European Economic and Social Committee Consultative Committee on Industrial Change

1. European Economic and Social Committee Consultative Committee on Industrial Change European Shipbuilding Dealing with the Crisis Reinhard Lüken Vigo, 1 December 2009

2. 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

3. Production and Orderbook Values(merchant newbuilding only) Source: CESA

4. Source: CESA

5. 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

6. Quarterly New Orders by Shiptype Source: Lloyd’s Register-Fairplay

7. Supply and Demand Source: Clarkson´s Forecast 2009

8. World Fleet and Orderbook Source: Lloyd’s Register-Fairplay

9. Fleet & Orderbook by Shiptype

10. Capacity Expansion

11. Focus on High-end Ships

12. European Results: Value vs Volume Source: CESA

13. New Orders and Production in Europe Source: CESA

14. 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

15. 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

16. 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: • Access to pre- and post delivery financing for viable and feasible projects • Active stimulation of demand - replacement of aging and environmentally unfriendly vessels • New ways to restore and defend a level playing field • New forms of innovation collaboration for green technology

17. Shipbuilding Price Evolution Source: Clarkson

18. Steel and Ship and Prices Evolution Source: MEPS, Clarkson's

19. Price war? “Shipbuilders may be drawn into a global price war next year triggered by South Korean discounting” Bloomberg 28.08.2009 « Recent order-intake for the construction of 50,400-dwt tanker octet (options for four units included), worth $340m ($42.5m per ship), has caused price controversy » Asiasis June 2009 Newbuilding price war startsBrokers say some of the smaller yards are aggressively marketing capesize contracts at low price Asiasis, October 2009 “shipping ministry surprised by offer to build two dredgers at half the price“ New Ships, November 2009 « At their peak in 2008, Capesize prices went up to a record-high $110 million in a deal made by a major Korean builder for delivery in 2010. Just over a year from then, the prices have come closer to half their peak levels » Kaiji Press, October 2009 “newbuilding price in line with current Clarkson Newbuilding Price Index not being acceptedby South Korean large shipbuilders” New Ships, June 2009

20. 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

21. 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

22. 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!)

23. 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)

24. 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

25. +++ Thank you for your attention +++more info athttp://www.cesa.eu