After months of uncertainty regarding the future of Finland's Turku shipyard, the Finnish government has announced a state purchase in joint venture with German shipbuilder Meyer Werft.
The announcement is an apparent U-turn from the conservative party's previous free market stance, with economics minister Jan Vapaavuori reluctant to offer any assistance to the yard to help it win shipbuilding orders ever since taking office in late-2012. The state is now teaming up with Meyer Werft to purchase STX Finland's last shipyard.
STX's tenure of Finnish shipyards has been controversial. Since the Korean company's takeover of what was formerly Aker Yards, the Finnish shipbuilding industry has been stuck a slow downward spiral, assisted in no small part by the much larger woes of the Korean-headquartered parent company.
Lost orders and underinvestment
According to Finnish business daily Kauppalehti, a combination of underinvestment and a lack of proper secure financing has cost STX Finland up to €4.5 billion (US$6.2 billion) worth of newbuilding orders. This figure includes two of the largest cruise ships in the world, the 227,000GRT Oasis-class series, which will be built by STX France.
The French government has a one-third holding in STX France and was able to provide advance funding in order to secure the contracts. The multi-billion-dollar figure also includes two LNG-fuelled ferries for Scandlines, which were to be built at STX Rauma but had to be given up for the same financial reasons. Meanwhile, another two Freedom-class cruise ship orders went to Meyer Werft.
"The Korean owners of STX Finland have been informed by the State of Finland that it is interested in the possibility of acquiring the Turku shipyard together with an industrial partner. This intent was communicated to the Koreans last year," Minister Vapaavuori was quoted in the official release.
"Finland maintains that it is prepared to resolve to any rational and reasonable action to improve the operating conditions of the Turku shipyard. Further, it has been stated that the state will not exclude the possibility of participating in a structural arrangement involving the Turku shipyard, given the prerequisite of finding a credible and competent industrial partner as well as a commercially justifiable solution. Following a comprehensive analysis, the state of Finland has found an aforementioned partner in the German shipbuilding company Meyer Werft."
"Both parties are firmly resolved to the ongoing negotiations, but they are still at an early phase, and hence no further details can be disclosed at this point in time," Vapaavuori concluded.
A spokesman for Meyer Werft acknowledged the family-owned shipyard had thrown its hat into the ring, but would not fully commit to the announcement: "Meyer Werft may decide in the end that no deal or solution will result," said company representative Peter Hackmann.
"All our options are open."
Mixed fortunes
According to STX's financial creditors, mainly comprising the state-owned Korea Development Bank, all of STX's European assets yards must be sold by July.
According to Korean sources quoted in Finland, STX wants between €200 million (US$274 million) and €400 million (US$550 million) for the yard, after shelling out about €560 million (US$768 million) for three Finnish yards during Aker's 2008 takeover.
This figure may very well prove fanciful, as industry experts speculate that the yard needs up to €200 million of investment and refurbishing after years of neglect by STX.
STX Finland's two other Finnish yards have had mixed fortunes.
The Helsinki yard now specialises in polar vessels, with ownership split equally between STX Finland and Russia's United Shipbuilding Corporation (USC). With three polar vessels on the order books, its medium-term viability seems assured, with USC negotiating to purchase STX Finland's remaining share.
The Rauma yard, meanwhile, will close at the end of this month after completing a conversion project for Fjord Line. The site was bought by the city for €18 million (US$24.7 million) and will become a maritime business park.
A question of why
The question remains: why would Meyer Werft be interested in taking over an under-invested rival, rather than simply let it close down? Meyer Werft possibly sees Turku as a sub-contractor, but that seems unlikely given the abundance of cheap capacity located around the Baltic.
A more tangible possibility, floated by an STX Finland executive, could lie in the forthcoming formation of a Baltic emissions control area for sulphur (SECA).
These strict emissions standards, combined with the ageing ferry tonnage currently sailing the Baltic, could signal Meyer Werft's intention to move into the ferry sector.
Currently, the shipbuilder's other yards, located in Papenburg and Rostock, respectively, have a backlog of cruise ship orders.
John Pagni
