Genting HK banks on Germany for its newbuilds, adjusts delivery schedule

Colin Au talks to reporters during a visit to MV Werften's Wismar yard this month (Photo: Anne Kalosh) Colin Au talks to reporters during a visit to MV Werften's Wismar yard this month (Photo: Anne Kalosh)

While Carnival Corp. & plc gears up to build large cruise ships in China, Genting Hong Kong is investing into its owned yards in Germany in a bid to attain the efficiency of the world's top cruise shipbuilders. Genting has ambitious plans for MV Werften but a new delivery timetable puts back the dates for a couple Crystal Cruises ocean ships.

MV Werften now envisions handing over the first polar expedition yacht (Crystal Endeavor) in 2019, instead of 2018, and the first Crystal Exclusive-class ship by 2021, instead of autumn 2019. Star Cruises' first Global-class ship will come by 2020. Crystal's first pair of river newbuilds, already under construction, are due in 2017, with two more in 2018. 

All told, 10 vessels are planned in the next five years: the four river yachts, three polar expedition yachts, two Star Cruises vessels and one Crystal Exclusive-class ship.

By 2023, the targeted annual output of MV Werften is two 200,000gt neo-Panamax ships and one 60,000gt Panamax vessel.

The allure of German-made cruise ships is the same as that of German-made cars: quality, said Colin Au, Genting HK founding president, adviser and a director of MV Werften, the trio of shipyards in northern Germany that Genting acquired last spring to carry out its multi-brand growth strategy.

Speaking at MV Werften in Wismar this month where the delivery timetable was presented, Au stated Chinese yards will work their way up to cruise-ship standard. For now 'We believe the quality and value [of building in Germany] will offset the lower cost of Chinese steel.'

Steel for a cruise ship in China may cost just $20m, but that's just a fraction of the ship's value. And salaries in China aren't that cheap compared to Europe's any more, Au said.

A yard contributes just 25% of the value of a newbuild, while 75% comes from subcontractors, nearly all based in Europe, he noted. Genting HK looked at China, Korea and Japan before banking on Germany. Au pointed to Mitsubishi Heavy Industries' losses in building for AIDA Cruises, and the expense of flying suppliers in and out from Germany, Italy and France.

'So there's less risk for us to be in Germany,' he said.

The Genting HK executive shared his views during a visit to MV Weften's Wismar facility, one of three in the shipbuilding cluster Genting HK acquired for €240m. All are vast and modern, with enormous covered building halls. Wismar, for example, has 170,000 square meters of roof-covered space, a drydock of 340 meters by 67 meters with a height of 72 meters, and crane capacity for up to 1,000 tons.

Following the unification of East and West Germany, the government poured €1.2bn into modernizing the Wismar, Rostock and Stralsund yards. They have a long, productive track record, having delivered more than 2,500 vessels—among them, the original ships for AIDA, Stena Line ferries, Premicon riverboats, icebreakers, offshore supply vessels and LNG carriers.

Genting HK is pouring another €160m into automation and robotics including a thin plate laser welding line to ensure the steel is very light.

'Our benchmark is Meyer Werft,' Au said, what's considered the world's most technically advanced and efficient cruise shipbuilder. He added MV Werften believes it can reach Meyer standard in three to four years.

The group is led by Meyer and Royal Caribbean veteran Jarmo Laakso. According to Au, the three yards employ 1,700 workers and will recruit 1,300 more.

Instead of continuously playing suppliers off each other, the Genting executive said MV Werften intends to forge strategic alliances, for example, with engine and wastewater treatment manufacturers. Once ship platforms are decided, the same suppliers will be used across brands.

Among the advantages of vertical integration for Genting is being able to nimbly incorporate design changes instead of having to use a yard's reference ship, which could be a design six or seven years old.

Genting didn't aspire to become a yard owner. After focusing on turning around and building up Norwegian Cruise Line for many years, in 2013 the company decided it was time to order for China. A pair of ships at Meyer Werft were subsequently earmarked for the new China brand, Dream Cruises. The first, Genting Dream, is set for mid-October delivery.

Genting had been talking with yards for 2018 deliveries, Au said, when Carnival Corp. & plc ordered nine ships, pushing its deliveries out to 2022, then MSC Cruises aggressively ordered at STX France, all the way out to 2026, including options.

'Pricing is growing dramatically. I doubt anyone is able to get a ship by 2025, 2026 except at very high prices,' Au said.

After buying Crystal Cruises, Genting HK first intended to build at Lloyd Werft, which it acquired. The Bremerhaven yard is highly seasoned in cruise repairs and conversions and had turned out three NCL ships but it has no hull fabrication capability.

Though hulls could be built elsewhere, Genting ultimately decided the 'integration risk' was too high. What if a hull built in Poland were delayed, leaving 3,000 subcontractors idle in Germany?

So Genting ultimately settled on the Wismar, Rostock and Stralsund yards that now comprise MV Werften.

This leaves Lloyd Werft to focus on repairs and building megayachts, for which it has a track record. The Lloyd Werft Design Center has been established to help strengthen megayacht competence, and with the support of MV Werften's huge fabrication capacity, Lloyd Werft is expected to become much more competitive in megayacht construction.

'We are competing with all the major shipyards. We are happy,' Au said. 'We have a lot of advantages. We are here to stay.'



Posted 27 September 2016

© Copyright 2019 Seatrade UBM (UK) Ltd. Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade UBM (UK) Ltd.

Anne Kalosh

Editor, Seatrade Cruise News & Senior Associate Editor Seatrade Cruise Review