Wednesday, May 5, 2010


FOR those who regard the smashing of a champagne bottle as a tragic waste, the

problems facing the world's shipbuilders are excellent news. It takes such a long

time to construct huge ocean-going container ships, bulk carriers and oil tankers

that the vast shipyards of South Korea, China and Japan will still be cracking

bottles of bubbly over newly launched ships for a couple of years yet. But once

these vessels, ordered in the boom before the financial crisis, are in the water,

the course ahead looks rocky. Oddly, Europe's shipyards, although still stormlashed

after 30 years of low-cost competition from Asia, seem to face a slightly

brighter horizon.

Fresh orders for the world's shipyards are at low ebb. Last year they were more

than 80% lower than in 2007, when sky-high freight rates and cheery economic

forecasts encouraged shipping companies to scramble for new vessels. The

subsequent recession in the rich world sent shipping rates tumbling. A swift

rebound is unlikely: despite more scrapping and some cancellations, hundreds of

ships are poised to hit the oceans this year.

Asia's shipyards, streamlined and efficient, concentrate on building large,

standardised ships. These are the sort in greatest oversupply. South Korea's

shipyards won over half of global orders for new ships in the first quarter of 2010,

but they were worth just $2.2 billion. In 2008 Korean yards won orders worth

$32 billion. Hyundai Heavy Industries, one of four big Korean shipbuilders, has

not won a single order for a ship since late 2008.

European shipbuilders are suffering from a dearth of new orders too. The Odense

shipyard owned by A.P. Moller-Maersk, one of the world's biggest shippers, has

an illustrious history: it produced the world's biggest container ship. But cheap


Asian competition for this type of vessel has holed it below the waterline. It will

close in 2012.

Europe's shipmakers are turning to national governments and the European

Union for help, claiming that their industry is close to collapse. In early April

representatives from nine EU countries called for an emergency programme to

support the industry. Shipyards want help in gaining access to credit lines and

soft loans, as well as rules to promote greener ships. This would support them

until shipping finance recovers and hesitant customers regain faith in the world


Yet the restructuring forced by low-cost Asian competitors has left Europe's

shipyards with some advantages. Their revenues of €30 billion-40 billion ($40

billion-53 billion) a year come mainly from niche markets which are not suffering

from as much overcapacity as the mainstream.

Cruise ships are a particular speciality, and the market is growing. Four orders

have been placed with European yards this year, compared with one in 2009.

Ferries, another area of European dominance, are also in demand, and ageing

ferry fleets in the Mediterranean are due for replacement soon. The offshore wind

farms sprouting around the continent provide another opportunity. Europe's

shipmakers are adept at designing cable-laying ships and other service vessels.

And as oil firms are forced to drill in ever deeper waters, ships suited to the task

of towing and maintaining new rigs will be needed.

Pressure to make ships greener will also favour European shipyards. The

International Maritime Organisation is discussing regulations that may force ships

to belch out less carbon dioxide, and has introduced tighter limits on other

pollutants. Europe leads in this type of technology, too. European shipmakers will

also benefit from plans to encourage greater use of the continent's inland


waterways to ship goods instead of hauling them by road. If they can weather the

current storm, Europe's shipyards may yet resound again to the smashing of


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