Far East crab catchers to have their fleet renovated at domestic shipyards

On the wave of state efforts to develop fishery and to stimulate shipbuilding, both industries are in active search for mutually acceptable compromises. Aleksandr Duplyakov, President of the Far East Crab Catchers Association, answers the questions of IAA PortNews.   

- What is your opinion about the state of crab fleet in the Far East today? How many units, what types and what age? 

- The level of today’s crab fleet can be recognized as satisfactory. Although this fleet is not new it excellently copes with its tasks. In 2016, crab fleet in the Far East numbered 95 units, mostly vessels of medium tonnage. Small size vessels (12) account for only 2.3% of the total catch. As for the core of the fleet, its performance is not the same – 56 vessels ensure 86% of the catch in the Far East. Their annual catch was ranging between 400 and 1,800 tonnes. The rest of the fleet had a moderate or very small catch but such vessels spent little time for crab catching. So, the core of the crab fleet in the Far East numbers 50-60 vessels of medium tonnage with a half of them built at foreign shipyards. A large part of this fleet has undergone modernization or retrofit and its efficiency is high, which is confirmed by the catch figures. 

- Which companies determine the development of the industry in the region? 

- A for the number, 62 companies operated in the Far East in 2016. Compare it with 138 companies in 2009. The key trend of the market is a gradual completion of consolidation and specialization of companies. There are very large companies and groups of companies, there are medium-size and small-size companies. I think the total number will decrease to 40 in some years. As of today, 20 large companies account for 84% of the catch in the Far East Basin. They will determine the development of the industry in the region.

- What a the key technological trends?

- If we look back to the history of crab catching in the Far East, which is longer than 100 years, we can divide it into several phases in terms of production. The first phase started in the beginning of the previous century and lasted till the end of 80-ies. The key product at that time was canned crab produced directly in the sea, on floating facilities supplied by crab catchers. The second phase began in early 90-ies and lasted for almost 25 years. During this period, processing vessels were catching and freezing cooked (or sometimes raw) crab claws. The product was first discharged to transport ships and then delivered to ports. The third phase, nowadays, is in the very beginning of its development. Its specific feature is catching and delivering live crab from the area it was caught to a Russian or foreign port to be delivered to the end user. This type of production has recently started developing rapidly mostly due to the growth in consumption of live crab in China. It is catching and transportation of live crab that is in the focus of many companies today. I would add, that biological features of crab, today’s technologies, equipment and experience of the companies allow for keeping almost all crab species live for quite a long time. The ability to deliver live product from a remote fishing area with the depth of 500 m and more directly to the consumers’ tables is an important competitive advantage of Russian crab. 

- Do the industry capabilities correspond to the potential of the resources and annual permissible catch today?

- The capabilities of the industry fully correspond to the potential of the resources. As of today, crab TAC (Total Allowable Catch) is at its historical maximum and the potential of its growth is limited by the biological component. There is science-based limit, a rate of loss, which should not be exceeded to prevent the population damage. I think, in the nearest years, TAC will grow a little but today we can note some excess of the fleet while crab catch quotas are practically used up to 100%. There are no problems with fulfilling quotas.
However, the vessels are not new and sooner or later they should be renovated. Introduction of investment quotas is an instrument intended to encourage scheduled renovation of the crab fleet within 5-10 years.

- What is the status of legislative and administrative process to ensure building of crab caching ships at domestic shipyards for investment purposes? Is this an anticipated initiative? 

- The Federal Fishery Agency is currently elaborating draft regulations and I think in the nearest future we will understand its vision of investment quotas in crab segment, the requirements to investment projects, the size of quota per vessel, the availability of special mechanisms for distribution of investment quotas in the crab segment as compared with that in the fish segment. I would add that the Association members are also undertaking preparatory actions in this respect. When the regulations come into effect this work can be adjusted but we will certainly take part in this process. The state has set certain rules through introduction of investment quotas and it is up to the companies to participate or not participate in it. 

- How will this initiative influence the industry development? 

- In my opinion, investment quotas is a challenge for domestic shipyards. Fishing companies will certainly come to them. Yet, are the shipyards prepared for that? Of course, they can build but they should ensure high quality for fair price and within a scheduled time. There will be no time to get into the swing of things, all the shipyards will have to simultaneously embark on construction of fishing ships on a massive scale complying with the above criteria. Fishing companies and the state will sign agreements with stringent parameters and schedule. Non-compliance will mean severe consequences up to partial cancel of quotas. Nevertheless, I hope everything will be ok and investment quotas will give an impetus to the development of domestic shipbuilding for the fishery industry, special instruments will be offered to finance this process and it will become a norm for fishing companies to have their vessels built at domestic shipyards. 

- What is your opinion about the utilization grant initiative? 

- Utilization grant is a separate measure which cannot be applied together with investment quotas. As I have said before, most of vessels catching crab in the Far East have been upgraded and their market value considerably exceeds the utilization grant. 

- Does the level of regional and Russian designers comply with technical requirements of fishing companies? Is it comparable to foreign counterparts? What are the major drawbacks of domestic designs? Is there an example of optimal crab catching ship in domestic shipbuilding? 

- Today, there are no ready designs developed from scratch for crab catching. Such dedicated vessels have never been designed or built in the world. They are always fishing vessels or other vessels converted or adjusted for crab catching. Perhaps, Russia will design and build a specialized crab catching ship. Anyway, Russian designers like, for example, our partner Nordic Engineering, are working towards this and their designs will be in demand when the investment campaign is launched.

– Far East Crab Catchers Association has recently signed a contract of cooperation with Pella shipyard after an order was placed by Antey Co., Ltd. Will this contract be followed by a construction of a series of vessels? 

- Pella is a shipyard which is certainly able to build quickly, with proper quality and for a fair price. The latter will directly depend on the size of a series. If crab catchers do not award the order for a series, that will be done by other companies. As soon as investment quotas are put into practice the number of customers can exceed the number of shipyards able to build.

- What do you think about the capabilities of the Far East shipyards to implement this programme (shipyards in the Amursky Region, Primorsky and Khabarovsk Territories)?

- I would repeat, Russian shipyards including those in the Far East, can build vessels but such vessels should be competitive with foreign ones in term of price, quality and time of construction, otherwise, that will have no sense economically. Why having a ship built at a Russian shipyard even with consideration of an investment quota if it is more profitable to award an order to a foreign shipyard or not to build a new ship at all? Therefore, many Russian yards will have master working under new conditions.

- When speaking about a serial production, is it possible to outline basic parameters for an optimal ship complying with the requirements of most market players?
 
- I will not specify optimal parameters of a crab catching ship as there are quite many of them. Yet, I will say that they are quite similar for all crab catchers and they come from practice. The only thing, they can differ for processing ships and those that catch and transport live crab. However, the new designs are focused on the concept of a universal ship or a modular structure allowing for prompt conversion of production. 

- What is the optimal price for a ship built at domestic yards under the state support programme? What is the expected time of construction? Are they comparable to foreign manufacture? 

- So far, the general idea is that it is more profitable to have vessels built in foreign countries in terms of all parameters. Experts say, a crab catching ship built at a domestic shipyard will cost about $20-22 mln. However, I have not heard any shipyard to announce the cost of a certain crab catcher project. I think, in the beginning of the next year, when application campaign under the investment quotas programme begins, we will know the price agreed by the shipyard and the customer, as well as the time of construction. Then we will be able to compare them with those of the foreign shipyards.