The State of Shipbuilding

Greater Scott, a 158-foot crew boat from Neuville Boat Works, heads to work in the Gulf. (Brian Gauvin)

This is how fierce demand is for newbuilds in the Gulf: Bollinger Shipyards of Lockport, La., didn’t even bother to line up customers for its new pair of 193-foot supply boats. Instead, it built them on spec and now plans to auction them off online to the highest bidder.

Marinette Marine in Wisconsin prepares to install the waterjets for Freedom, Lockheed Martin’s new Littoral Combat Ship. (Courtesy Lockheed Martin)

Robert Socha, Bollinger’s executive vice president for sales and marketing, says the offshore market is “probably better than we’ve seen it in the history of the company.†It’s reached the point, he says, where operators are looking abroad to see what vessels they can bring back to the United States. “There’s a shortage of supply vessels today in the Gulf of Mexico.â€

Despite the damage on land and to oil platforms wrought by two summer hurricanes, early indications were that most shipyards in the Gulf had escaped without serious impact. Meanwhile, the offshore boom that has blessed yards from Texas to Florida continues strong, with increasing demand for better, faster vessels. An outstanding example is Gulf Craft’s Seacor Cheatah, our Ship of the Year, profiled on Page 12.

Over the years, in fact, American Ship Review has paid increasing attention to shipbuilding for the Gulf. In our first issue, we profiled just one newbuild for the offshore market, an anchor handler for Edison Chouest Offshore. This year, our 10th anniversary, we tackle three: Cheatah, plus a liftboat (Superior Future, Page 24) and a crew boat (Pat Tillman, Page 35).

In an election year, with both major candidates willing to talk about offshore energy development, indications for the offshore market are positive well beyond the short term. Even though it would take time to reactivate mothballed rigs if offshore drilling were expanded — to the East Coast, for example — that would give shipyards time to gear up.

VADM K.R. Wheeler, built by Edison Chouest for the Military Sealift Com-mand, can pump fuel from a tanker eight miles offshore. (Courtesy Military Sealift Command)

In fact, the benefits could extend beyond yards that specialize in crew boats and supply vessels. Next fall, Aker Philadelphia Shipyard will deliver the first Jones Act shuttle tanker to serve the Cascade and Chinook oil fields in the Gulf, where deep water makes delivery by pipeline prohibitively costly.

And Cynthia Brown, president of the American Shipbuilding Association, believes the high cost of energy opens up possibilities other than oil. “I think it’s an opportunity for the Jones Act trade as we tap into more of our natural gas,†she says, suggesting a need for domestic LNG tankers. She also sees opportunities for shipbuilders if more nuclear power plants are built: Some of the bigger yards have nuclear expertise, she says, and besides, “We are the last heavy manufacturing industry left in the United States.â€

For the smaller yards, Matt Paxton, president of the Shipbuilders Council of America, sees a need at this point for long-term planning. “I think the biggest thing we have to worry about as an industry is looking out to the horizon and saying, yeah, we might have order books that are two, three or four years out, but we’ve got to make sure we’re able to continue beyond that and weather any downturns and make sure we are competitive and efficient,†he says.

Waiting for orders

Two new product tankers take shape in a graving dock at General Dynamics Nassco in San Diego while the newly completed replenishment vessel USNS Robert E. Peary (upper left) awaits departure for combat logistics force service. (Courtesy General Dynamics Nassco)

While the energy shortage may have grabbed the attention of John McCain and Barack Obama, there’s little evidence that either candidate has focused on shipbuilding. That’s particularly the case with Navy construction, which Brown estimates has slowed to about six major combatants a year. “Neither candidate has come out and said we need to rebuild our Navy,†she says.

Military shipbuilding is at an awkward point because the Navy is trying to assimilate — and pay for — a large number of complex new designs at once. Some of these, such as the Littoral Combat Ship (LCS), designed for brownwater use in settings like the Persian Gulf, or the Zumwalt-class destroyers with guns that can pound a target from 100 miles away, reflect a Rumsfeld-era mindset that may not survive the election.

New systems are almost always costlier than expected, so it’s no surprise that successes this year came mainly from long-established programs. In August, Electric Boat delivered the Virginia-class submarine New Hampshire eight months early and $54 million under budget.

Aker Phladelphia Shipyard lowers the engine for its sixth 46,000-dwt product tanker into the hull. Aker is now installing Tier II-compliant engines in its newbuilds.

