

Eastern Shipbuilding

Eastern Shipbuilding of Panama City, Fla., has stayed busy with new tug and towboat projects.

The slowdown in new tug construction over the last few years has been tough for shipyards, naval architects and suppliers. The outlook for the next 12 months doesn’t appear a whole lot better, although some firms see reason to be optimistic.

Many of the same factors that have dogged the industry since 2016 haven’t gone away. Demand for new offshore/platform supply vessels is virtually nil. In their absence, shipyards along the Gulf of Mexico are competing fiercely for tug projects.

“Boats will never be this low again on price,” said Joe Rodriguez, owner of Rodriguez Shipbuilding.

Cutthroat competition for work means historically low margins for shipyards. This leaves little room for error if costs exceed projections. Horizon Shipbuilding noted “higher than anticipated” labor and materials associated with building new EPA Tier 4 tractor tugs in its bankruptcy filing last fall.

Rodriguez Shipbuilding owner Joe Rodriguez, left, and Capt. Mark Pearson oversee final outfitting on the Coeymans Marine tugboat Daisy Mae.

Brian Gauvin

The inland towing market faces similar challenges. Jeffboat, a longtime builder of barges and towboats, recently announced it would shut down, likely for good.

“I’d say it hit the bottom sometime early last year,” Great Lakes Towing Co. President Joe Starck said of the U.S. new tug market. “There are other tugs being built now, but at volumes that are still very slow.”

Tug and towboat deliveries fell to 88 in 2017, down about 20 percent compared to 2016, according to Shipbuildinghistory.com, one of the few comprehensive sites tracking new vessels. From 2010 through 2017, the site recorded an average 106 new tugs per year. Yet through the first three months of 2018, the site listed just 14 new tug deliveries.

Rodriguez Shipbuilding has been quiet since its last tug, Daisy Mae, left the yard in October 2017. Some other yards in the once-bustling shipbuilding town of Bayou La Batre, Ala., have steady work, but others are finishing existing jobs with little else in the pipeline.

Great Lakes Shipyard crews made progress this spring on a 2,000-hp tugboat at its Cleveland facility.

Great Lakes Shipyard

The oil field slowdown, which is well-documented by this point, has hurt shipbuilders across the Gulf. But rising construction costs from Coast Guard Subchapter M requirements and EPA-mandated Tier 4 engines are another hurdle for new tug construction. Rodriguez suggested potential clients have backed off recently after seeing shipyard quotes for new tugs.

“The price to build what you want these days is surprising,” he said. “If you had figures in your head from two, three, four years ago, then you’re going to get a serious wake-up call.”

E.N. Bisso & Son in New Orleans has two new Tier 4 tugboats on order from Eastern Shipbuilding in Panama City, Fla. The first is due next year and the second in 2020. The company president, Matt Holzhalb, acknowledged the effect of new regulations in a recent interview.

“Complying with Subchapter M and Tier 4 standards increases our costs,” he said. “It takes some effort to make sure that everything we’re doing meets these requirements.” The industry has worked closely with the Coast Guard to meet the new specifications.

Operators have revised their newbuild proposals to meet Subchapter M requirements, published in mid-2016, for the design, construction, onboard equipment and operation of towing vessels. Any U.S. towing vessel being built now must get a USCG certificate of inspection, or COI, before operating.

Conrad is building three ATB units for Vane Brothers, including Wachapreague, named for a coastal Virginia town.

Vane Brothers/Jim Demske

Elizabeth Boyd, president of propulsion equipment manufacturer Nautican, is feeling optimistic despite these headwinds.

“The first half of this year is still pretty weak, but we are thinking that by the end of the year things will be looking up. It looks promising,” she said in a recent interview.

Boyd recalled having relatively limited expectations during a series of recent trade shows, including the WorkBoat event last fall. Instead, there was a “steady stream” of customers who wanted to talk about upcoming projects.

“These were good, quality customers with boat designs and plans to get something done, and we have been working on quite a few of them,” she said.

It’s certainly not all bad news out there. Large operators such as Moran Towing, Harley Marine Services, G&H Towing and Marquette Transportation are pressing ahead with new tug projects. Harley Marine, for instance, has taken delivery of two tractor tugs since last summer, Dr. Hank Kaplan and Rich Padden, and a third is in the pipeline. The Seattle company also has built four new ATBs and ordered two new oceangoing tugs from Conrad Shipyard.

Fincantieri Bay Shipbuilding built Millville with a Nautican propulsion system for the Wawa convenience store chain.

Nautican Research and Development

Foss Maritime announced a new series of Damen-designed tugs at its Rainier, Ore., shipyard. Operators on the West Coast and Gulf of Mexico also announced new diesel-electric hybrid tug projects, and Edison Chouest Offshore is nearly finished building nine new tugs for the Alyeska Pipeline Service Co. in Valdez, Alaska.

As for the vessels getting built, they are trending toward lower emissions, more horsepower and larger size overall. Greater safety and cost controls also are factors, according to Robert Allan of naval architecture firm Robert Allan Ltd. in Vancouver, B.C.

In the U.S. Gulf and Southeast, traffic involving large ships is increasing because of expanded Panama Canal throughput. “As ships get bigger, tugs have to be more powerful and typically larger to accommodate heavier machinery,” Allan said. Growing U.S. oil and gas exports will call for more powerful and capable tugs, especially when escorts are required.

Bryan Nichols, director of business development with Jensen Maritime Consultants, argued that diversification will help shipyards ride out slower periods. Like some vendors, he also sees signs of life in the escort and ship-assist tugboat sector.

Senesco Marine is building two Franklin-class ATB tugs for Reinauer Transportation.

Casey Conley

“Overall, the market is down but we have quite a few new tugs getting built from us at Jensen and quite a few people looking at our tugs,” he said, adding that some operators are starting to consider building again after “a break.”

The slowdown in tugboat building comes during a period of relative strength in the U.S. economy. Right now it’s not clear what factors, if any, will spur new demand for building projects.

Brandon Durar, president of deck equipment maker JonRie InterTech, believes Subchapter M could provide that boost as older vessels become more expensive to maintain or retrofit. He agreed new tugs remain something of a bargain.

“Right now is the best time to invest in your fleet,” Durar said, adding that the alternative will be, “wait in line for a higher price.”

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