By J.J.C.M. van Dooremalen
The European Shipbuilding operates in a totally open and global market without regulating instruments, such as customers' tariffs, quotas, antidumping rules or other similar protection measures. In the same time Far East competitors maintain a tight internal market either by law or by actual practice and the USA traditionally isolate their wide domestic shipping traffic, as exclusive for their home yards.
In spite of all this, the European Shipbuilding Industry has achieved a remarkable performance and maintained a significant presence in the market, thanks to its high technology and environmental safe products and its high productivity in design and production processes. This result was achieved by our industry by strengthening its own excellence. It has developed ships and offshore devices, complex and multifunctional, which combine different technologies as advanced materials, propulsion systems, electronic and navigational, in close co-operation with many suppliers and subcontractors as an increasing integrated process.
In order to achieve this state a significant restructuring was performed during the last two decades. Production facilities, internal organisation and labour force had to be adjusted to the size and quality of the changing market. From 1975 to 1997 the directly employed labour force in shipbuilding and shiprepair had to be reduced to close to 1/5 of the original level (from 433,000 to 90,000 persons) by means of an intense reorganization and a drastic productivity improvement program.
While the EU operating aid remained unchanged at its lowest level, the Republic of Korea increased during the last decade its shipbuilding capacity by over 100%. The consequence is a dramatic market unbalance just in a period when the restructuring efforts of both the EU and Japan were expected to bear their stabilisation fruit.
The common efforts of industry, Member States and European Commission towards a level playing field were frustrated to the extent that the growing overcapacity and other unfair practices failed to be properly addressed by strong international action. The latest developments in the Far East, resulting from the financial crisis, have aggravated the situation to a limit where either this action is now urgently taken or shipbuilding in Europe will cease to exist.
During 1998 new orders decreased by 18% compared to the previous year; in the first quarter of 1999 the reduction stays around 55% compared to the same period in 1998. The yards more severely damaged are the European ones: for many ship types prices barely cover the cost of materials. Yards' worries in this respect are shared by shipowners whose fleets value is strongly undermined by the abnormal price decrease.
In a market situation where fair competition rules no longer apply, the competitive position of European shipbuilding appears to be severely deteriorated compared to the aggressive attitude and behaviours of the Far East yards, the Korean ones in particular. It is clear that European shipbuilding is facing its worst crisis since the one in the 80's. Although in some sectors a lot has already been done, the yards must spare no efforts to improve their productivity, efficiency, technology by co-operating and implementing the best practices available in the industry.
In the present circumstances, however, this could not be enough and therefore the European Union and national governments shall have to look in the very near future for effective and rapidly applicable international measures to enable the shipbuilding industry to be competitive on a seriously deteriorating international scene.
Full article: The Situation In The World Shipbuilding Industry - A Matter Of Survival, Paper presented on 14 September 1999