Victor Karagyaur, SSC    Head of Maritime Direction in Russia

Victor Karagyaur, SSC

Head of Maritime Direction in Russia

At the end of September, the Neva Exhibition - the 15th International Exhibition and Conference for Shipping, Shipbuilding, Offshore Energy, Ports, Inland Waterways & Oceanography - took place in St. Petersburg.

Our local Partner, Mr. Victor Karagyaur, expert in the maritime and shipbuilding industry, visited the fair and spoke to the industry experts and entrepreneurs in order to understand how the industry is changing, what are current problems and trends and what are the future developments. Here he shares some general update on the shipbuilding industry in Russia.

1. Adoption of the “Strategy for the Development of Maritime Activities of The Russian Federation up to 2030”.

On the 30th August 2019 the Government of the Russian Federation approved the Strategy for the Development of maritime activities of the Russian Federation up to 2030.

Problems of the shipbuilding industry and priorities for development.

In accordance with the current state of maritime activities and the main global trends in its development, the Strategy identifies the main problems and promising ways of development.

Regarding shipbuilding industry, the Strategy points out two main problems:

•       failure to meet the deadlines for the construction of ships and vessels due to the failure to resolve issues of import substitution;

•       low share of Russian shipyards in the total volume of orders of domestic shipowners for the construction, modernization and repair of civil vessels, caused by the insufficient level of technical equipment of shipbuilding enterprises and the high cost of production.

As for the main priorities in the development of shipbuilding for a long-term period the Strategy identifies the following:

•       meeting the needs of the state and the business community for modern products of military and civil shipbuilding and ship repair at Russian enterprises, which are equipped with equipment and components mainly of domestic production.

Among other priorities, the Strategy identifies the development of innovation territorial clusters and territories related to maritime activities, as well as of the ports and other SEZs, and using PPP mechanisms for the development of projects.

 

2. Presentation of the draft of the "Development Strategy of Shipbuilding Industry for the Period up to 2035".

On the 28th of June 2018 the Government of Russian Federation has presented the draft of the "Development strategy of shipbuilding industry for the period up to 2035".

Priority sectors for development.

It is interesting to look at the Section IX of the Strategy which identifies the industry production potential.

The largest lag of Russian shipbuilding from the leading world shipyards in the production and technological sphere is observed primarily in the following areas:

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•       Construction of ships and surface ships in a large-block way: In particular, there is no means of inter-workshop transportation and loading of large-sized and heavy assembly units at the plants. Modular-aggregate methods are applied in full only in the construction of submarines. In the design and manufacture of surface ships and ships, the use of assembly units and large zone blocks is sporadic.

•       Manufacturing of hull structures and elements of “clean size” systems in a single admission system.

•       Use of optoelectronic computerized measurement systems.

•       Use of automation and production robotics: the use of automated control systems and process control at all production levels and types of production is fragmented.

•       Work on 3D models of ships and vessels in close contact with designers.

•       High degree of wear and tear of production facilities: the industry still operates about 60% of the obsolete and up to 80% of the physically worn-out active part of production assets, many capital structures are outdated, require reconstruction and deep modernization.

New trends: digitalization and e-navigation.

Another important topic addressed by the Strategy is the digitalization.

The transition to digital production technologies is currently the leading trend and driver of the global economy. Currently, most Russian shipbuilding enterprises use a wide range of digital technologies, including three-dimensional computer modeling and related products, process automation systems, etc. However, the existing pace of digital technology implementation is significantly lower than the global average.

The largest enterprises in the industry carry out end-to-end digitalization in all areas of activity, including the introduction of automated production management systems and electronic data exchange of a technical nature. At the same time, the information infrastructure of enterprises needs further integration and unification of processes.

As part of the industry’s digitalization, the Federal Nuclear Center, Krylov State Scientific Center and OSK JSC developed the LOGOS-Shipbuilding project, which provides for the creation of specialized calculation modules and technologies for the numerical simulation of physical processes in shipbuilding.

The development of digital navigation is envisaged in the framework of the “Marinet” Roadmap of the National Technological Initiative, within the framework of which the architecture of a new navigation system will be formed, a crewless ship will be modeled, a geographic information portal, and an international digital platform will be created. In the eastern part of the Gulf of Finland there is a pilot digital navigation zone with the necessary infrastructure (Federal Target Program “Maintaining, Developing and Using the GLONASS System for 2012-2020”).

Opportunities in the shipbuilding industry in Russia.

The key priorities of the scientific and technological development of the Russian civil shipbuilding are:

Projects of ships and technical facilities:

•       offshore platforms and terminals;

•       submarine mining complexes;

•       reinforced ice class vessels for use in severe climatic conditions;

•       new fishing, passenger, research projects, high-speed vessels and technical facilities;

•       marine robotics for offshore development.

