COVID-19 brings uncertainty, fresh challenges for American shipbuilders

U.S. shipbuilders responded with characteristic resolve when the COVID-19 pandemic reached North American shores. Workers adapted to new safety protocols and managers overcame supply chain hiccups to keep projects moving forward.

But many of these shipyards now face another challenge altogether: Finding new work to keep their yards humming.

“We are getting through it, but we are not through it yet,” said Peter Duclos, president of Gladding-Hearn Shipbuilding in Somerset, Mass. “There is lots of work hanging out there we were counting on that hasn’t come yet. Things really stopped in terms of new projects.”

Gladding-Hearn, which primarily builds ferries, small ships and its trademark pilot boats, is by no means alone. Shipyards specializing in large-scale steel ships, ferries and offshore supply vessels (OSVs) have seen commercial order books empty out in recent years. Data from VesselsValue, a London-based maritime industry research firm, shows that orders for new U.S. cargo ships, large ferries and offshore vessels started falling in 2017. The decline has accelerated since then. Deliveries began ebbing in late 2018.

The explanations for the downward trend are well-documented by now. The collapse in oil prices reduced activity at Gulf of Mexico wells, forcing owners to lay up hundreds of vessels. As of late September 2020, VesselsValue reported 405 of 984 total U.S.-flagged OSVs are stacked up. That’s up from about 390 a year earlier.

Yet under this backdrop, the 221-foot Seacor Mixteca left Master Boat Builders in early 2020. The OSV is powered by twin Caterpillar engines with two Cat C32 gensets and two Cat C18 auxiliary power units. Deliveries like this one happened with startling regularity five years ago. Seacor Mixteca could be the last of its kind for years to come.

Beyond the decline of activity in the Gulf, fleet renewal programs launched by Jones Act shippers have run their course. U.S. Maritime Administration data shows the Jones Act fleet rebounded to 182 ships in 2019 from 169 in 2016 thanks to orders from TOTE Maritime, Crowley Maritime and American Petroleum Tankers. These days, only Matson and The Pasha Group have active shipbuilding projects, and both are nearing completion (Matson’s Lurline is profiled on page 16).

Construction of aluminum vessels, particularly high-speed ferries, has surged in recent years. NYC Ferry built an entirely new service from scratch, supporting multiple shipyards along the Gulf Coast. Those projects, however, are now starting to wind down. Reduced ridership and less travel overall during the pandemic could hinder new construction of ferries and excursion boats for years to come.

“The passenger boat business is going to take a while to recover,” Duclos said. “The ones that are operating are operating at reduced capacity, and some have chosen not to operate at all. It’s not a business environment where people are going to invest in new equipment.”

Matthew Paxton, president of the Shipbuilders Council of America (SCA), acknowledged the impact of COVID-19 and drew a similar conclusion.“The passenger vessel market is no exception (to the effects of the pandemic), and those companies involved in the construction, maintenance and operation of passenger vessels will need to adapt to the current marketplace concerns over COVID,” he said.

It’s not just the U.S. shipbuilding industry facing headwinds. Worldwide, new ship orders fell to the lowest level in 17 years during the first half of 2020, according to a report by BIMCO’s Peter Sand. The decline has been felt across the dry bulk, containership and tanker sectors, he said.

“Contracting activity has been quick to feel the effects of the pandemic, with owners and investors showing little appetite for new ships,” said Sand, chief shipping analyst for the Denmark-based international shipping association.

All that said, there are some bright spots on the horizon. Washington State Ferries is moving ahead with battery-electric refits on its three largest ferries. It’s also building up to five new hybrid-electric, 144-vehicle Olympic-class ferries. Additionally, Fincantieri Bay Shipbuilding has begun construction on the first new U.S.-built Great Lakes freighter in nearly four decades.

 

Opportunities in offshore wind
Offshore wind power has been slow to take hold in the United States. But in late 2020 there were some signs the industry is ready to take off. 

The five-turbine Block Island Wind Farm off Rhode Island has been the lone offshore wind project in the U.S. since its commissioning in late 2016. Not for long: The two-turbine Coastal Virginia Offshore Wind pilot project located almost 27 miles off Virginia Beach will come online by the end of the year. And by 2026 there could be a dozen or more projects up and running, according to the American Wind Energy Association (AWEA).

Those projects will likely require a lot of ships. The AWEA identified more than a dozen different vessel types needed in the construction and commissioning of offshore wind turbines. These include survey ships, cable-laying vessels, tugs and barges, heavy-lift vessels and crew transfer vessels (CTVs). The U.S.-flagged fleet contains many of these, but not all, particularly not some of the more specialized ships used in Europe and elsewhere.

“The emerging offshore wind market holds a lot of promise for the construction of Jones Act-compliant wind turbine installation vessels and numerous other offshore supply vessels,” Paxton told American Ship Review. He added that the SCA will fight any efforts to hire foreign-flagged ships to do the work.

Some new vessels already are being built for this purpose. Senesco Marine of North Kingstown, R.I., delivered an aluminum CTV around Labor Day for WindServe Marine (profiled on page 30). Blount Boats of Warren, R.I., is nearly finished building a second CTV, Atlantic Endeavor, for Atlantic Wind Transfers. Although these two vessels represent a drop in the proverbial bucket in terms of U.S. shipbuilding output, they could signal the start of a whole new industry. 

