Are there any real ideas on how to restore the shipbuilding industry in Europe and the US?
Debates are taking place in Brussels and Washington on how to revitalise the country’s shipbuilding industries. This is not a new issue but in the face of the geopolitical events of the last three years, it has taken on a different dimension.
On the one hand, the dependence on the purchase of merchant ships by European and American shipowners abroad has deepened. On the other hand, the dominant position in this offer is held by Chinese shipyards, which, after a period of competition with, at first, Japanese and, until recently, South Korean shipyards, have become global leaders for the last two years.
A multidimensional problem
The loss of orders by European and American shipyards dates back to the beginning of the century. The main reason was the higher costs of ship production in them than in Asian shipyards. South Korean shipyards followed the example of the Japanese ones, subsidising the domestic shipbuilding industry directly or indirectly (Japan withdrew from this) and offering ships at unbeatable prices. The problem took on a different dimension when Chinese shipyards developed the same practices, becoming strongly involved in the competition and becoming leader for several years.
European shipyards have been losing share in the global production of merchant ships but retained until recently a dominant share in the production of cruise ships for off-shore works and an almost 50 per cent share in global supplies of key ship equipment. However, that’s a thing of the past, among other things, due to the expansion of the Chinese industry, which has strongly entered or is entering these segments (it recently launched its second mega cruise ship, already on its own).
The Shipyards’ & Maritime Equipment Association of Europe (SEA Europe) – an umbrella organisation representing the European maritime technology industry and bringing together shipyards and marine equipment manufacturers – emphasises once again that the decline in the role of European shipyards poses a threat not only to them. It also undermined the entire supply chain ecosystem of equipment, systems and technologies and harmed naval shipyard capabilities.
And this is an important, new accent on restoring this industry in Europe.
Status of orders
According to Clarkson Research, a British shipbuilding and shipping market analyst, in the first quarter of the current year, the production of the global shipbuilding industry reached the value of 8.72 million CGT (compensated gross tonne – a unit of measurement of shipbuilding production taking into account the share of labour and production complexity), by 4.2 per cent more compared to the same period last year.
The share of Chinese shipyards increased and exceeded 50 per cent, while the share of the competing shipbuilding industry from South Korea decreased (by 5.7 per cent) and fell below 30 per cent (up to 28.4 per cent). Among the main reasons for this trend is that there is a labour shortage in the Korean industry, although it employs over 8,300 foreign workers. On the other hand, Chinese shipyards are not affected by this problem.
American actions
Last week, the Maritime Advantage Results in National Economic Resiliency & Security Act (MARINERS Act), which analyses ways to increase domestic production of the shipbuilding industry in the U.S., was presented to Congress in Washington.
“Decades of neglect by the U.S. government and private industry have weakened our shipbuilding capacity and workforce,” the report emphasised. It also stated that the capacity of commercial American shipyards is 230 times smaller than that of Chinese ones. During the National Maritime Day ceremony, Secretary of the Navy Carlos Del Toro confirmed on 23 May his commitment to rebuilding the domestic shipbuilding industry.
“History shows that no nation has survived as a great maritime power without also being a commercial maritime power, in both shipbuilding and maritime industries. For the first time in 125 years, we have a full-spectrum global maritime competitor,” Del Toro said.
At the beginning of this year, he travelled to Asia to meet with Japanese and South Korean shipyard executives, urging them to invest in American shipyards.
In turn, during one of the pre-election meetings with trade unionists, Joe Biden announced that his administration would investigate whether the Chinese government was using anti-competitive practices to artificially lower prices in the shipbuilding industry. “If the government does this and uses unfair tactics to undermine free and fair trade competition in the shipping industry, I will take action”.
It can be added that this has already been proven, so it is high time to take action.
SEA Europe appeals
SEA Europe representatives also called for action when they met with European parliamentarians in April. They called for the formulation of a comprehensive European maritime industry strategy.
“Due to significant ship price differences ranging from 30 to 40 per cent, combined with favourable financial incentives – especially those offered by Chinese banks – European shipowners are increasingly choosing Asian shipbuilders,” the association recalled in a statement.
“It is necessary to regain Europe’s shipbuilding potential by obtaining orders from shipowners, including European shipowners,” said Christophe Tytgat, Secretary General of SEA Europe. He called the EU decision-makers to adopt a maritime industrial strategy, which should be considered a priority in implementing Europe’s strategic autonomy.
“This strategy should strengthen technology leadership, facilitate investment and nurture a skilled workforce. By strengthening its shipbuilding potential in a difficult global landscape, Europe will increase its economic security and strategic maritime autonomy, which is much needed in the context of geopolitical tensions,” said Tytgat.
Without countermeasures?
Unfortunately, this information from the U.S. and Brussels does not provide a clear message as to how domestic shipyards should obtain larger orders for the construction of commercial ships. Formally, subsidising their production is out of the question, which only applies to warships.
Meanwhile, SEA Europe has been fighting for years on international forums to enforce the ban on subsidies to the shipbuilding industry in Asia but still without effect.