Cruise and ferry owners and operators building ships in China unveil their major considerations and challenges
Sponsored by Tomas Tillberg Design, the webinar was held on 27 April 2021 during Riviera Maritime Media’s Passenger Ship Webinar Week. Panellists were Stena RoRo managing director Per Westling, SunStone Ships chairman and chief executive Niels-Erik Lund, Tomas Tillberg Design managing partner Carlos Reyes, and Viking Line project manager newbuild Kari Granberg.
Tomas Tillberg Design is acting as a consultant to Xiamen Shipbuilding Industry Co in the building of Viking Glory. It is also in charge of the interior design aspects of SunStone Ships’ new cruise ships being built in China.
Mr Reyes highlighted the differences in commercial practices in China compared with in the west. “The commercial protocols in the east and the west are completely different. When we conduct meetings and business in the west, everyone has a certain level of expertise. This does not necessarily happen in Asia, so there are more extensive explanations and more work to get to a certain point commercially.”
He also singled out how in the west, “we are used to talking to the person who can commercially make decisions… In Asia this does not always happen with very large communities where a lot of people are discussing various possible projects.” There could be as many as 15 people in these discussions.
Mr Reyes continued, “It is less risky to go where there is decades of experience of building passenger vessels, but owners have to balance out the risk. One way of doing that is to have a robust inspection office in place, with designers, engineers and outfitters with a lot of experience in the trade. That balances out a great deal of the risk involved.”
He said trying to change the way Chinese shipyards operate is “completely unrealistic when they have been operating that way for many years. It is better to understand their practices and see how they meet with ours.” For this, he said integration of all parties is absolutely critical.
“To take full advantage of the way they have worked for decades, we have to be mindful that they build huge commercial vessels in large quantities and do it very, very well.”
Cruise ship tonnage provider SunStone Ships has signed a framework agreement for up to 10 expedition ships with China Merchants Heavy Industry. Seven have been ordered and the first vessel, Greg Mortimer, was delivered in 2019.
Mr Lund said the company originally looked for a shipyard in Europe but at the time all yards had full orderbooks for many years to come.
SunStone Ships then decided to go ahead with Ulstein, but was unable to put a finance package together in Norway. “Based on that, we ended up in China, in a shipyard with no experience in cruise ships.”
Mr Lund emphasised the most important issue for SunStone Ships is to ensure it has European co-ordination and supervision within the project. Therefore, Ulstein is responsible for all technical aspects, Thomas Tillberg Design for all interior design and Makinen for all contracting and supervision of the interior areas.
Mr Lund said, “We have three well-known companies doing the supervision and that is the main reason for our success.” Due to operating in remote areas, SunStone Ships did not want any equipment that was new and untested, therefore its maker’s list consists only of European equipment and suppliers which have supplied to the cruise industry for at least 10 years.
The finance aspect was very important. Mr Lund highlighted the benefits. “In China, it was a lot more flexible dealing with financing and the interest rate. We opted for a normal first mortgage financing, but on much better terms than in Europe.”
Mr Lund said, “When we signed the contract, I had a number of calls from colleagues saying, “you will never be happy with the quality,” and “never get the ships on time”.
“Greg Mortimer was delivered fully to our satisfaction from a quality point of view, and it was delivered 24 days early.” This, he said, is in contrast with some expedition cruise companies which ordered ships from European yards at the same time, as their ships were seriously delayed, some by more than two years and yet “we got ours early”.
Elsewhere, Stena RoRo is building its E-Flexer series of ropax ships at China Merchants Jinling Shipyard. This series consists of nine ships with the last to be delivered in 2023.
Mr Westling said, “All these ships have been delivered on time and to our full satisfaction.” He highlighted what is important to successfully build ships in China. “The most important thing is to know what you want yourself, and to specify it well. I would not recommend going to a shipyard and asking for their specification.”