Shipbuilding production:

•       hull processing, preparatory production;

•       assembly and installation of blocks and modules;

•       welding in shipbuilding;

•       additive technologies.

Marine instrumentation:

•       systems and systems of electrical seismic exploration;

•       control systems for marine equipment;

•       navigation, radar, sonar systems and their components, communication facilities;

•       means of e-navigation;

•       development of the domestic electronic component base.

Marine engineering:

•       power plants;

•       propulsors and means of active control;

•       electric power systems;

•       ship systems and devices.

•       paints and varnishes, special materials and coatings.

Ecological efficiency and safety of the use of marine equipment:

•       environmental safety when using objects of marine equipment;

•       environmental impact of shipbuilding production;

•       liquidation of emergency situations during the construction and operation of objects of marine equipment.

Shipbuilding materials and coatings:

•       steels and alloys;

•       composite materials

Import substitution of ship component equipment.

 

Import substitution.

Currently, in civil shipbuilding, the share of imports of ship component equipment ranges from 70% to 90%. A high degree of use of imported components and materials is also characteristic of military shipbuilding, especially in the construction of surface ships of small and medium displacement (up to 80%).

In terms of civil shipbuilding, domestic manufacturers in almost the entire range of ship components are not competitive, the main deliveries are from abroad or by enterprises that carry out complete knock down on the Russian territory. A particularly critical situation has developed in the field of production of power equipment (diesel engines, diesel generators, gas turbine engines, etc.), cranes, auxiliary mechanisms, pumps, etc., as well as equipment for the oil and gas sector.

At present, industrial import substitution plans are being implemented: the Plan of measures for import substitution in the shipbuilding industry of the Russian Federation (civil shipbuilding) and the Schedule for import substitution and reducing the dependence on supplies of products manufactured in the EU and NATO countries used in the development (production, repair) of Navy ships ( military shipbuilding). These plans define a list of component equipment, elements of the electronic component base and materials for which it is necessary to carry out priority measures for import substitution.

Measures to localize production through the creation of joint ventures with world manufacturers of marine equipment are designed to provide the industry with modern competitive equipment, to increase the independence of shipbuilding. Foreign medium-sized companies my also think of implementing the minimum localization requirements through a supply chain, maintaining the core business and know-how with the parent company.

 3. Creation of Shipbuilding Clusters.

As part of a shipbuilding development program, the Russian Government plans to boost its shipbuilding capabilities by creating shipbuilding clusters for construction of vessels and competitive marine equipment. In a broad sense, the shipbuilding industry includes such industries as the construction of ships and vessels, ship instrument making, mechanical engineering and electrical installation. Thus, clustering may become an industry driver that will ensure the effectiveness of interaction between shipyards, research and development institutions and authorities for better access to innovations, technologies, know-how, customized services and highly qualified personnel. 

Shipbuilding Innovation Territorial Cluster of Arkhangelsk Region.

As part of the implementation of the regional industrial policy, in 2012 a shipbuilding innovative territorial cluster of the Arkhangelsk region was created. The anchor enterprises of the cluster are shipbuilding and ship repair enterprises of the Arkhangelsk region, which are part of the United Shipbuilding Corporation. Such concentration of innovative shipbuilding potential makes the Arkhangelsk cluster a powerful growth point not only for the Arkhangelsk region but for the whole country.  The major projects of the cluster are uniquely characterized by high added-value and include two municipalities – the cities of Severodvinsk and Arkhangelsk.

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Shipbuilding cluster in the South of Primorsky Krai.

The Far Eastern Shipbuilding and Ship Repair Center implements the Shipbuilding Cluster Development Program in order to further promote the shipbuilding industry and improve the efficiency of the continental shelf development in Russia’s Far East and Arctic regions. A priority social and economic development area was created in Bolshoi Kamen in 2016. Currently, an industrial cluster of the ship component manufacturers is evolving around the new shipyard. Joint ventures were set up with world class foreign technology partners to acquire expertise and bring production to Russia.

Steps were taken to start a joint venture with the China National Chemical Corporation on the polymer coating plant project for ships of different classes including the Arctic class. Rosneft and the Ural Mining and Metallurgical Company established a joint venture to build a new steel mill in Primorski Krai.

Shipbuilding cluster in St. Petersburg and Leningrad Region.

Saint Petersburg and Leningrad region have 32 shipbuilding enterprises with 31 thousand employees. A substantial part of research organizations, design and engineering organizations of the industry and its production capacities are concentrated in the city. The shipbuilding cluster makes about 2.5% of gross regional product of Leningrad region.

Today shipbuilding companies of Leningrad region manufacture equipment which provides:

•         defense potential of the country;

•        fuel and energy security (construction of drilling plates and ships of small and medium tonnage for development of the marine offshore field of hydrocarbon crude);

•        transport safety;

•          mobilization preparedness and sustainability of the Russian economy in emergency situations (construction of port fleet vessels, accompanying vessels, hovercrafts).

