The Future of STX Europe

Christopher Kanal: In May 2009, you became president and CEO. What is your strategy for STX Europe?

Sang-Ho Shin: STX Europe’s strategy is to be the leading builder of cruise and offshore vessels. Having STX as owner gives us a solid foundation to build upon. STX Europe is a highly competent organisation and I have been impressed by the skills, experience and innovative ideas among its employees. Although the last two years have been challenging, I believe we are back on track. Our main focus is to continue to deliver on time, meeting or exceeding customers’ expectations.

What has been your biggest challenge so far?

As with the rest of the shipbuilding industry, there has been a drop in orders. The market slowdown and the lack of financing have affected the ability and willingness of ship owners to invest in new vessels.

Whereas the market for new ships has slowed in the short term, we believe that the underlying demand for specialised cruise and offshore vessels is still there in the long term.

Several of STX Europe’s shipyards have order backlogs that ensure high capacity utilisation throughout 2010 and into 2011, and the majority of financing needs for 2009 are secured.

If the situation with limited numbers of orders persists well into 2010 and beyond, we will gradually increase excess capacity, but with a strong order backlog for many yards, STX Europe has a good foundation for ongoing activity.

How is STX Europe coping with the economic downturn?

We are relatively well positioned compared with other shipbuilders. Nevertheless, securing orders is essential in order to maintain activity at our yards and this is a key focus for STX Europe.

How will STX Europe compete as an Asian/European company?

STX Europe is a well-established cruise ship builder with an extensive network of sub-suppliers based in Europe. The competence for building highly specialised cruise ships and offshore vessels has been developed at our European yards over many generations.

STX Europe will continue to build on this position by utilising its experience in order to remain at the forefront when it comes to developing concepts and innovative solutions.

Over the decades, STX Europe has developed close relationships with some of the world’s leading ship owners, and one of its hallmarks is the ability to create the world’s largest, most spectacular cruise ships.

What are Europe’s strengths and weaknesses in shipbuilding? What are Asia’s advantages?

Generally, shipbuilders in Asia specialise in high volume, labour-intensive production of long vessel series, and their strengths are related to outstanding efficiency, productivity and speediness in addition to a more favourable cost base.

In Europe, our competitive advantages include the unique competence in building advanced, customised ships which are tailor-made for each customer. The competence and experience of building technologically advanced cruise ships, ferries and offshore vessels are one of the hallmarks of European shipbuilders.

What are the advantages of being an international shipbuilder, with one foot in Asia, at a time when Asian yards are on the rise?

STX Europe has operations in six countries located in Europe, Asia and South America. Our global operations enable the optimal utilisation of competence, capacity and resources across the group and ensure customer proximity.

With STX as owners, we have the opportunity to exchange best practices, take advantage of synergies and share knowledge and experience. By combining expertise and experience, we are learning from each other and improving.

Does the dearth in orders allow opportunities to develop new concepts?

Despite low orders, it is important to maintain activity to avoid losing competence. Being a group of 15 shipyards, STX Europe can allocate production to the location where we can offer the customer the most favourable conditions. This allows us to move parts of the production from a yard with a heavy workload to a yard with free capacity.

Lower activity levels also allow us to focus more on innovation and R&D as more resources are available. By utilising the time and resources available, we may have some new concepts when the market returns and customers start ordering ships.

What lessons did you learn from the Oasis of the Seas project? What was the biggest challenge in the design?

In general, prototypes are more challenging than sister vessels as the design must be developed from scratch. The Oasis of the Seas is not only the world’s largest cruise vessel; it is essentially a floating city containing a wide range of entertainment concepts and facilities.

How will the Oasis influence future shipbuilding projects?

We definitely believe in building big and we are confident that Royal Caribbean will have great success with the Oasis of the Seas and Allure of the Seas. Big ships offer favourable economies of scale as well as being attractive destinations themselves.

That said, for the cruise market in general there will be demand for the big, spectacular vessels as well as more intimate ships. Cruise ship owners tend to develop tailor-made concepts based on the area of operation, passenger profiles, age groups, and on board experiences. As a result, there will probably be a mix of different ship concepts going forward, with the trend moving towards the large scale.

What is your most important cruise project at the moment?

Obviously, the Allure of the Seas, which will be in service this year, is taking the cruise experience to a new level. We are also delivering a series of vessels to MSC Cruises. Last summer we delivered the MSC Splendida, which is the ninth vessel our Saint-Nazaire yard has built for MSC and the sister vessel of the MSC Fantasia, delivered in 2008.

How has the industry coped with tight financing and cruise ticket prices at record lows?

Although some market fundamentals point against ordering new ships, cruise liners still report good capacity utilisation and passenger growth, with immature markets being among the areas of greatest growth potential. The cruise industry is resilient and rebounded quickly from such incidents as 9/11 and SARS.

Does STX Europe have any plans to scale back its operations?

At some of our yards, lay offs have been necessary depending on ongoing activity. At most of our yards, however, activity is still high with an order backlog providing a good foundation for capacity utilisation.

What has the impact been of the entry of South Korean-based STX Business Group on the company?

STX Business Group is an international, industrial conglomerate with strong positions in shipbuilding, shipping, energy, equipment and construction. As part of the STX Business Group, STX Europe has a solid, industrial owner which is focused on developing the company further into its main business areas of cruise and ferries, and offshore and specialised vessels.

Through our shipyards in Korea and China, the STX Business Group has extensive shipbuilding experience and together we share best practices and learn from each other. In addition, with the entry of STX, several areas of synergy have been identified and taken advantage of from sourcing and production practices to marketing.

Where do you want STX Europe to be in five years time?

STX Europe shall continue to develop unique, breathtaking cruise concepts together with leading cruise ship operators and be at the forefront of the offshore industry, developing vessels for operation in harsh conditions such as deep waters and arctic regions. With a constant focus on environmentally friendly solutions, STX Europe will be the leading builder of cruise and offshore vessels.