In surface programs, Northrop Grumman’s Newport News shipyard won a $5.1 billion contract for the new Gerald R. Ford class aircraft carrier. Its yard in Pascagoula, Miss., christened Dewey, an Arleigh Burke-class destroyer, in January, and Bath Iron Works named a sister ship, Stockdale, in May. It was a bittersweet occasion for Bath: The yard is slated to work on Zumwalt-class destroyers, but sentiment in the U.S. House has run strongly against building more than the two already authorized, at a cost for construction alone of over $3 billion each.

Austal USA’s version of the LCS, Independence, rolls out of the construction hall in Mobile, Ala., on 66 100-ton rail trolleys. The trimaran design provides a large internal mission deck capable of carrying a large payload. (Courtesy Austal USA)

The most exciting naval vessels to emerge this year have been the two LCSs. Freedom, a 378-foot semi-planing monohull built at Marinette Marine by a Lockheed Martin-led consortium, began builder’s trials on Lake Michigan July 28. In Mobile, Ala., Austal launched Independence, a 417-foot trimaran, in April.

The next step for the LCS, however, is far from clear. “I think everyone’s scratching their head right now at the Navy,†says Paxton, of the Shipbuilders Council. In an interview with The Hill earlier this year, Navy Secretary Donald Winter said the priorities were “getting the configuration right†and “setting the stage for cost-effective production,†adding: “It’s going to take us a little bit more time to get to the first half a dozen LCSs.†One consolation: Israel’s navy is interested in buying up to four ships based on Lockheed Martin’s design.

Also in question is the timing and future of the proposed joint high-speed vessel, or JHSV, a fast catamaran transport, although consortiums led by Austal, Bollinger and BIW have submitted bids. Looking ahead, an award for the Coast Guard’s fast-response cutter is expected this fall; a new Mobile Landing Platform to speed transfer of material from ship to shore is on the horizon; and concern over control of the increasingly navigable Arctic may also spur new building.

On the West Coast, General Dynamics Nassco, the only first-tier shipbuilder that maintains a steady balance between military and commercial work, delivered the underway replenishment ship Robert E. Peary in June. Some of its predecessors have deployed overseas. “These ships are performing tremendously out in the fleet,†says Karl Johnson, a Nassco spokesman.

Nassco has orders for this program, T-AKE, through 2014, but has hopes for the basic design beyond that. Two Navy hospital ships need replacing, and the company sees the replenishment ships as an adaptable model. It even sees T-AKE as the basis for new command-and-control ships, although Johnson admits: “It would take a visionary to get there.â€

Nassco’s other current project is a series of 49,000-dwt product carriers for U.S. Shipping Partners. Work has started on three: the first, Golden State, is up for delivery early next year. U.S. Shipping reported a net loss of $8.5 million for the six months ended June 30, but says financing is in place for five tankers with an option for four more.

Two other tanker programs are under way. In Mobile, Atlantic Marine laid the keel in May for the first of three 49,000-dwt Jones Act product carriers with diesel-electric propulsion for AHL Shipping. And in Philadelphia, Aker continues to turn out three 46,000-dwt product carriers a year. Overseas Texas City, its fifth, was launched in July and sea trials were scheduled for the end of September.

Help wanted

When Aker laid the keel for the seventh tanker in August, members of its first four-year apprenticeship class placed the traditional coins on the vessel’s keel blocks. It was a visual reminder of the industry’s desperate need for skilled labor, a shortage that is forcing yards to hire foreign welders and fabricators and plead with high schools to ramp up vocational training.

Yards in Louisiana, Alabama and Mississippi have formed the Gulf States Shipbuilding Consortium to promote interest in the industry. An existing labor shortage was exacerbated by Hurricane Katrina, but the rebirth of the region has led to other pressures too. In May, German steelmaker ThyssenKrupp announced that it would open a $3.7 billion plant in Alabama, sucking up 2,700 workers, many of them with skills similar to those needed in shipbuilding. “Labor is probably our biggest pressing issue,†says the SCA’s Paxton.

The shortage of skilled workers is apparent in the Pacific Northwest as well, even though the market is not quite as strong — somewhat to the relief of Keith Whittemore, president of Kvichak Marine Industries, which has facilities in Seattle and Kent, Wash. “It was just too hard to get things done,†he says. “We had competition for labor and raw materials going through the roof.†Even with a less frenetic pace, says Whittemore, the supply of labor can’t keep up. “We have full-blown training programs in both our shops,†he says.

Building for the future

Yards may have difficulty finding labor, but they’re pouring money into new facilities. With state and federal assistance, Austal USA broke ground July 31 on 840,000 square feet of modular manufacturing, warehouse and office space aimed primarily at Navy projects such as the LCS. In Pascagoula, VT Halter Marine is buying two 310-ton cranes. And in Houma, La., Edison Chouest Offshore broke ground on a new shipyard that it says will ultimately employ 1,000, an investment that drew a $10 million promise of state support.

