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European Economic and Social Committee Consultative Committee on Industrial Change European Shipbuilding Dealing with the Crisis Reinhard Lüken Vigo, 1 December 2009 Introduction of CESA CESA originates in 1937 16 Member countries > 99% EU production > 300 Shipyards turnover in bill. € 16 merchant 10-15 naval 3-5 maintenance, repair & conversion > 100.000 direct jobs Production and Orderbook Values (merchant newbuilding only) Source: CESA Source: CESA 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 Quarterly New Orders by Shiptype Tankers Gas Tankers Bulk Carriers Ferries / Passenger Ships Containerships and other dry cargo Other Non Cargo Vessels 22500 20000 (Average quarter 1999-2007) 17500 Source: Lloyd’s Register-Fairplay 000 CGT 15000 12500 10000 7500 5000 2500 0 Q 1999 Q 2000 Q 2001 Q 2002 Q 2003 Q 2004 Q 2005 Q 2006 Q 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Supply and Demand Source: Clarkson´s Forecast 2009 World Fleet and Orderbook Fleet vs. Orderbook World Fleet in 1.000 GT Orderbook % 1,300,000 44% 1,200,000 43% 1,100,000 29% 1,000,000 24% 900,000 800,000 700,000 23% 19% 600,000 500,000 400,000 300,000 200,000 100,000 2003 Source: Lloyd’s Register-Fairplay 2004 2005 2006 2007 2008 Fleet & Orderbook by Shiptype Other NON Cargo Activities 14% Offshore Activities 32% Fishing 1% Fleet Ferries / Passenger Ships Orderbook 15% Gastankers 30% Other Dry Cargoes 25% Containerships 47% 68% Bulk Carriers 39% Tankers 0 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 in 1 000 GT Capacity Expansion Production Index (cgt basis) 1999=100 800 700 China South Korea Japan CESA 600 500 400 300 200 100 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 19 99 0 Focus on High-end Ships European Results: Value vs Volume 20.000 Turnover in 1 000 € 16.000 9.000 Turnover in EUR Production in DWT 8.000 14.000 7.000 12.000 6.000 10.000 5.000 8.000 4.000 6.000 3.000 4.000 2.000 2.000 1.000 0 0 2005 Source: CESA 2006 2007 2008 Volume in dwt 18.000 10.000 New Orders and Production in Europe orderbook 18.000 new orders deliveries Possible orderbook correction by end of 2009 15.000 1.000 CGT 12.000 9.000 6.000 3.000 0 1998 Source: CESA 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 FY 2009 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 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 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: 1. Access to pre- and post delivery financing for viable and feasible projects 2. Active stimulation of demand - replacement of aging and environmentally unfriendly vessels 3. New ways to restore and defend a level playing field 4. New forms of innovation collaboration for green technology Shipbuilding Price Evolution Monthly Newbuilding Price Index 5 in $ in € in Won in Yen in Yuan 220 200 Jan 2000=100 180 160 140 120 100 80 Jan 00 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 -0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 n-0 y-0 p-0 -0 -0 ay Sep Jan a Se a Se a Se a Se a Se a Se a Se a Se a Se aJ aJ aJ aJ aJ aJ aJ aJ M M M M M M M M M M Source: Clarkson Steel and Ship and Prices Evolution Steel and Ship Price Indexes Steel 2003=100 Clarkson´s Prices 350 300 250 200 150 100 50 0 2003 Source: MEPS, Clarkson's 2004 2005 2006 2007 2008 Sep* 2009 Price war? Newbuilding price war starts Brokers say some of the smaller yards are aggressively marketing capesize contracts at low price Asiasis, October 2009 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 Demand Stimulation Aging vessel replacement programme: 300 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 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!) 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) 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 +++ Thank you for your attention +++ more info at http://www.cesa.eu