Marine Link
Monday, September 25, 2017

Shipyards Expect Painful Correction Period

June 23, 2009

Just at a time when Europe discovers the vast growth opportunities linked to new technologies for the sustainable use of the oceans and seas, the key maritime sectors face their deepest slump ever. Driven by ill-informed speculation, massive overcapacities have built up in global shipping and shipbuilding. All three main markets for standard ships, containerships, bulk carriers and tankers, are substantially oversupplied. While shrinking cargo volumes cannot fill existing ships, the orders for new ships placed over the recent years trigger a global fleet growth of nearly 50% by 2012. Now buyers and their bankers challenge signed contracts and urging shipyards to accept delays and cancellations or face prolonged order draught. Naturally yards are reluctant to follow such requests but often have no choice as many orders lack financing and often buyers face illiquidity.

In meetings of the global shipbuilding industry, CESA experts were among those who warned already in 2006 that a massive supply and demand imbalance of at least 50% was building up. However, the expansion course mainly in Asia further accelerated, stimulated by a distinct absence of globally applicable trade rules. Since September 2008, demand for new ships declined by 92%. During first quarter 2009 a global production volume of 11.5 million cgt was contrasted by new orders of only 1.1 million cgt. In this situation, substantial parts of the global shipping and shipbuilding community will face bankruptcies.

The focus on fast growth has been a main root to the current situation. Now, sustainable operations are the key for a sound course towards the future. European producers have a significant head start due to their concentration on innovation rather than mass production. European shipyards have refrained from an excessive expansionist courses like many Asian competitors. They have largely focused on niche markets with high technology requirements which have remained fundamentally healthy and profitable. The financial crunch is currently causing substantial difficulties also in these markets but a relatively fast recovery is expected once financial resources are obtainable again. However, with significant lead time needed to launch new innovative shipbuilding projects, also many high tech yards in Europe will need new orders in the coming months in order to avoid or at least limit temporary or permanent lay-offs. It is not acceptable that in the absence of global level playing field should cause irreparable damage to this skill base.

CESA anticipates that the current demand and financing gap will lead to structural damage also in the European maritime industry. Particularly SMEs and technologically less advanced companies will face severe, in some case fatal challenges. A united approach of European producers is needed to ensure that feasible and competitive companies do not become victims of ill-advised business practices elsewhere. Comprehensive government interventions in some parts of the world are likely to aggravate the situation.

European producers have vast experience in developing advanced products with outstanding environmental performances. Europe has strong interest in maintaining its technological capabilities in the maritime field. CESA calls for concerted European action to facilitate a decisive push for the application of green maritime technologies. Europe must take LeaderSHIP for a Green – Blue Revolution.

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