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The Shipbuilding market in 2000 (5)

Europe
A number of factors may have contributed this year to the increase of sales by European shipyards compared with 1999: u the appreciation of the dollar against the euro by about 20 % since the beginning of year up through October 2000 in a market largely dominated by US dollar transactions even if the euro seemed to appreciate slightly by the end of the year, the return of stronger economic growth in Europe, the rise in freight rates, the saturation of orderbooks in Asian shipyards by the middle of the year, which pushed a number of shipowners to Eastern European shipyards (Poland and Croatia) or to order in German yards to benefit from earlier delivery dates or from prices which had been made more competitive by the appreciation of the dollar, the often announced end of subsidies to European Union shipbuilders appears this time to have finally now arrived and seems to have motivated some owners and shipyards into taking the opportunity of signing newbuilding contracts. All of the above factors have had an impact in year 2000. However, the demand for specialised vessels was lower in 2000 for chemical tankers, ro-ro's, ferries and cruise ships than in 1999. These specialised vessels constitute the core of European Union shipbuilding. Despite this, the orderbook passed the 8 million gt mark, to reach 8.7 million gt in the fourth quarter. In global market share terms European Union shipbuilders now stands at 12.3 % down from a 13.3 % market share in 1999. The European Union shipbuilders have criticised their counterparts in Korea for price dumping and brought their grievances to the EU authorities in Brussels and thereby formalised the complaint that Korean shipbuilders have financed their expansions (which contributed to the over-capacity which has caused the reduction of prices) by incurring massive debt. According to the arguments put forward by EU shipbuilders, much of the Korean debt will either never be repaid or be partly forgiven due to the support from IMF and such debt forgiveness is seen as a public support to companies which would have gone bankrupt otherwise. The EU authorities commissioned a study of the problem which, according to the findings of the study, claims that the Korean shipbuilders are engaged in price dumping. The Korean shipbuilders have retorted that their success was simply the result of the depreciation of their currency, the improvement of the productivity as well as their purchasing power. The Koreans have also stated that the main goal of the European Union shipbuilders in this dispute was to obtain a continuation of EU subsidies to the shipbuilding industry beyond 2001. As a matter of fact, Europe, as planned, decided to end subsidies as of 31st December 2000. In their latest report the European Council has revealed the average amount spent, as of 1998, in subsidy per employee in the shipbuilding industry was 28,000 Euros, compared with only 1,113 Euros per employee average in all other EU industry. Under these conditions it is not surprising that Europe's politicians have decided there are better ways to spend the taxpayers money. It is on the other hand just as legitimate to question if the taxpayers money which comprises the IMF funds was well spent at a time of crisis, without demanding that Korean shipbuilders reduce capacity, as had been the case of Europe's shipbuilding industry, as the price to be paid for direct or indirect subsidies. In any event, European shipbuilders will have to take orders for newbuildings without the benefit of subsidy from the start of 2001. Even if the markets for European and Asian shipbuilders are somewhat different, there are certain segments they share in common, in the containership sector for example in Germany, but also in Spain and Italy, all countries which were in firm disagreement with the decision in Brussels to end subsidies. These shipyards risk to encounter enormous difficulties to obtain new orders without subsidies as the prices of newbuildings still remain below those of pre-1997 Asia crisis. The year 2000 demonstrated that Korea could take on 7.5 million of additional gross tons, in less than a year, an amount nearly equal to the entire orderbook in Europe. Finally we note that in the implementation of its exit strategy from shipbuilding in Europe, the Kvaerner Group was successful in selling during the course of 2000 the following shipyards: Fjellstrand, Floroe, Govan, Kleven, Leirvik and Mandal. The group is still owning three major shipyards: Kvaerner-Masa, Kvaerner-Philadelphia and Kvaerner-Warnowerft, but disposal of these yards is still a priority as part of Kvaerner's policy of shedding non-core assets.
France
The orderbook for French shipbuilders remains stable at about 920,000 gt. After the final shutdown of Ateliers et Chantiers du Havre (which delivered their last unit, an unfinished hull to be completed in Croatia by Uljanik) France is left with one large and three small shipyards. It was another exceptional year for the Chantiers de l'Atlantique, which took advantage of the ongoing demand for cruise ships. Cunard Line, with its order for the 'Queen Mary 2', brought the first newbuilding to Chantiers de l'Atlantique for the account of the world's leading cruise operator, Carnival Corp. The contract for the 'Queen Mary 2' also marked the first newbuilding of a full-fledged transatlantic liner vessel in more than thirty years, and being the most expensive passenger ship ever ordered. Other significant successes were achieved, one of which was the contracting of a cruise ship for Japanese owners NYK. This was the first time NYK had signed with Chantiers de l'Atlantique and is one of the few orders placed by Japanese owners in any European shipyard. No less significant was the success of obtaining the cruise ship newbuilding order for Mediterranean Shipping Cruises in the face of lively competition from Italian shipbuilders. As of today, Chantiers de l'Atlantique has 12 cruise vessels and two naval frigates on order and in the year 2000 has delivered four new cruise ships: the 'R Five', 'R Six' and 'R Seven', cruise ships of 702 passengers to Renaissance Cruises, the 'Millenium', cruise ship of 1,900 passengers to Royal Caribbean Cruises.