He said it is important for the owner to spend a lot of time building up the spec and makers list. “Close co-operation with European design houses is very strong advice, and close co-operation with class and flag state and main suppliers is also extremely important. It is crucial you are in close contact with them to make sure you are on same page as the shipyard.” He said Stena RoRo spent a lot of time on CFD.
Mr Westling commented, “In China nothing is the way you like it unless there is good communication and good understanding between the parties… One of the more interesting things in China, is that everyone is very open and very friendly. Always a prerequisite for a good relationship with the shipyard is that there is a good contract and good spec.”
So, Mr Westling said regular project meetings, which are very clear with clear markings of action points and when these are to be delivered, are important.
In terms of the makers’ list, he said, “We spent a lot of time traveling around China looking at offices and factories and making sure we felt comfortable with the maker.” This was done before adding makers to the list. Stena RoRo also worked with European architects for the interiors.
Meanwhile, LNG dual-powered Viking Glory, which is being built in China, is a cruise ferry with a “high standard and big focus on passenger experience, comfort and energy efficiency,” said Mr Granberg.
He said “China is lacking in experience in building high-end passenger vessels. Our requirement was that Tomas Tillberg Design and Deltamarin provide co-ordination of the interior work.”
There will be 1,122 cabins and 10,000 m2 of public areas. Viking Line decided to use four contractors for such a large area. He said to ensure quality, from the owner’s side there needs to be “a mixture of different disciplines, good knowledge and experience, with team players. Language is challenging so we have a mixture of local supervisors and experts.”
Mr Granberg added, “Before owner-approval of any local maker we visit and explain our expectations and requirements and investigate the production and quality system, and they participate in the factory acceptance test.”
He highlighted the importance of teamwork and keeping an open and transparent environment between shipyard teams. “The passenger vessel has a limited deadweight compared to vessel size, so it is critical the shipyard uses lightweight equipment and design.” In this aspect, building up a technical mock-up is helpful, which is a “very good way for the shipyard design and production team to learn”.
Mr Granberg summed up that the shipyard really listened to Viking Line and “we are very pleased and positive”.
Our poll of the webinar audience shows that building a passenger ship in China is gaining traction. Asked, Do you believe China will be a major centre for building cruise ships for the European/US markets in five years? The majority, 54%, said yes.
And asked, Which country will deliver a large cruise ship for a western world client first?, a huge 80% plumped for China, with just 20% saying South Korea.
And despite the pandemic, many of those who plan to build in China have not delayed because of it. When asked, I have been planning to build a cruise ship in China, but the pandemic has meant… 47% agreed with, ‘I will pause my order but probably go ahead in China’, while 30% said ‘nothing – I will go ahead’. 23% said ‘I will pause my order and re-route to Europe’.
However, asked, Where will you place your next cruise ship order? European shipyards were still ahead, with 59% opting for this. However, China was second, with 24% of votes. Third was South Korea with 13% and Japan trailed in their wake with 4%.
Asked whether Chinese passenger shipyard quality will be in line with European shipyards after 2025, 49% said it was too early to make a judgement, while 21% agreed. 17% disagreed and 10% strongly disagreed. Only 3% strongly agreed.
Asked, What is the main reason for companies not ordering passenger ships in China? 65% cited cost due to delivery-voyage/quality-concern, 26% cited cultural barriers, and 9% said distance to travel.
In their key takeaways, the panellists expressed the view that more passenger ships will be built in China, with Mr Lund saying “It is quite clear that China will become a major player in building passenger ships going forward. There is no doubt that from 2025 forward, more and more cruise ships and ferries will be built in China.”
He singled out “A very important aspect is a timely delivery… China delivering early is a wonderful situation and from a cost point of view, that is more important than anything else.”
Mr Westling said “I believe it is a question of taking the steps and making sure there is the capacity and knowledge. You will probably be rewarded. The financial side of the shipyard is very important, and I believe Chinese banks are a very important factor in the future, offering packages to shipowners. There is a big difference in culture, but it is not insurmountable.”
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