1998 was marked by a drop in prices of about 15 to 30% for standard ships. 

However, shipbuilding was not the only sector to suffer from deflation. The prices of raw materials from metals to oil, from textiles to chemicals, from semi-finished products to electronic memories all fell by about 20 to 30%, caught in a scissors effect between demand that suddenly collapsed and increasingly abundant production. 

Having lived with inflation, disinflation and zero inflation, we have entered a period of deflation. In this sense the shipbuilding yards are neither better off nor worse off than the other industries. But what are the other industries doing to adapt to this new economic context? 

The most immediate response is to implement the reduction of overcapacity, even closing the least-competitive production sites. These are often the most obsolete or those that are in a less favorable economic environment (distance from the market, tax system, etc.). This is the path chosen by the steelmakers and the electronic component manufacturers. 

The petrochemical industry and the major oil companies have chosen mega-mergers (Exxon-Mobil, BP-Amoco, Total-Petrofina) and restructuring, with severe consequences on employment. 

What path can the shipbuilding industry follow? It is the victim of certain particular features which constitute as many handicaps. 

It suffers not only from overcapacity but also from an extraordinary fragmentation. It is under-capitalized and hardly benefits from any technological advantages. It is an old industry, impregnated with history, riddled with social conflicts, which must deal with greater inertia than other, younger sectors. 

For all that is needed to set up yards - albeit primitive -just about anywhere are some lifting gear, some welding stations and above all cheap labor. Over the last few years the improvement in shipbuilding and the lower cost of capital have allowed investment in slightly more elaborate facilities. 

The technology is often simpler and above all more available, because the shipyards have not been able to keep it to themselves. Everyone agrees that methane carriers are sophisticated ships. Maybe, but the heart of these ships, the containment, is the property of engineering companies, and not of the shipyards, which have sold their expertise just about everywhere around the world. Moreover, there has been little evolution since the beginning, forty years ago: today there are no longer any methane carriers under construction in Europe. 

The overcapacity is flagrant. But it could be dealt with if it was more concentrated, less fragmented. However, there is no real dominant shipyard capable of defending the interests of this branch, and the European, Japanese and Korean shipbuilder associations do not have the means to make their voices heard, assuming that they can agree among themselves. 

In the mid-1980s, at the height of the shipbuilding crisis, the Korean and Japanese governments legislated to limit the capacities of their yards. 

In 1993 the Korean authorities decided to relax their regulations (it is true that sale prices had attained peak levels shortly before). As a consequence new yards were set up, such as Halla-Samho, with its two VLCC construction docks, and Daedong, while Hyundai HI and Samsung increased the numbers of their docks from seven to nine and from two to three, respectively. At the same time the yards increased their ship production by improving productivity or by switching from repair to shipbuilding, a choice made by Hyundai-Mipo. The Korean market share thus increased from 20% at the beginning of the 1990s to more than 33% today. 

In 1996 the Japanese authorities, in order not to be left behind by Korea, in turn decided to deregulate by allowing the yards to trade nominal building capacities and to build in tandem when possible. Recently Imabari decided to invest in a new VLCC construction dock which should start operation in October 2000. The Japanese shipbuilders have since increased their production by about 25%, even though their market share has fallen from 37% to 33%. 

Of course the soundness of such policies can be queried when, at the same time, China also wants - legitimately -to obtain the market share it considers to be its due. It is certain that the imbalance between supply and demand is going to get worse. 

Shipbuilding operates in an open world, except for a few special cases (Jones Act, flag obligations): there are no quotas or customs barriers, nor any other natural protection derived from a proximity market, as is the case for agriculture or the vehicle market. 

It is therefore worth wondering whether a new economic order should be constructed and whether the authorities should be more involved in helping an industry that does not have the ability to regulate itself. 

The devaluations of the European, Japanese and Korean currencies determine the rate of changes in the order-books of these three major shipbuilding blocs. This was particularly true in 1998 with the floating of the won against the dollar. It is distressing for the yards in these three zones that their fate depends to such an extent on the relative value of the dollar against their own currencies, those of their expenditure, while they have hardly any means of affecting it and the United States shipbuilding industry does not occupy a significant position. 

It is to be hoped that the introduction of the euro will allow a new balance to be established. This will take a long time. It will concern not only the shipbuilding market, but also the second-hand and charter markets. It would suffice for: 

• certain raw materials to be bought in euro in the future to become free of revenue variations caused by parity fluctuations, 
• certain industrial companies (major oil companies, petrochemical companies or agrifood companies) to commit themselves to long-term contracts in euro, 
• the cruise market to continue its expansion in Europe, to generate a new dynamism.