Fishery renaissance

Fishing fleet of Russia used to be expanded with vessels operated in other countries or built by foreign shipyards. It became possible to reverse the trend and to attract fishing companies have new ships built at domestic shipyards thanks to introduction of state support measures, namely investment quotas known as “keel quotas”.

Fishing fleet accounts for over 70% of total value of the entire fishery industry’s basic production assets. According to Rosrybolovstvo (Russian Federal Fisheries Agency), average age of fishing ships in 2018 was 28.5 years old. 

Downwards

Before 2017, the fishing fleet expansion was primarily based on acquisition of ships operated in other countries (some 88%) and on construction of vessels at foreign shipyards. Between 2010 and 2016, Russian shipbuilding industry built 30 fishing ships with total cost of RUB 2.291 billion including 13 vessels subsidized by the federal budget, one vessel – by municipal budget and the rest 16 – by private customers.

Under market relations, the interests of fishing companies are focused on making the highest profit from operation of catching vessels and are occasionally different from those of the state focused on the development of different industries including those related to construction of fishing ships.

As of 2018, fishing fleet of the Russian Federation numbered over 2,300 units including catching, processing, refrigerating, research, training and small-size ships. The majority of those vessels were built in the second half of the ХХ century and were purchased from foreign companies.

Rosrybolovstvo says that more than 70% of the fleet is concentrated in the Far Eastern fishery basin with the rest 30% distributed between the Northern, Western, Azov-Black Sea and Volga-Caspian basins. Although the Far East Federal District is the largest supplier of fish products (55% of the total catch of bioresources), the age of 90% of fishing ships exceeds the rated life.

Transition toward a market economy in 1990s of the previous century resulted in the situation when domestic shipbuilding companies virtually ceased serial production of fishing ships. Fleet modernization was sporadic with investment programmes of individual ship owners. The problem worsened in 2014-2015 when Russian shipyards did not deliver a single fishing ship to Russian companies due to the absence of orders.

Other periods of contemporary Russia saw placement of orders for only small-size fishing ships. Among the shipyards involved were Ushakovskiye Verf, Ladozhskaya Verf and Shipbuilding Plant named after October Revolution. With a purpose of large-scale modernization of fishing fleet and preservation of shipbuilding competence in this segment of shipbuilding it was necessary to undertake certain state measures

State support

Starting from 2009, the Ministry of Industry and Trade began providing subsidies to Russian organizations to cover part of interest rate on loans raised from Russian credit organizations and from State Corporation "Bank for Development and Foreign Economic Affairs" (Vnesheconombank)” in 2009 - 2021, as well as to cover leasing payments as part of agreements signed in 2009 - 2021 with Russian leasing companies for purchase of civil ships under RF Decree dated 22 May 2008 (No 383). Albeit efficient for construction of transport ships, this measure was not in demand from shipping companies.

RF Government Decree dated 27 April 2017 (No 502) approved the rules developed by the Ministry of Industry and Trade for providing subsidies  from the federal budget to Russian organizations to cover part of their expenses for acquisition (construction) of new civil ships to replace ships subject to scrapping. This subsidy has already been used by Fishing Company “Virma” building fishing ship of Project МТ1112XL 2451-01, Gandvik-1, to replace a ship built in 1983 by VEB «Volkswerft Stralsund» and subject to scrapping.

However, these measures failed to encourage customers to systematic modernization of fishing fleet.

In this respect and in pursuance of RF Government’s instructions the Ministry of Agriculture and the Ministry of Industry and Trade have developed a package of regulations on providing of bioresource quotas for investment purposes. Their approval in 2017 let reverse the trend. Domestic shipbuilding companies started receivig orders for construction of large and mid-size fishing ships before this mechanism of state support came into effect.

According to RF Ministry of Industry and Trade, as part of 2017 campaign, a special commission selected 33 projects on construction of ships in the interest of fishing companies.
An order to build six 108-meter long processing trawlers was placed at Admiralteiskie Verfi (Saint-Petersburg). The ships will be put into operation in 2022-2023.

Three mid-size seine trawlers are under construction at Yantar shipyard (Kaliningrad) with the series delivery scheduled for 2019.

Total investments in construction of fishing ships for the Far Eastern fishery basin amounted to about RUB 42 billion.

The companies of the Northern Basin applied for construction 24 vessels (a total of RUB 70 billion) including 14 applications for construction of trawlers of over 80 meters long, 9 applications for mid-size vessels (58 to 70 meters long) and one application a small-size vessel (35 meters long). The contracts for large capacity vessels are awarded to Vyborg Shipyard (Leningrad Region, 8 trawlers) and Severnaya Verf (Saint-Petersburg, 6 trawlers) with the delivery between 2019 and 2023.

The orders for construction of mid-size vessels are placed at Pella (Leningrad Region, 4 seiners), Yaroslavsky Shipyard (2 vessels) and Severnaya Verf (3 vessels) with the deliveries to be completed by 2022. Total investments in construction of fishing ships for the Northern fishery basin amounted to about RUB 68 billion.

Thus, the campaign of 2017 numbered 33 applications for construction of fishing ships with total investments into the industry estimated at RUB 110 billion. Four of the ships were launched in 2018 with construction of six ships to be completed in 2019.

Ministry of Industry and Trade says that the application campaign of 2019 numbers 11 ships including 9 for the Far Eastern fishery basin and 2 for the Northern one. Total financing is estimated at RUB 55 billion.

Over the two years since the mechanism was put into operation the companies of the industry have secured orders for construction of 44 ships with total amount of financing exceeding RUB 165 billion. Besides, Draft Federal Law “On introduction of amendments in the Federal Law “On fisheries and conservation of aquatic biological resources” in the part of improving the order for distribution of quotas on catching aquatic biological resources” has been recently submitted to the State Duma

The years of 2012 - 2018 saw a trend towards increasing of total allowable catch of crab. Crab resources are estimated as stable according to scientific forecasts, Therefore, application of investment quota mechanism for construction of crab catching ships is expected to encourage the construction of at least 40 ships in the mid-term period.

It must be separately noted that instructions the Ministry of Industry and Trade, the Ministry of Agriculture and Rosrybolovstvo (Russian Federal Fisheries Agency) are developing a new support measure to provide a targeted subsidy on construction of small-size fishing ships. According to the draft document, a customer is to receive RUB 50 to 210 million depending on ship type. Experts say this measure is to encourage construction of at least 59 ships by 2024. 

Aleksey Timofeyev

Photos contributed to IAA PortNews by Expo Solutions Group.

Read more about the development of Russia’s fishing fleet and other segments of domestic shipbuilding in annual analytical report “Development of Civil Shipbuilding in Russia — 2018” prepared by IAA PortNews for RF Ministry of Industry and Trade.