Editorial:

Europe needs an offensive shipbuilding strategy

Shipbuilding is a risky, capital intense
business so why risk taxpayers’ money in
an effort to save an industry producing things others apparently can produce a lot cheaper?

Europe’s shipbuilding industry is struggling and the downhill trend is accelerating. In 2002, European shipyards delivered about one fifth of all new ships over 30,000 DWT, but was only awarded just over 10 per cent of the new orders, measured in CGT.
Something has to be done to change the trend if European shipbuilding is to survive. The only significant action taken today is the EU Commission’s complaint to WTO, accusing South Korean shipyards for un-fair pricing and the re-introduction of a six per cent subsidy for certain vessel types.
Even if South Korean shipyards have a number of skeletons in their financial closet, the action has a certain scent of the classic “let’s find an outer enemy to blame for our own failures”. The main reasons for the demise of the European shipbuilding industry lies here with us.
It is also an industry far to complex for a “one-and-for-all” solution.
General shipyards competing in the global arena for orders of all ship types face the competition from the efficient large-scale South Korean shipyards as well as from shipyards in low-cost countries like China. This can probably only be met by continued consolidation and possibly also closures and re-locations to achieve economy-of-scale advantages, and improved work organisations. Shipyards specialised towards high-value vessels like cruise ships face a high degree of competition from other European shipyards. Their main problem is that there are too few potential orders (or too many competitors) in the marketplace today.
Smaller shipyards work mainly in a regional European market, often having long-term relationships with the orderers. In this market shipyards in the West have a competitive disadvantage towards the shipyards in the East of Europe. Western shipyards tries to compensate the cost difference by ordering hulls in the East for completion in the West. In the long run, this will only mean that competitive advantages for the Western shipyards as knowledge, experience and work organisation also will flow from West to East, adding to the Eastern shipyards competitiveness. To survive, the shipyards in West must become more cost-effective. Therefore the on-going consolidation will continue. Re-locations and concentration of resources are also likely.
Shipyards are work intense and often have an enormous impact locally and nationally. Restructuring of this industry is a politically hot potato but more than traditional measures and general subsidies, we need a long-term and offensive strategy developed by the society and the industry together.
Now, why bother? Shipbuilding is a risky, capital intense business so why risk taxpayers’ money in an effort to save an industry producing things others apparently can produce a lot cheaper?
The answer is simple. Maritime transportation is essential for the development of the European society. Ships transport more than 90 per cent of the EU foreign trade. The intra EU-trade depends on the development of seaborne transport systems for many reasons, not least environmental. Without a strong shipbuilding industry, Europe will in the long run loose competence, research institutions, marine equipment developers and not least the initiative in the development of environmentally friendly and cost effective maritime transport systems. The fact that shipbuilding creates a lot of jobs at the shipyards and with the suppliers and sub-contractors are just bonuses.

Rolf Petrén Nilsson
Editor-in-Chief