Europe is still a major player in the global shipbuilding industry, despite a shift in production of new ocean-going vessels in recent decades.
Europe is still a major player in the global shipbuilding industry, despite a shift in production of new ocean-going vessels in recent decades, first to Japan, then to South Korea and most recently to China. Whilst by volume, Europe"s market share is now only around 15% of the global total, Europe remains in a leading position in value terms of civilian ships delivered, worth around 30% of the total, or ?15 billion in 2007. Although in the past few decades there have been many closures and workforces are reduced, there are still about 150 large shipyards in Europe, with some 120 000 directly employed. Significantly, in some coastal areas, there tend to be few alternative major sources of employment. Beyond the shipyards, a further 750 000 jobs in the marine equipment industry directly or indirectly depend on shipbuilding. This covers suppliers of everything from steel plate, to engines, to safety systems, to electronic communications and navigation equipment, to cabin furnishings.
Globally, the shipbuilding industry (aside from the design and building of naval vessels) is the subject of significant government subsidy, with the result that European yards face unfair competition. There are also significant barriers to enforcing European patents on ships built elsewhere, and so European firms may suffer infringements of their intellectual property rights.
In response to the economic turbulence following the 9/11 attacks, the EU developed the LeaderSHIP 2015 strategy for the shipbuilding sector, seeking to strengthen its competitiveness in the global market. In the period from 2003 up until the economic crisis struck the sector in 2008, the strategy had much success. European yards" orders more than tripled in value between 2002 and 2005; growing at a faster rate than those of any other region. But while it achieved important results, LeaderSHIP 2015 needed to be reviewed to ensure it is fit to address the new economic crisis.
Recent years have seen huge increases in the number of ships ordered ? particularly of the tanker, bulk cargo and containership types ? many by financial speculators rather than traditional ship-owners. Indeed, many shipyards across the world still have a backlog of orders to deliver in the next two to three years. But since the end of 2008, new orders have fallen close to zero across all ship types. The amount of cargo carried around the world has dropped off dramatically. Many ship-owners are laying up vessels for the long term because there is no business for them, so they now have little interest in bringing new ships into their fleets. Some orders will be cancelled, and some yards will complete vessels and find their buyers can no longer finance the purchase.
Indeed the financial crisis has brought a new problem for the shipbuilding industry, one which was much less significant in 2001-02. Traditionally, shipyards receive a relatively small down-payment, with the balance of around 80% of the price only paid when a ship is delivered. The yards therefore typically fund the building, paying workers, suppliers and sub-contractors through a bank loan. Similarly, ship-owners would fund the purchase with a loan, to be paid back from the revenue from carrying cargoes. The collapse of cargo rates means banks will lend much less. Finding new means to finance ship construction and purchase in the context of a much more cautious financial sector is therefore essential.
Significantly, the economic boom now ended also brought massive additional shipbuilding capacity in Asia. Whilst it was mainly intended to build relatively simple tankers, dry-cargo and container carrying vessels, in the absence of orders in those sectors, many yards in the region will be seeking whatever business they can get. European yards are currently strong in more technically advanced sectors such as cruise ships, ferries and private yachts, off-shore supply vessels (used for example in the North Sea oil and gas industry), dredgers and specialist ships such as wind-turbine installation barges or cable layers. But they can soon expect to face renewed, low-price competition in these sectors, much of it with government support explicitly enabling their competitors to reduce their prices.
Revitalised strategy for an innovation intensive sector
The European Commission brought together senior representatives from the industry, governments and trade unions concerned at a High-level Meeting in Bremerhaven on 11 September 2009. Participants reviewed the direction of LeaderSHIP 2015, so as to agree how to address the long-term competitiveness of the sector as well as the additional problems raised by the economic crisis. This implied both refocusing implementation actions for the strategy up to the 2015 horizon, and seeking agreement on short-term actions to overcome the immediate problems, including difficulties in accessing finance. The other major immediate problem is that ? when orders have dried up and ships are actually being built ? yards have no work for their design teams. Since these are a crucial element in Europe"s competitive advantage, it is vital that the skills of both individuals and teams are not lost to the industry.
Europe is the world-leader in innovation in shipbuilding. The European Commission aims to review the instruments currently supporting R&D and innovation in the sector to see how they may be improved and strengthened. The Commission will also continue and increase efforts to agree at global level on the regulation of subsidies and pricing in the shipbuilding sector. Although such an agreement is now more vital than ever to create a level playing field, the temptations for countries facing massive over-capacity to subsidise their yards will likewise be stronger than ever.
The fleet operating today does not fully respond to the future needs of safe and environmentally friendly maritime transport. Something like a quarter of Europe"s ferry fleet, for example, is more than 30 years old. Appropriate incentives to operators of older vessels to replace them would make Europe"s fleet greener and safer and at the same time stimulate demand for new ships and new technologies.
The Copenhagen climate change negotiations in December 2009 are likely to refocus attention on the energy performance of shipping, and in particular the greenhouse gases they emit. Industry acknowledges that technology to reduce emissions of such gases by up to one-third already exists, and so the European Commission will seek to get widespread commitment to schemes to introduce such technologies on new vessels and retro-fit them on vessels already in service.