Yachtmakers cruise ahead as shipyards feel the pinch

Financial Times (UK) Wednesday, December 14, 2011
Special Report : Istanbul: Business & Finance, p. 2

By Daniel Dombey

Maritime industry. An extremely wealthy clientele has insulated some manufacturers from the sector’s woes, writes Daniel Dombey

Ccatch a boat from the old heart of Istanbul, cross to the Asian side, past where the Bosphorus meets the sea of Marmara and where tankers line up to go through the strait. Then drive along the coast, keeping the sea to your right. In little more than half an hour you will come to a bay that is a world of its own.

Tuzla Bay is crammed with shipyards. Ships of all sorts are produced, repaired and serviced here. Out on the water a tanker rests on a drydock. Nearby are a cattle carrier, a coastguard cutter, a tug and a great number of yachts.

This is one of Istanbul’s near hidden areas of expertise. Among its other activities, Tuzla Bay has become a specialist producer of luxury yachts, including both sailing ships and motor boats.

Indeed the business has become one of Istanbul’s clusters of industrial excellence, along with specialisations such as autoparts, jewellery and, in shipbuilding, small tankers.

« In recent years, Turkey has increasingly tapped into niche markets, which in turn has led to a growing participation by Turkish shipyards in the international trade in new ships, » the Organisation for Economic Co-operation and Development concluded in a recent report.

« These developments reflect in part the strategic location of the yards, the experienced workforce, the quality of production and Turkey’s significant role as a political, cultural and economic bridge between Europe and central Asian and Middle Eastern economies. » Still, Turkey’s shipbuilding sector as a whole has been badly hit by the international financial crisis.

Between 2008 and 2010, production fell by more than 40 per cent. Exports tumbled from $2.7bn in 2008 to little more than $1bn two years later.

The sector’s workforce, much of which is concentrated in Tuzla Bay, mushroomed from 2,800 in 1998 to more than 34,000 a decade later – but then almost halved to 19,000 in 2009, recovering a little to 22,000 this year.

Meanwhile, Turkey lost its status as one of the world’s five biggest shipmakers, falling to eighth place, with only the 11th biggest order book.

But the yacht sector, with its extremely wealthy clientele, can be insulated from such trends to a certain extent.
According to Camper & Nicholsons, the luxury yacht group, Turkey built 25 « superyachts » of at least 100ft in length last year, making it the world’s third biggest producer of such vessels, after Italy and the Netherlands. It was also third in the number of new orders taken during the year.

« It is cost-related, » Zihni Bilgehan, a leading Turkish shipping lawyer, says of Istanbul’s success in the business. « The majority of people who placed orders for yachts have been Turkish, but as those yachts sailed in Turkish waters and around Europe and owners chatted to each other about price and cost, it became clear that Turkish yards were able to produce very good quality yachts at a very good price. »

A reasonable price is of course a relative concept. In Tuzla Bay, RMK Marine, part of Turkey’s Koc Group of companies, is building superyachts for Oyster Marine of the UK. The price-tag for the end-consumer is about €8m-€10m for a 100ft ship and about €16m for a 125-footer, reflecting up to 250,000 hours of labour.

Next door, Yildiz shipyard is building the hull of a much bigger superyacht for Perini Navi, based in Viareggio, Italy. Yildiz has traditionally sent such ships abroad to be completed by the Italian group, but it can also produce enormous yachts on its own – as it did with the 289ft Maltese Falcon, which Camper & Nicholsons classifies as the world’s third biggest sailing yacht.

Meanwhile, the 600-person RMK Marine carries out design work in a warren of offices in the shipyard itself. After the hull has been made for its ships, and the basic electrics have been installed, all the other features are slipped into position. Workmen pad about gingerly in slippers on a nearly completed yacht; it will continue to be taken for test sails in the bay until ready for delivery.

RMK Marine is also building ships for the Turkish coast guard, part of the country’s attempts to become more self-sufficient in producing military hardware.

Still, not all the ships are new-builds. Also undergoing work at the yard is a steam yacht that is more than 100 years old, an exuberant mix of cream and blue with old-fashioned brass portholes.

It will soon be taken back to a museum on the Golden Horn, the stretch of water that served as the city’s shipbuilding centre for centuries before the development of Tuzla Bay. Istanbul may be up and coming where producing big yachts is concerned, but as the Ottoman navy proved in its day, it has a shipbuilding tradition that stretches back to even before the great age of seafaring began.