Just when this new industry will really arrive is still hard to know.

Charles Donadio Jr., president of Atlantic Wind Transfers, said it likely will be 2023-2024 before construction starts on any new wind farms. “It’s coming, but it’s a matter of how fast,” he said in a recent interview, adding that “the time frame is still several years out.”

“There has been a lot of momentum in the recent months, and our team is excited to see these projects begin to move forward,” Donadio said.

Marcia Blount, president of Blount Boats, said she’s stopped trying to predict when the market for offshore wind service vessels will finally come. Blount built Donadio’s first CTV five years ago and is currently building his second. By now, Blount hoped to be building five or six of these aluminum catamarans each year in support of a vibrant, thriving offshore wind sector.

“We obviously have been disappointed with the slow rollout, which has happened for all sorts of reasons,” she said, among them a longer permitting process for wind farms and concerns from fishermen. “I am not discouraged, but I am disappointed. It is going to happen. I am not sure when anymore.”

 

Responding to COVID-19
COVID-19 came on slowly, and then all of a sudden everything changed. While the broader economy came to a standstill in most states, the “essential” nature of U.S. shipyards kept those facilities running. Overnight, in some cases, managers had to find solutions to keep crews healthy and projects on track.

Most yards followed protocols as they emerged from state and federal agencies. Crews kept their distance when safe and practical, masks became mandatory, and workers covered by personal protective equipment became the norm. Many yards staggered shifts to reduce the number of people on site at any time.

“Like other essential work, the ‘new’ way of doing business includes many precautions to keep our employees and facilities safe,” said Anthony Paolino, spokesman for General Dynamics NASSCO. “Our workforce has proven to be incredibly resilient and quickly adapted to the COVID-19-related changes and continues to work toward our goals and milestones.”

The SCA, whose leadership includes executives from the nation’s largest commercial and military shipyards, established a working group in February to prepare for the virus. Although there were sporadic cases at shipyards, there were no major outbreaks that shut down production for extended periods.

“Safety is part of our culture,” Paxton said, adding that he was “very proud of what we have done as an industry.”

Gladding-Hearn, located in a state hit hard and early in the pandemic, closed for two weeks in late March “just to get a handle on the situation,” Duclos said. Crews returned to a wholly different workplace, with staggered shifts, distancing and universal face coverings. Daily meetings were convened to check in with managers and discuss the latest government precautions.

Duclos also made some tough choices. His yard on the Taunton River had multiple jobs under way at once. It needed to hit certain deadlines to keep revenue flowing to the yard, but lacked the manpower due to the pandemic to do all of the projects at the same time. As a result, he would focus his crews on one project or another to reach certain milestones.

“We are very fortunate to have some really good customers. We explained our situation, and I’ve got to say, without exception they were extremely understanding,” Duclos said.

 

Government shipbuilding stays strong
Government shipbuilding activity accelerated during the Obama administration and remains strong under President Trump. The future, however, is harder to predict.

First, the good news: There is a lot of government and military work happening across the U.S. Earlier this year, the Navy awarded a contract to Fincantieri Marine Group to build its new FFG(X) guided-missile frigate. The order could grow to nine ships and $5.5 billion.

Meanwhile, work continues on America-class amphibious warships at Ingalls Shipbuilding in Mississippi, and on littoral combat ships at Austal USA in Mobile, Ala. Gulf Island Shipyards won a contract to build two more Navajo-class towing, salvage and rescue ships. Addionally, Navy tugboats are under construction in the Pacific Northwest, RHIB builders on both coasts are fulfilling valuable contracts, and Metal Shark developed a new class of Navy patrol boats.

The Coast Guard is upgrading its fleet as well. The nearly $2 billion polar security cutter program is advancing at VT Halter. The lead icebreaker is due in 2024, with sister vessels due in 2025 and 2027. Ongoing problems with the Coast Guard’s two remaining heavy icebreakers mean these ships can’t arrive fast enough. Other projects include offshore patrol cutters at Eastern Shipbuilding and fast response cutters at Bollinger.

NASSCO in San Diego is building six John Lewis-class fleet oilers for the Military Sealift Command, and Vigor is building a new series of landing crafts for the Army. Philly Shipyard has a contract for up to five national security multi-mission vessels that will be used primarily as training ships for state maritime academies. The National Oceanic and Atmospheric Administration is working to add two new research vessels to its fleet, the first of which will be based in Honolulu.

It’s not clear how long the Navy, and other branches of the military, can sustain this pace. The Navy itself has scaled back its expectations for 2021-2025. It now expects to build 44 ships in that period, down from an expectation of 55 as recently as last year, according to a September 2020 report from the Congressional Research Service.

“Navy officials state that while the 355-ship goal (total fleet) is a priority, they want to avoid creating a so-called hollow force, meaning a Navy that has an adequate number of ships but is unable to properly crew, arm, operate, and maintain those ships,” the research service said in its report.

Paxton acknowledged there are still some questions about how the 355-vessel fleet will look. He also said there will be some level of unmanned or autonomous capability, both in surface and submersible vessels. “While we want these government programs to remain predictable and stable,” he said, “the reality of budgets in the future (is something) we’re keeping our eye on.”

Categories: American Ship Review