Building the Largest Ship in Brazil

With an increasing number of Korean shipbuilders entering the Brazilian market, it is noteworthy that they earn royalties in return for exporting shipbuilding technologies.

The industry expects that such changes can not only bring more foreign exchange earnings but also help domestic companies win major bids in overseas markets in the future. Recently, Samsung Heavy held the launching ceremony for the first of its ten 15,000-ton class oil tankers at the Atlantico Shipyard in Brazil. The event was attended by more than 1,000 guests, including President Lula da Silva of Brazil, the CEO of Petrobras (Brazil’s national petroleum corporation), the CEO of Transpetro (state-owned ocean shipping company), and CEO, Park In-sik of Samsung Heavy Industries.

The largest ship in Brazil will be named after ‘Juan Candido,’ a Brazilian naval hero. What attaches more significance to the ceremony is that the President of Brazil and the CEOs of state-owned corporations celebrated the event in person.

In 2006, Samsung Heavy selected Atlantico as its strategic partner for making a foray into the Brazilian market, signing partnerships with the Brazilian firm in regards to supporting shipyard technologies and providing shipbuilding drawings. Under the agreement, Samsung Heavy exported drawings for building 150,000-ton class oil tankers as well as offered know-how on safety and purchase, provided shipbuilding technologies and conducted employee training for skills improvement in order to help Atlantico perfect its shipbuilding abilities and operate an efficient shipyard.

In return for such support, Samsung Heavy has earned royalties worth $29 million so far, and successfully made additional contracts with Atlantico for $10 million worth of technical support in regards to building 110,000-ton class oil tankers. Completed through Samsung Heavy’s technical support at the end of last year, Atlantico Shipyard successfully placed itself at the top of the industry today, receiving shipbuilding orders for the next two years. The shipyard, also the largest in Central and South America, features a dock measuring 400-meter in length and 73-meter in width as well as two goliath 1,500-ton class cranes on a site totaling 1.6-million square meters,

The shipyard plans to form a drill ship bid partnership with Samsung Heavy. With the bid application due by the end of May, Samsung Heavy expects this to be an opportunity to expand its operations in Brazil.

All of Korea’s major shipbuilders are present or will be in Brazil, in order to participate in bids for seven large-scale drill ships that Petrobras plans to place annually for the next three years starting this year.

Such a move is because Korean firms need to form consortiums with local companies, due to the Brazilian government’s regulation that prohibit foreign firms from participating in local shipbuilding and offshore plant bids independently. For this reason, Hyundai Heavy Industries signed a Memorandum of Understanding (MOU) with OSX (one of the Brazil’s major shipbuilders) in February. According to the MOU, Hyundai Heavy provides a consulting service to OSX regarding the construction of a shipyard in Santa Catarina and acquires 10 percent of the stake.

While STX Offshore & Shipbuilding has its European unit to participate in the operation of a local shipyard, Daewoo Shipbuilding & Marine Engineering Co. (DSME) is reviewing whether to acquire part of stake in a local shipyard in Brazil.

Furthermore, Korea’s shipbuilders have been approaching the Russian market in a similar way to Brazil. In Russia, regulations introduced in 2007 only allow local companies to build equipment or ships related to energy development.

While some are worried about the risks of technology drain, the industry insists that there is no alternative. An official with Samsung Heavy explains that unless they do not export their expertise, European counterparts will take it as an opportunity and benefit from it.