RE-ENERGISED RAUMA YARD BUILDS BUSINESS

Wholly Finnish owned again, the Rauma yard is harnessing its resources to full effect. (Photo credit: RMC).
Wholly Finnish owned again, the Rauma yard is harnessing its resources to full effect. (Photo credit: RMC).
The Finnish maritime cluster will provide the innovative electrical propulsion system and main machinery for the new Wasaline ferry from Rauma. (Image credit: RMC).
The Finnish maritime cluster will provide the innovative electrical propulsion system and main machinery for the new Wasaline ferry from Rauma. (Image credit: RMC).
RMC’s largest newbuild order so far, Tallink’s 50,000gt ro-pax ferry due in 2022. (Image credit: RMC).
RMC’s largest newbuild order so far, Tallink’s 50,000gt ro-pax ferry due in 2022. (Image credit: RMC).

Finland is the setting for an unusual European case of the revival of shipbuilding in one of the industry’s traditional centres, writes David Tinsley.

Returns on investment for even the most successful and financially resilient shipbuilders are typically slim, and belie the scale, the technical and logistical complexities, and risks associated with the task of ship construction.

While the intensification of global competition in most sectors of the market has benefited the customer and the quality of the product in relation to price and value, it has also ensured that already narrow margins have been kept in check. Unless embarked upon as a largely socio-economic endeavour underwritten by the state, and/or as part of a wider national industrial strategy, venturing into shipbuilding today would not generally be viewed as an attractive proposition for investors.

Against this backcloth, the recent revival of a medium-sized Finnish shipyard under new, mainly private ownership assumes greater significance. It is testament to a belief within the Finnish business community as to the industry’s long-term opportunities, complementing the political view of its strategic importance.

Rauma Marine Constructions (RMC) was established by private investors with local backing soon after South Korean-owned STX Finland closed the Rauma shipyard in 2014, and the senior management team that has restored business and re-energised activities represents a deep pool of experience in shipbuilding, marine equipment and technology.

A pragmatic approach to RMC’s development has seen the launch into targeted sectors of the newbuild market preceded by an initial period wherein the focus was on conversion and subcontracting work. Right now, having transited its start-up phase, the yard has a capital-intensive backlog of orders in hand featuring two Baltic ro-pax ferries and the prospect of a corvette programme for the Finnish Navy.

RMC is based in the shipyard area acquired by the city of Rauma from STX Finland as an industrial investment of EUR 18.2 million (US$20.3m) in early 2014. The company has a 30-year lease from the city on the site, and has exclusive rights to shipbuilding operations there.

In December 2015, RMC received a major injection of capital when the state-owned entity Finnish Industry Investment (Tesi) became a shareholder, together with Finnish investment fund managers. Today, the five largest shareholders are Taaleri Telakka, with a stake of nearly 25%, Tesi, Satu Invest, Olderman and Finda. The strengthened capital position created a platform for the company to undertake major shipbuilding projects. At the time, Tesi stated that “The Finnish maritime industry is on the rise. We want to be involved in promoting the international growth of a company whose Arctic expertise is of the highest standard in the world.”

One of the objectives established by the Marine Industry 2020 working party appointed by the Ministry of Employment and the Economy is to develop Finland into a major player in the global market. The potential contribution to the national economy is all the greater for the fact that, in Finland, the functions and services related to the Arctic marine sector are highly integrated and the entire value chain is under local control.

RMC is chaired by Mikko Niini, whose career has included posts at erstwhile Finnish shipbuilding entities Valmet Helsinki, Wartsila Marine Industries and Kvaerner Masa-Yards, and 10 years at Aker Arctic Technology, followed by chairmanship of ice-class tanker asset management firm Navidom.

The yard is carrying the torch of Rauma’s shipbuilding tradition, targeting the production and maintenance of multipurpose icebreakers and Arctic-going vessels, passenger/vehicle ferries, naval ships and special-purpose vessels. “We are the only domestically-owned shipbuilding company in our size range,” stated RMC. “As a result, our decision-making and employment remains securely within Finland.”

A respect for local skills crafted over generations, and apposite to growing concerns throughout Europe as to personnel retention and recruitment issues facing heavy industry, is implicit in management’s continual references to the re-emergent yard’s “90 shipbuilding experts, whose solid expertise is founded on a craft passed on through the centuries, from one generation to the next.” That the technological standard of the production systems is of a high order is taken as read, rather than being advocated as of greater importance than the human resource.

In its guise as RMC, early projects at the yard have entailed the construction of the 158m ro-pax ferry Hammershus, delivered to Danish operator Molslinjen in mid 2018, and the refurbishment, lengthening and propulsion updating of the Finnish research vessel Aranda. Construction of hull modules for cruiseship newbuilds on behalf of Finland’s German-owned, major shipbuilder Meyer Turku, continued into and through the first half of 2019.