The regional shipbuilding centre includes such companies as: the Vyborg Shipyard, the Pella Shipyard in the Kirovsky District of St Petersburg, the Nevsky Shipbuilding and Ship-Repair Plant in Schlusselburg, the Burevestnik and KRIZO Plants in Gatchina and the Ladoga Plant in Kirovsk.

 

Shipbuilding cluster in the Astrakhan Region.

This shipbuilding cluster is supposed to integrate enterprises of different profiles like production facilities, design bureaus, service companies, educational institutions, who will focus on:

·       production of ship systems;

·       production of shipboard equipment;

·       production of shipbuilding components.

 

4. Inland waterways: current state and investment potential

Th river and canal traffic has always played an important role in Russia. Currently, the Russian government has announced a new project to expand its internal transit links in order to expand east–west trade in a way that will compete with the rail systems China and the West have been promoting.

The total length of the inland waterways in Russia is 102 thousand km which spread across 11 time zones. 78% of the inland waterways are the only way to deliver cargo and even people to some places.

Currently, river ports are the key nodes of inland water, rail and road transport and play an important role in ensuring the transport of goods and passengers, domestic cargo and passenger traffic in the country, and foreign trade.

There are 126 river ports in the Russian Federation and most of them are equipped with railway access which makes it possible to transship goods from water to railway and road transport. The number of economic entities engaged in the transshipment of goods via inland waterways exceeds 200 organizations.

The main arteries of this system are the rivers Volga, Kama, Don and Neva, as well as the Volga-Don and Moscow Canals. A total of 74.500km are open to navigation by various types of vessels - 16.900km of which is made by human power. 6.500km of the system with a water depth of 360cm is suitable for vessels with up to 5.000 tons carrying capacity. Various types of ships are used for the inland navigation. During winter period, Russian inland waterways are frozen for 3-8 months a year and river-going type vessels are idle at their moorings. Thus, some of the river vessels have been designed as “sea-river going type” in order to continue their navigation in sea areas. Shipping companies prefer to use this type of vessels because of their profitability and, in addition, such vessels can be operated all year round.

Moscow Canal: investment potential.

“Moscow Canal” FSBI (Federal State Budgetary Institution) is the largest water transport and water management complex, and acts as a public administration body in the Moscow basin of inland waterways. The Moscow Canal FSBI includes 12 subjects of the Russian Federation (Moscow, Moscow Region, Tula, Tverskaya, Vologda, Yaroslavl, Novgorod, Ryazan, Vladimir, Kaluga, Nizhny Novgorod and Ivanovo Regions), 3842 km of inland waterways, including 88 km along Moscow and 484 km - in the Moscow region. Together they form the Moscow basin, which includes 50 navigable arteries.

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The Moscow Canal, as an artificial channel, is a unique hydraulic structure - the only one in the world in terms of its engineering design, size and capacity. The length of the man-made channel is 128 km. The Canal’s infrastructure is formed by five pumping stations with a total capacity of 100 megawatts (pumping about 1.5 billion cubic meters of water per year), seven hydroelectric power stations with a total capacity of 66 megawatts (these hydropower plants can generate 215 million kilowatt-hours of energy annually), 20 locks, as well as dams, canals, moorings and other hydraulic structures.

The Moscow Canal is the most important waterway in the central region, connecting Moscow and the Moscow Region with large economic regions of the European part of Russia. Today “Moscow Canal” FSBI is engaged in a comprehensive modernization and re-equipment of hydraulic structures and infrastructure in order to increase the existing potential of the Channel.

Investment initiatives and priorities:

•  facilities;

•      digitalization;

•      water supply;

•      wind farm;

•      coastal infrastructure and recreation;

•      transport potential;

•      water infrastructure development;

•      generation and hydro accumulation;

•      environmentally friendly transport.

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Potential demand:

In 2018 circa 30 million tons of goods have been transported through inland waterways, among which 75% - to Moscow.

The biggest consumers:

·       repair and expansion of the road network of Moscow and Moscow areas: Central Ring Road, M1, M10, M11;

·       airports: Domodedovo, Sheremetyevo, Ramenskoye.

Renewable needs of Moscow city:

·       8,5 million tons of municipal solid waste;

·       2,8 million tons of soil removal and replacement;

·       13 million tons of waste from construction and demolition (5-year renovation program).

Development potential of inland water transport (IWT):

>70 billion rubles (in 2019 - 2020) investment in the IWT infrastructure

>115 million tons/year +97,1% (data 2017) – the total volume of traffic on the inland waterways of Russia.

If you have any questions regarding the topic, we will be happy to help.

Our contacts

Victor Karagyaur: v.karagyaur@strategiaesviluppo.com

Fabrizio Zucca: f.zucca@strategiaesviluppo.com