November 21, 2008

Odfjell cancels contract with Sevmash for 12 vessels

It is reported that Russian shipyard Sevmash lost a USD 500 million contract for up to 12 bulk chemical product carriers with Norwegian Odfjell SE because of production delays and price increases in February end.

Odfjell SE said that it is canceling the contract as its terms were violated. Odfjell said that the fixed total contract price for all 12 vessels was about USD 500 million but Sevmash later increased that to USD 544 million. Odfjell also said it would claim full compensation for its costs and losses caused by what it called willful misconduct and massive contract breaches.

Sevmash, located in Severodvinsk on the White Sea, denied breaching the contract and accused the Norwegian company of failing to agree on a fair price for its work. Mr Mikhail Starozhilov spokesman of Sevmash refused to comment further on the dispute but said that the yard would continue building the vessels and try to find another customer.

In a similar conflict, Sevmash has fallen behind the schedule on the USD 1 billion contract to modernize the Soviet-built Admiral Gorshkov aircraft carrier for the Indian Navy and demanded to more than double the price. The Indians have complained vociferously, and negotiations are continuing.