COMMENTARY: Buyers’ market in shipbuilding

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By Pyry Lapintie
     
      Shipbuilding knowhow in Turku has been getting plenty of praise today, when the world’s largest cruise vessel, Allure of the Seas is being handed over to the Royal Carribean Cruises shipping line.
      The announcement by Viking Line of an expected preliminary agreement for an order received plenty of attention and a wave of good will, as history teaches us that once closed down, a shipyard is not easily opened again.
      Although they are important, one or even two orders from Viking Line will not save the shipyard, or Finnish shipbuilding. The Allure, with its billion-euro price tag, which sails toward the Carribean on Friday, corresponds in its volume alone to 4.5 ships the size of the Silja Europa.
      At present, shipbuilding is a complete buyers’ market.
     
Prices of cruise ships have dropped so low that shipyards find themselves in a vicious circle. There are too many shipyards in Europe building cruise vessels. There are fewer orders, and there are too many shipbuilders competing for them.
      There are suspicions of dishonesty. Subsidies are granted within the EU by stretching the rules at the very least.
      The Turku Shipyard has made some mistakes along the way. It has built nothing but big cruise ships for the same shipping line for 11 years since 1999, thus putting all of its eggs in one basket, so to speak.
      When the customer went into a momentary slump, it would have been a good idea to bring in some other cruise line. However, it is a fact of life that two cruise ships being built for competing shipping lines will not fit onto the same shipyard at the same time.
      Royal Carribean is currently making good money in the Carribean. There will soon be two gigantic luxury liners built in Turku, both of which are selling well.
     
Prices of cruises have remained high, and it has not been necessary to bring ticket prices down after the novelty has worn off. If there were more of these ships they would start to eat away at the other vessels in the shipping line’s fleet.
      Another cause for concern in Turku is that the Caribbean region is getting to be saturated. When the management of the company receives the Allure in the evening, there will be anxious anticipation of what the shipping line will say. Will there be a promise for a new order, or will they simply say that negotiations for a new order are moving forward in a positive spirit?
     
Helsingin Sanomat / First published in print 28.10.2010


Previously in HS International Edition:
  Giant cruise liner handed over to buyer at Turku shipyard (29.10.2010)
  Turku Shipyard to close for up to a year despite anticipated Viking Line order (27.10.2010)
  Viking Line to order new ship from Turku shipyard (26.10.2010)

See also:
  Floating pleasure palace beckons those with deep pockets (26.10.2010)

PYRY LAPINTIE / Helsingin Sanomat
pyry.lapintie@hs.fi