French orders to foreign shipyards

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22 Artist impression of the 975-cabin cruiseship Millenium, to be built by Chantiers de lÕAtlantique for Royal Caribbean Cruise Line on behalf of Celebrity Cruises on shore. The variety of attractions is also increasing, including shows based on the Las Vegas model. These improvements have resulted in major increases in the size of vessels. These changes have opened broader perspectives in terms of passenger profiles, increasing growth prospects, especially through the participation of younger cruisers, whose average age in the US is now 45, compared to 60 ten years ago. The sector is currently generating its own demand through a permanent increase in the supply of cruise products. Furthermore, the market is developing simultaneously in several zones including the US, Asia and Europe, making it less dependent on a single market. For those who detract from this sector, let's remember that in 1970 Las Vegas hosted 6.7 million visitors, roughly the same number of people that went on cruises in 1999. By 1980, there were 12 million visitors, in 1990, 21 million and in 1998, 30 million people went to Las Vegas. The products of both industries share growing similarities. Las Vegas prospered because gambling was allowed there, almost the only place in the US. This is no longer true as many other states have since legalised it. Las Vegas' dynamism stems not from gambling, but rather from the effort promoters constantly place in developing new attractions. This instils in people the desire to discover or to revisit the city ; gambling has become a secondary consideration. Although we remain optimistic about growth in the cruise sector, the overall picture is nevertheless not always rosy for all players in the industry. The sector has its share of ups and downs. The Kosovo crisis and the earthquakes in Turkey affected cruises in the Mediterranean, forcing owners to scramble to change itineraries, which is always a delicate and costly undertaking. Some companies that are wholly dependent on the Mediterranean market - such as Royal Olympic Cruisessuffered because of these unforeseen events. Still, most companies operating in the area surmounted the difficulties, but all experienced seasonal performance problems. The orderbooks situation should not mask the intense competition currently underway among European shipyards to attract major sector players. This competition has a sharp downward effect on newbuilding prices, a factor that led to heavy losses in two shipyards this year, Kvaerner Masa in Finland and Fincantieri in Italy. The Kvaerner group, already having difficulties, expects to sell its shipbuilding business. The following shipyards made their entry for the first time this year in the cruiseship construction business: - Fosen in Norway - Ingalls in the US - Aker MTW in Germany - Mitsubishi in Japan All have built passenger ships in the past, but no cruiseship over the last twenty years, excluding Mitsubishi. Many shipyards, attracted by high added value on cruise vessels, would certainly like to get a share of the market. However, building this type of ship requires wide participation from specialised subcontractors and suppliers. Therefore, the best-prepared shipyards for building these units, are those with an infrastructure environment and a qualified subcontractor base that is operational. Far Eastern shipyards, especially in Korea, will therefore have difficulties succeeding in this market without making some deliberate and very costly strategic choices. European shipbuilding capacity should be able to cover the growing demand in the sector through annual productivity gains and with additional shipyards becoming active in the cruiseship market. However, it is probable that owners will have to pay a little more for these ships - the more so with vanishing subsidies - if they don't want to lose sector expertise that they helped to develop. One industry problem recorded this year was with the failure of Lowline, which was forced to sell "Edinburgh Castle" (32,000 grt, 1,100 passengers, built in 1966). This case illustrates that it is impossible to speculate on this market as a shipowner without having a good grip on sales and marketing. It cannot be stressed enough; power and longevity in this business depend on companies' ability to fill their ships with passengers. This means having an efficient sales and marketing network. The overall consolidation occurring in the industry over the last few years, which has considerably reduced the number of operators, continued this year with mitigated
success. Carnival tried in vain to acquire P&O's cruise division. When that move failed, it turned to Norwegian Cruise Lines (NCL) with a $1.7 billion offer. This offer ended up being countered by a successful Star Cruises bid, which thus gained an established position in the US market. At the same time, it created the largest cruise company group operating on the two American and Asian markets. So, as history would have it, the newest cruise company joins forces with the oldest, the founder of the modern cruiseship industry. Louis Cruises, whose listing on the Cyprus stock exchange was a complete success, took over Royal Olympic Cruises by buying up the majority of shares belonging to the two founding families. This creates an homogenous unit on the East Mediterranean market that nonetheless is operating older vessels. P&O, entrenched in Great Britain with its dominant market position, is seeking to move into Germany, the second largest European market. To do this, it created Aida Cruises, then acquired Seetours International. Next, the company ordered sisterships of the "Aida" (42,000 