Report / Spain
Back on the radar
Spanish shipbuilders have seen out the storms and now, thanks to booming global demand, their order books are full. But as the yards launch ships for the Australian navy and the world’s biggest dredgers, could the tide turn again?
For almost a century, the residents of Sestao’s grey tenements have come out in their thousands to line the banks of the Ría de Bilbao to celebrate launches from the town’s La Naval shipyard. But when the giant 41m-wide Cristóbal Colón rum-bled down the slipway on the afternoon of 4 July, the police sealed off the surrounding roads fearing the resulting wave could sweep well-wishers away.
After decades in the doldrums, La Naval and other Spanish shipyards are winning major military and commercial orders ahead of larger european, American and even Asian rivals. The Cristóbal Colón is the world’s biggest “mega trailing suction hopper dredger”. It’s the current record-holder in a race between owner Jan De Nul, a Belgian land reclamation company, and Dutch rivals Boskalis and Van Oord, to build ever bigger jumbo hoppers. These floating leviathans dredge, carry and deposit sand to satisfy the demand from Gulf sheikhs and Russian oligarchs for artificial islands. La Naval is now at work on its twin, the Leiv Eiriksson, ready for 2010.
Bilbao is Spain’s largest port and by the mid-1970s the country became the world’s third largest shipbuilder. But that was before the rise of new shipbuilding nations in Asia, as well as the violent strikes and a suspect €1bn government grant of four years ago that almost put an end to Spanish shipbuilding. Today shipyards in Spain employ 6,200 workers compared with 30,000 in the 1970s.
But then the industry was kick-started when the government shifted the assets of its civilian shipyards into private hands. La Naval, now controlled by Construcciones Navales del Norte, has exploited its new found freedom by out-manoeuvring competitors overseas. It is the only European shipbuilder with the capacity and expertise to compete with liquid natural gas (LNG) carriers produced at Korean and Japanese shipyards.
La Naval cost estimator Alberto Vall, a dapperly dressed engineering graduate, says the trick is to trim labour costs but retain expertise. La Naval employs just 420 workers and 1,000 sub-contractors. “Ship owners come to us because we can be more flexible and adaptable,” says Vall. “If Jan De Nul goes to the Koreans or Chinese and asks for a jumbo hopper, the shipyards there will only say yes if the order is for five or six.”
“There is healthy demand for specialised vessels, which the yards in the Far East are not focusing on,” agrees Lars Erich Nilsen, shipbuilding analyst at securities firm Fearnley Fonds in Oslo.But it isn’t just civilian yards that are buoyant. Government-owned military shipbuilder Navantia also has a full order book, with work worth more than €6bn that will keep it busy until 2012.
Navantia was making losses as recently as 2005, but now back in the black, it’s the official supplier to next-door’s Armada Española. Fitters are putting thefinishing touches to the Juan Carlos I, a 27,000-tonne landing helicopter dock (LhD). at 230m-long, it’s the biggest ship ever built for the Spanish navy.
Over the past two years Navantia has also snagged the largest export naval contract ever in Spanish shipbuilding. The Australian navy is to get its own Spanish armada of three air warfare destroyers and two LHDs, beating off competition from an evolved version of the US navy’s American Arleigh Burke class destroyers and French rival DCN’s Mistral – class LHD.
As we walk through the yard located on the Galician coast, ship production director Manuel Iglesias claims that the navies of South Africa and Malaysia are interested in Navantia’s destroyers, Greece in frigates and Turkey in submarines. The shipbuilder has also been invited to battle Italy’s Fincantieri, the UK’s Bae Systems and Korea’s Hyundai for a contract to build 12 fleet replenishment vessels for the British Royal Navy.
Central to this success has been Navantia’s F100 platform – a blueprint that can be scaled up or down to build destroyers or frigates according to requirements. Iglesias picks up an example of the flatpack-style instruction book that comes with each steel block. This enables Navantia to ship pre-built modules anywhere in the world for final assembly. As in other Spanish yards, Navantia has cut its workforce – there are just 2,000 full-time employees today, compared with 11,000 20 years ago. But engineering and technological know-how has been stowed safely – from the ability to integrate Lockheed Martin’s Aegis combat system on smaller ships with help from the OEM, to welding skills for manufacturing with lighter, more elastic steel.
Can this Spanish revival be maintained? After all, the shipping industry is notoriously cyclical. A slowdown in the global economy could quickly reverse the trend. And then, of course, there’s China. The London-based International Institute for Strategic Studies says China is increasing its military shipbuilding activities and is close to beginning production of aircraft carriers. And with the South Koreans buying a European bridgehead through Norwegian shipyards, Spanish shipbuilders cannot be complacent. The Koreans, says Iglesias, are already building their own Aegis destroyers. His shipping forecast? “We have seven to 10 years to start running faster.”
An analyst’s view:
Until recently, the Spanish state-owned Navantia was a fairly unremarkable European naval dockyard. It was capable of building workmanlike variants of other yards’ designs but had little potential to break out and become a real international success.This changed with the rehabilitation of the Spanish navy, which ordered new vessels and set out high capability requirements.
First was the design of the F-100 Alvaro De Bazan- class of frigates at the beginning of this decade. Despite being the shipyard’s first wholly new design, it has proven a successful one, with building running on time and the ships receiving rave reviews from sailors. Crucially it secured access to Lockheed Martin’s Aegis combat management system (CMS) – Europe’s first taste of the most developed CMS in the world – enabling it to land orders for Aegis corvettes from Norway and underpinning an Australian destroyer order. The Spanish navy’s ambitious order for a new Strategic Projection Ship (essentially a Harrier and F-35-capable LHD) also opened up access to a small, but potentially lucrative market for baby carriers and amphibious assault ships.
Navantia’s Cartagena facility in the Mediterranean, meanwhile, has carved out its own niche underwater, building the cutting edge S-80A submarine for the Spanish navy and working with France’s DCNS to build the advanced Scorpene design for Chile, Malaysia, India, and Portugal. — NB Nick Brown is editor in chief of Jane’s International Defence Review.