Compared with Ontario and Quebec, B.C.’s manufacturing sector is still relatively small. But one sub-sector that has been growing by leaps and bounds in the last couple of years is shipbuilding.
In 2011, Seaspan was awarded an $8 billion shipbuilding contract under the federal National Shipbuilding Procurement Strategy. Since then, its head count has nearly doubled: to 2,300 today from 1,200 in 2009. And it continues to grow.
Over the past three years, the company has hired 370 professionals, including naval architects, marine engineers and procurement specialists. Its trades workforce – welders, electricians, mechanics, pipefitters and labourers – has grown to 250 in 2015 from 200 in 2014.
“Today we’re at 370,” said Seaspan CEO Jonathan Whitworth. “At year-end we’ll be at 550, and in 2018 we’ll be at 1,000.”
On top of all the new hires, Seaspan has also invested a significant amount of its own capital – $170 million – to modernize its Vancouver Shipyards, and is building a new headquarters to accommodate a growing corporate workforce.
All of that growth comes down to a single contract with the federal government. As part of Canada’s commitment to modernize its naval fleet and boost Canada’s shipbuilding industry, the federal government awarded billions in shipbuilding contracts to Seaspan and Irving Shipbuilding in Halifax.
Irving Shipbuilding won a $26 billion contract to build up to 15 new combat vessels for the Royal Canadian Navy. Seaspan won the contract to build up to 17 non-combat ships for the Canadian Coast Guard and Department of Fisheries and Oceans (DFO), as well as non-combat support vessels for the navy. The contract includes building an “extremely large” polar icebreaker.
“These first 17 ships are part of – probably – another dozen behind it,” Whitworth said. “We don’t have a contract for those, but we expect that there are more ships behind it. And we expect the federal ship program to be 20 to 25 years.”
Qualifying for the contract required Seaspan to commit to an overhaul of its Vancouver Shipyards, which were built in 1966 and with the $170 million modernization investment can now accommodate three ships at a time.
“That money was completely out of Seaspan’s pocket,” Whitworth said. “That was all our money.”
He added that the $170 million upgrade was a big challenge for the company. Seaspan, after all, has experience building ships, not shipyards.
“We were very concerned that we could get that done and do it on time and on budget,” Whitworth said. “We set ourselves a pretty ambitious goal. We needed to do it in 24 months. We actually did it in 22 months, and it came in $20 million below our budget.”
In addition to the Vancouver Shipyards expansion, Seaspan recently began construction on a new 84,000-square-foot, four-storey headquarters to accommodate the company’s growing corporate head count.
Seaspan is owned by U.S. businessman Dennis Washington. His son, Kyle Washington, Seaspan’s executive chairman, lives in Vancouver.
The company owns three shipyards in B.C.: Vancouver Shipyards, Vancouver Drydock in North Vancouver and Victoria Shipyards. Victoria Shipyards employs 750 workers and will do some of the finishing work, once the new ships are nearly completed.
The company is currently working on its first order: three DFO science vessels.
“We finished the design early last year, and we began cutting steel in June of 2015, and we should be launching our first ship around year-end this year,” Whitworth said. “And then we’re building three of this class.”
In 2016’s second quarter, Seaspan will begin building the second ship.
Ramping up for the new orders required the company to go on a hiring and training spree. So far, the company has not had trouble finding skilled workers, and the downturn in Alberta’s oilpatch has been working in Seaspan’s favour.
“We always thought that we were going to be in a better position than projects in the north because you get to live at home,” Whitworth said. “You don’t have to live in a man-camp. You don’t work in minus-20-degree weather. And it’s not a three-month or three-year contract; it could be a career.
“That was before the Alberta meltdown. Since then, our unions say they have been averaging about 1,000 resumés a month trying to get into Seaspan.”
In addition to hiring skilled trades workers, Seaspan has been working with the British Columbia Institute of Technology and colleges on apprenticeship training. Of the new apprentices Seaspan is sponsoring and hiring, 25% will be women and First Nations.
The jobs pay well. Red Seal certified welders are paid an average of between $75,000 and $100,000 per year.
The economic spinoff of the federal shipbuilding contract for other B.C. companies is significant. Over an eight-year period, Seaspan estimates that $1.3 billion will be spent with Canadian suppliers. The lion’s share – $785 million – will be spent in B.C.
The total economic spinoff is estimated at $6.7 billion in economic activity, $3 billion in gross domestic product growth (Canada-wide) and 26,000 full-time equivalent jobs over 10 years.
“The largest benefactors are going to be small and medium enterprises across Canada,” Whitworth said.
Roughly 150 suppliers across Canada will receive $197 million in orders, $21 million of which will go to aboriginal businesses.
Ideal Welders Ltd. on Annacis Island is one of eight B.C. companies that have been benefiting from service contracts.
Dale Hamill, Ideal Welders’ vice-president of operations, said a master service agreement with Seaspan to provide pipe fabrication is welcome, especially given the downturn in work related to the oil and gas industry in Alberta.
“[The Seaspan agreement] is significant,” he said. “It’s probably in the neighbourhood of 20% of our annual volume.”
The federal government’s goal under the National Shipbuilding Procurement Strategy wasn’t just to acquire new ships for the Canadian navy, DFO and coast guard – it’s also intended to build Canada’s shipbuilding capacity.
For the time being, the federal contract consumes all of Seaspan’s capacity. When BC Ferries put out a request for proposals to build new ferries, Seaspan wasn’t able to bid, because it’s got its hands full.
But eventually it hopes to be able to bid on other contracts, domestic and international.
Within seven years, the company plans to dedicate 50% of its capacity to the federal shipbuilding contract, with the remaining capacity open for other commercial orders.
“What we couldn’t offer in the past was for the government to use our product as a trading tool,” Whitworth said. “Hypothetically, now there could be a trade deal done with another country.”