Smaller shipyards, meanwhile, benefited from $9.8 million in Maritime Administration grants aimed at capital and infrastructure improvements. In Washington State, for example, Todd Pacific Shipyards won $358,515 to enlarge and renovate its main assembly building. “Marad I thought did an exceptional job getting those grants out,†said the Shipbuilders’ Paxton.

While most yards have focused on newbuilds, Bollinger, which divides its attention between construction and repair, has reinvested heavily in dry dock tonnage. “We’ve recently delivered a 9,000-ton dry dock to our Texas City facility that’s twice as big as anything that facility ever had,†says Socha. Bollinger is also putting in a 5,000-ton dry dock for commercial use at Port Fourchon and is building a 5,000-ton dock for Morgan City and a 3,000-ton dock for Bollinger Calcasieu.

Thinking small

In the small-boat market, Kelly Webb, executive vice president of Aluminum Chambered Boats, of Bellingham, Wash., sees continued business in homeland security, with increased interest in interception. “I think the market has seen its surge,†he says. “A lot of what’s going on has been surveillance, putting a boat out there that can just actually be a presence on the water, and now the natural progression from that is: once you’ve contacted something, what do you do to board it?â€

Webb is also looking at the municipal and fire markets more than in the past and at possibilities overseas, particularly in Malaysia and the Philippines. “I really think that’s where the next market is,†he says. Exports have been strong for larger yards too; Halter, for example, is securing long-lead items and doing development work for three fast missile craft for the Egyptian Navy.

If American yards are looking abroad, foreign shipbuilders are casting a hungry eye over here as well. Italy’s Fincantieri bought Manitowoc’s marine division, which includes Marinette Marine, for $120 million in cash, joining companies such as Austal (Australia) and Singapore Technologies as investors in prime U.S. waterfront real estate. Marinette’s version of the LCS is based on Fincantieri’s semi-planing seaframe technology, and a Fincantieri subsidiary, Isotta Fraschini, supplies the ship-service generators.

No survey of shipbuilding would be complete without recognizing the more unusual deliveries of the last 12 months. Pride of place goes to VADM K.R. Wheeler, a 349-foot offshore petroleum delivery vessel that can pump fuel ashore from a tanker anchored eight miles off the coast. Wheeler, built, owned and operated by Edison Chouest for the Military Sealift Command, carries 8 miles of flexible pipe on five 35-foot tall spools mounted on the ship’s weather deck.

And two opportunities for new commercial work still loom on the horizon as they have for years: the replacement of the Jones Act dry cargo fleet and short-sea shipping. A Canadian startup, Great Lakes Feeder Lines, began service between Lake Ontario and Halifax in June aboard the 250-TEU Dutch Runner; ports such as Cleveland, Toledo, Ohio, and Erie, Pa., are eager for similar service.

North of the Border

Canadian shipbuilders were disappointed in August when the government canceled plans for a C$2.9 billion order for three new resupply vessels for the navy. Also dropped was a C$750 million project to buy 12 midshore patrol vessels for the Canadian Coast Guard.

With a contract for armed Arctic patrol ships still over the horizon, that left two repair jobs as the biggest naval awards in the last 12 months, a C$900 million, 12-year project to upgrade Canada’s 12 frigates and a C$370 million, five-year award to refit its four trouble-plagued submarines. Irving Shipbuilding’s Halifax Shipyard and Washington Marine Group’s Victoria Shipyards split the former contract. Victoria and its partners won the latter outright, amid complaints from Halifax. Victoria Shipyards is also delivering 108-foot Orca-class patrol and training vessels at a rate of one every three months; Wolf was delivered in November and Grizzly in March.

In commercial building, TransLink announced a C$25 million award to Washington Marine Group for a third 400-passenger aluminum catamaran SeaBus to ferry passengers between Vancouver and the North Shore. ABD Aluminum in North Vancouver is building two 65-foot Camarc-design pilot launches with MTU Series 60 diesels rated at 600 hp each for the Pacific Pilotage Authority. Delivery of Pearl Mist, a 210-passenger cruise ship from Halifax for Pearl Seas Cruises of Guilford, Conn., was delayed until next year, canceling its 2008 season.

In Lévis, Québec, Davie Yards bounced back from bankruptcy to close a C$47 million initial public offering on the Toronto Stock Exchange in February and had almost 1,000 employees working on five offshore-vessel projects by June 30. With losses mounting, however, it shook up management and told shareholders its outlook was bleak without access to more capital, saying its only client was a single Norwegian customer.

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