Brazil’s naval industry, which boasted the second place worldwide in the 1970s, lived two decades of hard times. Revitalized over the last ten years, the sector sees the future with confidence and believes it may become one of the main players in the international market again.
Just to give an idea of the recent evolution of the activity, in 2000 it employed less than 2,000 people, but last year the number of employees exceeded 46,000, according to figures supplied by the National Union of the Naval and Offshore Construction and Repair Industry (Sinaval).
Early into his first term in office, in 2003, Brazilian president Luiz Inácio Lula da Silva defined the revitalization of the naval industry as a priority. The government had – and has – strength to guide the destiny of the sector, as the two main ship buyers in Brazil, oil giant Petrobras and Transpetro, its transport subsidiary, are state-owned companies. The order was for the companies to prioritize national shipyards when placing their orders.
The first phase of the Program for Modernization and Expansion of the Transpetro Fleet (Promef), announced in 2004, resulted in 33 orders, with the first six vessels scheduled to be set to sea this year, according to the company. The budget for this project is US$ 3.9 billion and nationalization required is 65%.
“When the government called, the naval industry had to answer,” said the executive vice president at the National Union of Maritime Navigation Companies (Syndarma), Roberto Galli. “We are currently discussing new shipyards coming here,” he added.
In fact, in the evaluation of executives of shipyards Mauá and Ilha (Eisa), both in Rio de Janeiro, the sector is currently living its most important moment in 20 years. In the same line, Sinaval evaluates that Brazil is reaching a new industrial and technological level in the area, as it has returned to the construction of large vessels.
According to Sinaval, the order portfolio at Brazilian shipyards includes 156 orders, including vessels of several kinds that are under construction or are ready for delivery. This volume of orders, according to the union, shows that the Brazilian fleet is doubling. In 2007 and 2008, 53 ships were delivered and, last year, sector companies had revenues of 5 billion Brazilian reais (US$ 2.8 billion).
Perspectives for future orders are even better. This year, Sinaval expects the result of tenders for the construction of eight gas tankers for Transpetro, 13 drilling vessels and eight hulls for oil platforms. The second phase of the Promef, according to Transpetro, involves the construction of 23 vessels, being the required level of nationalization 70%.
The return to sector growth began before the new oil discoveries made in the pre-salt layer on the Brazilian coast, so a large part of the orders made up to now do not take into consideration the demand of this new oil frontier.
According to Sinaval, it is estimated that 45 new oil platforms will be necessary, as well as another two support vessels for each platform, and 70 Petrobras tankers. That is not taking into consideration the demand of navigation companies that operate in foreign trade and coastwise navigation, which should be boosted by the growth of the Brazilian economy and by the return to growth of the global economy.
Transpetro informed that, with the discovery of oil in the pre-salt layer, the Promef should have other phases, although the initial objectives of the program have already been reached, i.e., the revitalization of the naval industry and making it competitive on the international market. According to the company, Brazil currently has the fifth largest vessel order portfolio in the world.
In December last year, the Managing Board of the of the Merchant Marine (FMM), the main source of financing for the industry, approved priority for 161 projects evaluated at 14.2 billion reais (US$ 7.8 billion), which includes the construction of four new shipyards in the Northeast.
One of the new installations forecasted is the Eisa unit in Alagoas. The shipyard which, like Mauá, belongs to the Synergy group, which belongs to businessman German Efromovich, has a plant at Ilha do Governador, in Rio de Janeiro, where 4,000 people work three shifts to supply orders. The company does not reveal the volume of investment necessary in Alagoas, but market estimates point at something like US$ 750 million.
Despite the Petrobras and Transpetro weight, it is not just those companies that move the market. Eisa, for example, has received orders from the Venezuelan PDV Marina, a subsidiary of oil company PDVSA, as well as from American, Argentine and Brazilian clients.
Mauá, in turn, plans to invest US$ 114.1 million in expansion works over the next two years, including the reopening of a unit in São Gonçalo, also in Rio. “Mauá shipyard is still focusing on growth. Apart from modifications at the administrative headquarters, we are going to reopen a unit in Gradim, in the city of São Gonçalo”, said the company president, Domingos D’Arco.
More than Oil
Brazilian shipyards also see good opportunities in areas that may expand in Brazil and guarantee conditions to supply orders of any kind, national or international.
According to a report by Sinaval, the United Nations Conference on Trade and Development (Unctad) pointed at Brazil as the best served country in South America in container transport. However, there is no ship operating long-distance flying a Brazilian flag. This shows that even Brazilian shipping companies lease vessels.
According to the union, the leasing of vessels flying foreign flags for long-haul routes cost US$ 7.7 billion over the last six years, which would make possible the construction of 50 vessels. For the institution, an own fleet would grant the country defense against abusive freight cost, security in foreign trade and would also generate further jobs.
Roberto Galli, from Syndarma, agrees that, despite the Unctad evaluation, Brazil is not well supplied in international trade of products. We are inserted in global trade and would have benefits if we could use vessels flying national flags,” he said.
Nowadays, all shipping companies affiliated to Syndarma operate in cabotage or maritime support operations. To him, the use of national vessels in long-haul commercial routes also depends on state incentives.
In the area of cabotage, Sinaval informs that there are perspectives for renewal and expansion of the Brazilian fleet. Galli confirms that there is pressure on the sector for renewal of the fleet as the economy grows.
Another area that offers opportunities is the military. Eisa, for example, plans to participate in a tender that the Navy should open this year for the construction of four 1,800-tonne oceanic patrol vessels. Last year, the shipyard won a tender to produce four 500-tonne vessels for 174 million reais (US$ 96 million).
“We are working hard on strengthening ourselves in this niche of military vessels, as there are excellent perspectives for expansion of the Brazilian fleet in coming years, due to the need to redouble safety in territorial areas due to the oil reserves in the sea,” said Ilha president Manuel Ribeiro.