Editorial:

Tough decisions ahead for European shipbuilding

The year of 2003 was in many aspects a record year for the world’s shipbuilding industry in general. The order book reached and passed 170 million deadweight tons. Twice as much tonnage was ordered as in 2002. A huge amount of money was poured into shipbuilding, with total investments, according to Clarkson, reaching an estimated USD 57.4 billion, which of course is an alltime high.

Rising steel prices and shortage of steel are big clouds in the shipbuilding sky. It increases costs, mostly affecting those shipyards with a large portion of orders signed when prices were significantly lower. The surprisingly fast and significant steel price hikes has also caused uncertainty in the market. Capacity utilisation is high at the shipyards and finding delivery slots before 2007 is difficult, but no one can guarantee steel delivery at that time. It has also become increasingly difficult for the shipyards to get quotes from the steel producers.

Seen over time, the European shipbuilding industry has lost out heavily to its competitors in Asia. While the size of the European order book has varied between 6.9–3.7 million CGT during the last ten years, the Asian order book has grown continuously from 12.7 million CGT in 1994 to 60.8 CGT in 2003.

In Europe, the shipyards in Germany, Denmark, France, Italy, Poland and Croatia secured more orders than in 2002. In 2003, the shipbuilding industries in Germany and Croatia surpassed the order intake in 2002 by more than 200 per cent, measured in CGT. In total, contracting at European shipyards almost doubled in 2003 to 5.1 million CGT. By the end of 2003, the total European order book stood at 615 vessels of 10.8 million CGT and just over 12 million tons deadweight.

The contracting trend is, however, negative in some of the traditional shipbuilding nations in Europe. In Spain, contracting decreased by over 70 per cent in 2003 compared to 2002. Also in Norway, Finland and Holland, fewer contracts were signed in 2003.

In Norway and Finland the situation is more than troublesome, and the shipyards are in acute need of new orders for delivery in 2005 and onwards. The industry’s inability to secure orders in today’s market, with shipowners fighting for open delivery slots, shows that the industry and the political leadership have to solve large structural problems, if shipbuilding is to survive in these nations.

Last year, EU Commissioner Erkki Liikanen presented the Leadership 2015 report where the Commission and a highlevel expert group presented 30 recommendations for the future development of the EU shipbuilding and ship repair sector.

The report points out that the strength of the European shipbuilding industry lies in the construction of sophisticated vessels, and the report suggests that aid should be diverted from production aid to development aid. The shipyards of Europe should promote safer and more environmentally friendly ships. It should also explore the potential of the growing short sea shipping sector. For environmental and transport safety reasons, sufficient ship repair capacity must be maintained. The report also contains recommendations to improve financing. In Leadership 2015, increased cooperation in naval vessel projects is also recommended.

On the bottom line, it’s of course also a question of jobs and economic development. The European shipbuilding and ship repair sector comprises 9,000 companies and 350,000 employees.
The report recommends that consolidation should be facilitated by incentives for removing less efficient capacity. The development of the European shipbuilding industry depends to a large extent on political will. Tough decisions have to be taken; often affecting many people in regions where unemployment already is of major concern.

Rolf P. Nilsson
Editor-in-Chief