Editorial:

Prepare for the down-turn

The EU and the European shipyard industry didn’t get much sympathy or support from the WTO. The South Koreans got a small rap over the knuckles when WTO ordered them to abolish some creative financial support to the shipbuilders within 90 days, but that didn’t upset the Koreans.
– We’ve already done that, so it won’t bother us, they said.

European shipbuilding obviously has to find its own solutions without outside help.
The present market situation is however the best seen in many, many years. The number of vessels ordered was up by more than 40 per cent in 2004 compared to 2003, according to Clarksons. Compared to 2002, contracting was up by more than 200 percent. In Asia, contracting was slightly less in 2004, compared to the year before.

A prosperous shipbuilding industry is good for Europe, not least for the 350,000 Europeans depending on shipbuilding for their livelihood. The production value of the shipyard industry was in excess of EUR 13 billion in 2002. With well-filled orderbooks, the shipyards will of course have most of their focus on building the vessels ordered.

It would however be a mistake if the large work-burden at present leads to a loss of momentum in the necessary structural change of the industry and a reduced focus on technological and commercial development. There will be a downturn and there will come a time when Asian shipbuilders once again can offer slots
at attractive prices.

European shipyards have a technological and infrastructural advantage compared to Asia. Europe has all the suppliers and production plants necessary to build the most complex vessels, such as cruise ships. Europe is still the main centre for technological innovations, equipment development and design.

This can however change and it can change fast. Asian shipyards have shown that they can build complex vessels such as ro-ros, ro-paxes and cruise ferries. China for instance has taken large losses in high-value ships projects, but seen it as an investment in competence for the future. So why aren’t they more active on the high-value shipbuilding arena today? The answer is simple: why bother with risky complex projects in the present market when you can fill your slots with simple standardised vessel projects in which the financial return can be calculated to the cent already before the steel is cut?

Sooner or later (probably sooner) they will be back in the “sophisticated” market. The competence advantage can vanish very quickly, something that other industry sectors have experienced. For instance, it didn’t take long for India to develop from solely being a supplier of cheap clothes and footballs to also being
a major actor in the IT industry. Well educated IT engineers and system developers are pouring out by the hundreds from Indian universities. A similar development will of course also happen in the shipbuilding industry.

The European advantage of having a strong presence of state-of-the-art equipment suppliers, while Asia still lacks some to be able to enter the most complex markets, such as cruise vessels, is also diminishing, not least as a result of the knowledge transfer when European equipment makers move resources and production to the East.

Rolf P. Nilsson Editor-in-chief

Therefore, it is imperative that consolidation and rationalisations continues, that productivity is improved and that research into ship technology and production techniques increases. Positive initiatives taken during recent years, such as the LeaderSHIP 2015 and the Waterborne Technology Platform, must lead to concrete measures.