R SEVEN
30,277 grt, blt 2000 by Chantiers de l'Atlantique - perated by Renaissance Cruises.

The other shipyard of the group, Alstom Leroux Naval, was successful in taking an order for the account of NEL Lines in Greece :

a fast-ferry of 36 knots and 1,000 passengers / 210 cars,
and delivered :
a fast-ferry of 36 knots and 1,116 passengers, the 'Aelos Express' for Nel Lines,
a fast-ferry of 42 knots and 1,000 passengers, the 'NGV Liamone' for SNCM,
four 3 680 kW tugs for Les Abeilles S.A..

NGV LIAMONE
12,000 grt-42 k., blt 2000 by Alsthom Leroux Naval - owned by SNCM

The shipyard Pirou took orders for:

five "long liners" of 55 m for Armement R'unionnais, Mascareignes, Sapmer, le Garrec and Comata,
two trawlers of 25 m for Armement Nocca,
a trawler of 25 m for Armement Hamon,
a 2 000 kW tug for Papeete Port Authorities,

and delivered not less than 20 vessels including:

two tuna-seiners, the 'Sterenn' and the 'Cap Saint Vincent', a multipurpose vessel, nine trawlers, six shrimpers, a river passenger ferry and a crew boat.

The shipyard Constructions Mecaniques de Normandie obtained orders for four luxury yachts and one multi-hull yacht, and delivered four fast patrol boats for the Kuwaiti Navy.

Germany

With an orderbook of 2.63 million gt (as of the fourth quarter of 2000) Germany maintained the number one rank in European Union shipbuilding, just ahead of Italy. However, for the first time Germany has been overtaken by neighbouring shipbuilders outside of the European Union in Poland. Germany therefore now declines to the number five ranking in terms of gt percentage of the world orderbook. It is of interest to note the four types of vessels that have dominated the German orderbook this year:

container vessels, as usual, lead with 39 % of the orderbook (compared with 35 % in 1999),
cruise ships advanced to 33 % (against 28 % in 1999),
ro-pax orders increased to 16 % (compared to 13 % in 1999),
ro-ro newbuildings in Germany remained at 8 % of the orderbook.

Germany, with its strong participation in the containership newbuilding sector did not vote in favour of the ending of subsidies to shipbuilding. In spite of the dynamic participation of German shipowners in this sector, shipbuilders in Germany have seen their market share of the world containerships orderbook declining from 14 % in 1998 down to 6 % in 2000. German shipbuilders can be legitimately worried about their future. If the euro continues to appreciate, it might become difficult for them to maintain even their present level of orders.

Italy

With an orderbook of 2.15 million gt, Italy holds the second place ranking in European Union shipbuilding. Three types of vessels dominate Italian shipyards:

cruise ships (56 %),
ro-pax (25 %),
ro-ro's (13 %) which have pushed chemical tankers to the 4th place in 2000.

Fincantieri has decided to utilise additional capacity at a third site (out of the six they control) to the newbuilding of cruise ships and passenger ships. Outside of the construction of cruise ships, Italian shipbuilders are almost exclusively at work for orders placed by Italian shipowners, who nonetheless have been extremely active ordering newbuildings from shipyards outside Italy. Italian shipyards have relied heavily on the "scrap and build" law and thus on the new fiscal law for financial aid to the maritime investment.

Spain

The Spanish decided to create a giant state-owned shipbuilding group by combining the nation's civilian and military shipbuilding capacity and re-branding it under the new name "Izar". Izar has taken the activities of two public groups in Spain, those formerly of Bazan in the military sector and AESA in the civilian shipbuilding sector, with the hope thereby of rationalising shipbuilding in Spain and achieving some economies of scale. However to increase their competitiveness, Izar will most likely have to truly attempt to reduce the number of shipbuilding sites in Spain, of which today there are eight, and increase the productivity of those shipyards which will remain. This will not be easy in a country with strong independent regional interests, where each region has its own good reasons to preserve its shipbuilding capacity. Spanish shipyards took few orders in 2000 even with the low euro / USdollar exchange rate making them more competitive than they otherwise might have been. The Spanish orderbook however remained stable at about 797,000 gt. We need to highlight however, the success of the former AESA bringing Spain into the club of shipbuilding nations that are capable of constructing LNG tankers. AESA was successful in signing contracts for three LNG newbuildings of 138,000 cubic meters after competing in an international tender in the face of fierce competition. Two vessels will be built at Bilbao and one at Puerto Real.

Shipping and Shipbuilding Markets in 2000

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