European Economic and Social Committee Consultative Committee on Industrial Change

1

• European Economic and Social Committee
  Consultative Committee on Industrial Change
• European Shipbuilding Dealing with the Crisis
• Reinhard Lüken
• Vigo, 1 December 2009

2
Introduction of CESA

• CESA originates in 1937
• 16 Member countries
• gt 99 EU production
• gt 300 Shipyards
• turnover in bill.
• 16 merchant
• 10-15 naval
• 3-5 maintenance, repair conversion
• gt 100.000 direct jobs

3
Production and Orderbook Values(merchant
newbuilding only)
Source CESA
4
Source CESA
5
Key Messages

• Deep crisis impact on global maritime sector
• Shipbuilding in Europe successfully restructured
  into high-tech niche player with growth prospects
• Key contributions to EU 2020
• Late cycle industry 2010/2011 problems will
  rise
• Acute unprecedented challenge to critical mass
• EU must respond to global market distortions
• Need decisions before summer 2010!
• Proposals serve multiple policy objectives

6
Quarterly New Orders by Shiptype
Source Lloyds Register-Fairplay
7
Supply and Demand
Source Clarksons Forecast 2009
8
World Fleet and Orderbook
Source Lloyds Register-Fairplay
9
Fleet Orderbook by Shiptype
10
Capacity Expansion
11
Focus on High-end Ships
12
European Results Value vs Volume
Source CESA
13
New Orders and Production in Europe
Source CESA
14
Crisis Impact

• Capacity utilisation 80 in 2010 and 50 in 2011
• No action will help without new orders!
• Numerous bankruptcies already
• Almost 20 of jobs affected in 2009 2010 will
  be worse!
• Impact on suppliers evident but more difficult to
  document

15
Crisis Impact

• Global (not only European) shipbuilding is among
  the worst hit industries
• Late-cycle sector is a political challenge
• Paradoxically, Europe is more affected despite
  the superior markets (balance of supply demand)
• Critical mass is a major concern for all
• Europe could lose the capability to construct
  complex maritime hardware

16
LeaderSHIP

• Role model also for European Crisis response?
• Oriented towards future competitiveness (not
  structural conservation)
• Action package in line with other policy
  objectives
• Short term medium-long term measures
• Access to pre- and post delivery financing for
  viable and feasible projects
• Active stimulation of demand - replacement of
  aging and environmentally unfriendly vessels
• New ways to restore and defend a level playing
  field
• New forms of innovation collaboration for green
  technology

17
Shipbuilding Price Evolution
Source Clarkson
18
Steel and Ship and Prices Evolution
Source MEPS, Clarkson's
19
Price war?
Shipbuilders may be drawn into a global price
war next year triggered by South Korean
discounting Bloomberg 28.08.2009
 Recent order-intake for the construction of
50,400-dwt tanker octet (options for four units
included), worth 340m (42.5m per ship), has
caused price controversy  Asiasis June 2009
Newbuilding price war startsBrokers say some of
the smaller yards are aggressively marketing
capesize contracts at low price Asiasis, October
2009
shipping ministry surprised by offer to build
two dredgers at half the price New Ships,
November 2009
 At their peak in 2008, Capesize prices went up
to a record-high 110 million in a deal made by a
major Korean builder for delivery in 2010. Just
over a year from then, the prices have come
closer to half their peak levels  Kaiji Press,
October 2009
newbuilding price in line with current
Clarkson Newbuilding Price Index not being
accepted by South Korean large shipbuilders New
Ships, June 2009
20
Level Playing Field

• WTO rules have shown to be ineffective
• OECD process doubtful
• Council Regulation on Injurious Prices from 1996
• Support action in many countries
• China estimated at 30bn
• Korea estimated at 20 bn
• Domestic support programmes in Russia, India,
  Brasil etc.
• Member states provide funding to construction in
  Asia!
• EU must ensure not to lose orders to less
  competitive builders due to government support

21
Demand Stimulation

• Aging vessel replacement programme300 Ships
  30 more energy efficient 3 years
• New markets off-shore wind, ocean energy, artic
  conditions, low carbon
• International collaboration with Russia, Brazil,
  Canada etc.
• Public procurement of naval and other government
  vessels

22
Financing

• Very challenging to acquire long-term facilities
• Member States are active additional
  transparency would be helpful
• EIB very reluctant to support the sector...
• ...existing EIB facilities could be applied, such
  as Clean Transport Facility (4,5 bn allocated
  to automotive since Dec. 2008!)

23
Innovation

• The only way to succeed!
• Shipbuilding Framework to be reviewed and
  application to be streamlined
• Prolongation after 2011 essential
• New forms for Community funding structures (FP8)

24
Employment

• Safeguard employment and capabilities are the key
  objective
• Employment measures are mainly at national level
• Member States to be encouraged to provide full
  support
• Social Dialogue committee will work with the EC
  to explore possible application of Community
  instruments

25
Thank you for your attention more info
athttp//www.cesa.eu