grt, 1,270 passengers) from Aker MTW. The German market represents 300,000 passengers per year and is growing at a rate of 11%. Two long-debated projects were finally decided upon. The first involves an order for two 72,000 grt, 1,900 passenger cruiseships for American Hawaii/AMCV from Ingalls in the US. Very favourable credit terms were negotiated for this deal through a Chapter XI action for the two vessels flying US flags. The second is the ordering of ResidenSea's luxurious apartments cruise vessel from Fosen, despite widespread scepticism that haunted this project. P&O Group ordered actively this year: - Two firm orders and options for two more vessels of the "Grand Princess" class (109,000 grt, 2,600 passengers). They were ordered at Mitsubishi with a July 2003 and May 2004 delivery date at a price of around $420 million each. - Two firm orders and two options for 88,000 grt vessels, 1,950 passengers, at Chantiers de l'Atlantique for delivery in October 2002 and June 2003 at a price of around $360 million each. - One firm order and an option for sisterships of the "Grand Princess" (109,000 grt, 2,600 passengers) at Fincantieri for delivery in October 2002 and June 2003 respectively, for a price of around $450 million each. - Two vessels for Arkona at Aker MTW (42,000 grt, 1,270 passengers) for delivery in 2002 and 2003, at a price of $180 million each. Royal Caribbean International ordered the following vessels: - Three firm orders for "Vantage" class vessels of 88,000 grt, 2,000 passengers, plus two options, at Meyer Werft for April 2002, June 2003 and June 2004 for an average price of around $350 million, thus bringing to six the total number of that series vessel ordered. - Two firm orders (85,000 grt, 1,900 passengers) at Chantiersde l'Atlantique for August 2001 and March 2002 ("Millenium" class), for around $340 million per vessel. The Carnival Group was less active, apart from its attempted acquisitions that have been already mentioned. Management did not decide till the end of the year - following protracted hesitation over ordering in Korea - to exercise the first option on its February 1998 CCL order at Kvaerner Masa. This was for an 84,000 grt, 1,800 passenger vessel to be delivered at the end of 2001 at a price of $375 million. It also placed two firm orders and three options for 84,000 grt, 1,800 passenger vessels at Fincantieri for Holland America Line with October 2002 and July 2003 deliveries at a price of $360 million each. One of Carnival's subsidiaries, Costa, decided to rapidly increase capacity by lengthening the "Costa Classicaat Cammell Laird, going from 1,600 to 2,486 berths. Its sistership, the "Costa Romantica", will probably undergo the same transformation, bringing the total cost of the operation to $100 million per unit. Festival Cruises ordered two other vessels, lengthened versions Artist impression of the 360 cabin cruiseship Seven Seas Mariner, to be built by Chantiers de lÕAtlantique for Radisson Seven Seas T h e c r u i s e m a r k e t S H I P P I N G A N D S H I P B U I L D I N G M A R K E T S 2 0 0 0 23
Page 3 and 4: Bad and good reasons ? At the end o
Page 5 and 6: The shipbuilding market in 1999 The
Page 7 and 8: Quarterly orders in gross tonnage (
Page 9 and 10: In contrast, most Chinese shipyards
Page 11 and 12: As an example, production costs for
Page 13 and 14: China As it was the case last year,
Page 15 and 16: 10 9.5 9 8.5 8 7.5 7 The European C
Page 17 and 18: The Asian challenge is clearly felt
Page 19 and 20: Norway Norwegian shipyards, which a
Page 21: The cruise market in 1999 1998 was
Page 25 and 26: European sector. Very few second-ha
Page 27 and 28: The containership market in 1999 Br
Page 29 and 30: (before absorption), Evergreen, P&O
Page 31 and 32: Teu 300,000 250,000 200,000 150,000
Page 33 and 34: 4,000-4,999 teu 17% 3,000-3,999 teu
Page 35 and 36: The reefership market in 1999 Anoth
Page 37 and 38: The spot market Compared to 1998, t
Page 39 and 40: concluded until very late. • Expo
Page 41 and 42: The dry bulk market in 1999 The pes
Page 43 and 44: 14 12 10 8 6 4 2 0 Jan 96 US$/tonne
Page 45 and 46: US$/day 15,000 13,000 11,000 9,000
Page 47 and 48: older ladies in the 15 years-old br
Page 49 and 50: The tanker market in 1999 Crude •
Page 51 and 52: 15% At the same time, youth in the
Page 53 and 54: for us just how stagnant this marke
Page 55 and 56: their specifications and their SBT
Page 57 and 58: Dwt 12,000,000 10,000,000 8,000,000
Page 59 and 60: The chemical carrier market in 1999
Page 61 and 62: the previous year. Deliveries for t
Page 63 and 64: There are two corollaries to this.
Page 65 and 66: The liquefied petroleum gas shippin
Page 67 and 68: We believe that further consolidati
Page 69 and 70: In this respect, the Chevron/Dynegy
Page 71 and 72: Perceptions As mentioned, the conso
Page 73 and 74:
The liquefied natural gas shipping
Page 75 and 76:
In Malaysia, the Japanese market wi
Page 77 and 78:
The offshore market in 1999 Allow u
Page 79 and 80:
The oil-drilling world also acknowl
Page 81 and 82:
35,000 30,000 25,000 20,000 15,000
Page 83 and 84:
The fishing vessel market in 1999 D
Page 85 and 86:
45,000 40,000 35,000 30,000 25,000
Page 87 and 88:
The marine insurance markets in 199
Page 89 and 90:
of future resources in order to mee
Page 91 and 92:
French shipyards deliveries and ord
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Chantiers Piriou • Ships delivere
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French orders to foreign shipyards
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• Samsung (South Korea) FDS 2000
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French orders to foreign shipyards

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