RMC has since attracted a succession of ferry newbuild and small naval vessel contracts. The work intake in 2019 to date has included an LNG-fuelled ro-pax ferry, valued at EUR 120 million(US$133.5m), for trans-Baltic service, and an LNG-fuelled ro-pax ferry, valued at EUR 250 million (US$278m), for Estonia-Finland service operator Tallink. The 212-metre Estonian ferry, due in 2022, is RMC’s largest contract so far.

The new domestic ferry order is for Kvaerken Link, which is owned by the municipalities of Vaasa (Finland) and Umea (Sweden), both of whom are guarantors of the financing. After scheduled handover in April 2021, the vessel will maintain the Wasaline service across the Gulf of Bothnia between the two cities. Finnish government assistance has been acknowledged as having helped to bring the project to implementation.

The Wasaline ferry will employ a hybrid power generation system in conjunction with an electric propulsion solution conceived specifically for vessels of high ice class, and aimed at conferring both environmental benefits as well as operational efficiency.

The economic multiplier effect exerted by shipbuilding is amply demonstrated by the contract, whereby the power and propulsion technology and hardware will be provided by companies located in the Vaasa area, north of Rauma, including ABB, WE Tech, VEO and Danfoss/Vacon. The ferry will feature an energy storage system, based on Leclanche lithium-ion batteries, dimensioned to cover the electrical load in harbour without having to run machinery. The prime movers will be Wartsila dual-fuel engines, to be fed primarily on LNG with the potential also for operation on biofuel.

Confirmed in March 2019, RMC’s contract with the Tallink Group of Estonia is valued at about EUR 250 million and calls for a vessel of some 50,000gt, 212m in length, to accommodate 2,800 passengers and provide 3,000 linear metres of ro-ro capacity. Due to be introduced on the Tallinn/Helsinki route in early 2022, the newbuild will represent over 1,500 man-years of employment for the shipyard.

The ship’s main machinery will be of LNG dual-fuel type, and the design offers the option of a battery installation. Powerful equipment for connecting to the shoreside grid will obviate the need to run engines while in port.

Although it was announced in March this year that a procurement decision was being postponed due to a caretaker government being in power, the company’s letter of intent with the Finnish Defence Forces for a series of four corvettes can be expected to lead to a high-value production run through the next decade. Entitled the Squadron 2020 project, the 105m Pohjanmaa-class corvettes will supersede seven naval vessels slated for decommissioning. First steel cutting is anticipated in 2021, with a view to programme completion by 2028.

RMC’s operating philosophy focuses on the effectiveness of project management and the supply chain network. Long-term strategic partnerships and alliances are a cornerstone of its business model. Such cooperation is viewed as elemental to efficiency and ultimate profitability. A team of experts from the network of partners is hand-picked for each project, with RMC responsible for overall project management, finances and quality assurance. Arrangements with strategic partners, subcontractors and other companies typically involve annual contracts.

The networked operating model is intended to ensure flexibility and that fixed expenses remain at a reasonable level. This structure in conjunction with the lease arrangements covering the shipyard facilities provides a basis for operating competitively with low overheads, reducing pressure on RMC to take on ultimately loss-making contracts for the sole purpose of covering overhead costs.

The early reassimilation of newbuild work underscores the company’s identification of the ferry market as one of its core targets, drawing on the particular expertise of the yard and the Finnish maritime cluster in that segment. It is considered that the age profile of the European fleet coupled with more stringent environmental standards promises significant newbuild demand over the next 10-15 years.

Anticipated renewal of the Finnish icebreaker fleet, to be realised by 2029, near-future reinvestment in Swedish icebreaker capacity, and increased Arctic shipping activity fuelling demand for ice-going vessels, also present key opportunities for the Rauma yard, together with research and service vessels designed for the most challenging conditions.

While RMC’s immediate priority in the naval market is Finland’s corvette programme, the military cooperation between Finland and Sweden also offers long-term business potential, as does the wider market for coastguard and coastal protection vessels. Rauma’s capabilities in steel fabrication could also be applied to floating structures, including power plants.

Shipbuilding in Rauma dates back centuries. The Hollming and Rauma-Repola yards were merged as Finnyards in 1991, later to be owned by Norway’s Aker Group and subsequently by the STX Corporation of South Korea.

SHIPYARD FACILITIES

Rauma Marine Constructions

Building/drydock

260m x 85m

Lifting capacity

450t

Outfitting quays

240m, 220m

Building capacity

150,000dwt/80,000gt

RMC MANAGEMENT

Chairman of the Board

Mikko Niini

President and Chief Executive Officer

Jyrki Heinimaa

Chief Operating Officer

Timo Suistio

Chief Financial Officer

Kai Nordman

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