Russian commercial shipbuilding declines in 2014

10 Mar 2015

Attempts to rejuvenate commercial shipbuilding in Russia proved ineffective last year as the sector’s share of the market slipped and military orders grew according to Russian analyst Infoline-Analytics, writes Eugene Gerden.

Overall orders completed by Russian shipbuilders declined by 41% to 177 vessels, according to Infoline, comprising 112 commercial vehicles and 65 warships – far lower than 2013 numbers of 170 and 131 vessels respectively. The value or total orders declined by only 3% in 2014, to RUB 219.9 billion (US$3.8 billion). In value terms the decline of commercial shipbuilding is more apparent. In 2014 the sector accounted for just 20% of the cost of all orders, compared to 55% in 2012 and 63% in 2011.

Mikhail Burmistrov, head of Infoline, said that the value of defense orders and military exports are projected to grow by 30% this year. As a result the share of commercial shipbuilding will decline by a further 5%, reaching just 15% of total order value. Burmistrov attributed the decline of civil shipbuilding to increasing interest rates on bank loans. The situation has been aggravated by the decline of oil prices, while sanctions imposed on Russia have resulted in the suspension of several shelf projects and may force oil companies to refrain from building ships for those projects.

Infoline said the current situation could lead to the postponement of Rosneft’s Zvezda supershipyard in the Far East by Rosneft, previously scheduled for 2018, while offshore vessels programmes may be suspended by Rosshelf, a Russian state-owned company which specializes on the offshore development. Building of large LC-25 and LC-60 icebreakers may also be suspended at the Baltic Plant in St Petersburg, one of Russia’s largest shipbuilding enterprises.

In light of that outlook, analysts at the Russian Ministry of Industry and Trade predict that Russia’s largest shipyards – including Sevmash, Severnaya Verf and Admiralty - will continue to focus on the building of warships in 2015. Longer term prospects are less assured, with the economic crisis and currency devaluation forcing the Russian government to announce significant cuts in military spending over the next several years.