Northern Europe’s maritime communities:
Blue lights burning?

	Hamburg is one of the leading shipping centres in Northern Europe. It also upholds its old traditions within this area. PHOTO: JOACHIM SJÖSTRÖM

Entrepreneur-driven and operated along human networks, Northern Europe’s shipping operations are still found in patches along the coastline from Brittany to Norway.
These patches are made out from communities small and large which together own some 20 per cent of the world’s fleet and with commercial control of at least a quarter.

Add to this the importance of the support sector, from finance to technology, shipbuilding and equipment production, the broad maritime logistic field, all under the political ambitions by the EU to promote shipping internally and to curb substandard shipping internationally.
By a conservative estimate, some half a million people are directly employed in the maritime industries across our region, with wide repercussions in ancillary services. Counting seafarers in international trades, more than 150,000 are employed on ships from our region of which almost half are nationals.
Historically the world’s leading maritime region Northern Europe is facing low-cost competition in maritime labour and manufacturing.
Will this lead to irrepairable erosion of competence, or should it be regarded more as an opportunity than a threat?

Commercial drive
The maritime activities in our region span across a wide area divided into five sectors:
commercial shipping
ship operation and management
maritime technology, equipment, shipbuilding
support and ancillary activities, classification, financing, etc
maritime logistics, ports, distribution, services.
Shipping companies in our region have consistently been amongst the pioneers in commercial co-operation. With the trend towards consolidation, such market-building has been vitally important. In fact, operators from our region are amongst the world’s leading, be it Maersk-Sealand, P&O-Nedlloyd, Hapag-Lloyd, Odfjell, Lauritzen Cool, Star Shipping, Gearbulk, Eukor, Wagenborg, Beluga and others.
This commercial position has been so alluring that cash-rich companies around the world have been vying for a share, as seen by Hanjin buying Senator, Sohmen picking up Bergesen, Hugo Neu picking Krupp Seeschiffahrt, Star Cruises buying NCL, Teekay taking Bona, Ugland Nordic and Navion.
Moreover, the leading North European companies have been clever in adapting themselves to the new operating environment. The first ties in ship management with Hong Kong and Manila were forged in the late 70s; Norwegian owners have collectively been involved in maritime education in the Philippines since 1987 to obtain quality-assured maritime labour, and lately Singapore has become an important ship management and operations centre in Southeast Asia.
Much of this world-encircling commercial drive has been conducted from the main shipping centres in our region. London, Rotterdam, Hamburg, Copenhagen and Oslo are playing leading roles in different spheres, strong in broker houses, chartering, finance institutions and headquarter functions.
Much, however, points to the advantage of the smaller communities. These have grown out of small-scale shipping, often with a strong hands-on culture in management and operation. There are examples of easier cooperation and cross-fertilization in smaller communities, and attracting human competence of the right motivation could be easier.

The low-cost challenge
Despite steps from the EU to protect its shipbuilding industry, the competitive situation the last two years has clearly sidelined most European yards compared to Japan, South Korea and China. The difference in prices runs as high as 25–35 per cent in stainless steel chemical tankers, for example, and other advanced types of vessels like cruise ships and LNG carriers are snared by lower cost builders in the East. The re-introduced subsidy grant of six per cent for specific types will hardly be sufficient to counter the gap.
There are several negative factors for European shipbuilding, and indeed the equipment industry, too.
One is the lack of commercial transparency within Europe when large shipbuilding groups remain state-owned, like Spain’s Izar and Italy’s Fincantieri. The recent salvage mission of Alsthom by the French government will beyond doubt see taxpayers’ money go into covering losses and securing new contracts.
Even the age limitations on tankers to be introduced by the IMO are bad news for European shipbuilders. Up till now, European yards have offered high-quality product and chemical tankers for 30 years’ service, as against cheaper vessels from Asian shipyards with shorter life expectancy. Now, with a 25 year deadline, there is little point for shipowners to invest in vessels for longer lives, a view reflected by Stolt-Nielsen, Odfjell and JO Tankers by contracting cheaper stainless-steel tankers from Japanese yards through local shipowners.
Dutch, German and Norwegian shipbuilders in particular have been clever in utilizing low-cost shipbuilding capacity in Eastern Europe. Damen, Ferrostaal and Aker have all acquired shipyards in Romania and Ukraina.
It is hard to see how our maritime manufacturing industry can avoid some sort of structural adaption to mounting competition. But will the loss of jobs with shipyards in our region also lead to a loss of competence and technology lead? Not necessarily. B&W, the engine builders, retain their development centre in Denmark even though all the engines these days are built in the Far East.

Opportunities
The enlargement of the EU to comprise several East European countries will open up a market of lower-cost labour. This is regarded with mixed feelings, particularly from labour unions in the West whose members will become exposed to colleagues of inferior wage and social benefits.
To our shipping communities the larger EU should offer opportunities as well as challenges. In the field of maritime labour, seafarers from Latvia and Poland will now be EU nationals, while still retaining their local conditions – although these will gradually have to be improved. The same goes for manufacturing, and shipyards and equipment producers may see the opportunities for “globalization” within Europe, retaining market position and competitive edge by the division of marketing, design and development from manufacturing. This, however, will require a new approach in management to ensure motivation and overcome cultural differences.
The co-operation and involvement with new suppliers in Eastern Europe, as set about by the enlargement of the EU, may well become our region’s strongest card in the global competition from other corners of the world.
//Dag Bakka Jr

Back to SSG 16, 5 September