Thin order books for cruise shipbuilders
The slowdown in new cruise ship orders is starting to bring consequences for the shipyards.
Two of the yards that churn out big cruise ships are on the market, according to a spokesman for STX Corp., the Korean shipping conglomerate that owns them.
A downturn in the shipbuilding and shipping sectors has left STX heavily in debt, and a spokesman said it plans to pare its focus to domestic shipbuilding by divesting overseas assets.
In 2008, when STX acquired yards in Saint Nazaire, France and Turku, Finland, the cruise industry was already putting the brakes on its headlong construction of ships. The surge that culminated with delivery of the $1 billion Oasis and Allure of the Seas ships left the industry with enough berth supply that it was difficult to keep prices moving upwards.
In 2008, when STX acquired yards in Saint Nazaire, France and Turku, Finland, the cruise industry was already putting the brakes on its headlong construction of ships. The surge that culminated with delivery of the $1 billion Oasis and Allure of the Seas ships left the industry with enough berth supply that it was difficult to keep prices moving upwards.
Cruise chiefs since then have hewn to a strategy of measured capacity growth. Carnival Corp., for example, has said it plans to order only two to three ships across its 10 major brands each year. The result for shipyards is that they compete for fewer, larger ship contracts than in the past, raising the stakes for each order.
One recent example involved a third copy of the Oasis-class sought by Royal Caribbean International. First crack went to the STX Finland yard that built the Oasis and the Allure, but when the desired level of financing guarantees wasn’t forthcoming from the Finnish government, Royal instead turned to STX France.
As a result, the Finnish shipyard’s order book has just two cruise ships in it for delivery in 2014 and 2015. The Finnish government has already agreed to buy the Turku shipyard site from STX. Further restructuring may be coming in the second half of the year, STX says.
Germany's Meyer Werft has four ships in the pipeline, including Norwegian Getaway and Quantum of the Seas. In Italy, Fincantieri has seven, including Regal Princess and Costa Diadema.
In 1989, after the Finnish shipyard fell into bankruptcy, Carnival Corp. had to step in and buy part of it to assure completion of the Fantasy and Ecstasy ships. Carnival sold the stake two years later.
No one knows if that kind of rescue might be needed again. But until cruise lines step up the pace of new orders, European ship builders are going to have to be creative and flexible to stay in the game.
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