The Assonave, the Italian association of shipbuilders, ship repairers and marine suppliers, held their annual general meeting in Rome today, chaired by Corrado Antonini, chairman of Fincantieri.
A report on the current shipbuilding market highlighted that despite an increase in orders in 2010 which continued during the first months of this year, the world shipbuilding industry may well still have to wait a long time before regaining a sustainable balance with demand given that the total number of orders placed at year end will still be much lower than world production capacity.
In 2010 the total volume of orders amounted to approximately 39 million gross tons, up on the record low of 15.9 million tons in 2009. Although the improvement is significant it is important to bear in mind that world production capacity – of which approximately 80% is concentrated in the Far East – has risen by a further 60 million tons, also due to the emergence of new shipbuilding countries (India and Brazil), according to Assonave..
In this context European shipbuilding has largely been excluded from the general market for merchant ships and retains solely a small share of the business worldwide by producing vessels of high technological content for niche markets.
As workloads have diminished the pressure on prices has become greater and the competition to gain orders is ever fiercer. China is challenging Korea’s position as the leading world shipbuilder, and, as a result Korea is increasingly moving towards vessel types of a higher technological content.
With regard to passenger ships, there are signs of recovery, but industry experts indicate that in the next few years shipowners are more likely to seek to increase economic return rather than the size of their fleets.
Orders to yards in the medium term are forecast to total no more than six to eight ships a year, compared to an average of 12 in the period 2004-2007, with a peak of 16 in 2007. In addition, deliveries are being staggered over a longer period of time. Effectively it is impossible to saturate the production capacity of shipyards, which build for this high profile niche market, yards which to date are all located in Europe: Italy, Germany, France, Finland. Hence the vast majority of EU shipbuilders, which are also penalised by a strong euro, are in crisis, Assonave said in a prepared statement.
Thus, the European Commission must accept that it is necessary, as was already evident in previous years albeit never effectively translated into measures, to provide stimuli for demand with the objective of ridding European waters of obsolete vessels and to adopt instruments which favour the construction of ships with an advanced environmental profile. This would help overcome stagnated demand in the ferry sector which has been hit by financing difficulties for newbuildings and by shipowners restructuring.
In conclusion, if the crisis continues and failing intervention by the EU to support recovery in production – and currently not everyone is in agreement on this – the situation of the shipbuilding sector in the EU, which has already lost 50,000 jobs, would deteriorate even further.
With regard to Italy, while on the one hand the Italian shipbuilding industry has been confirmed as the major player for cruise ships, on the other hand a sharp drop in tonnage ordered recently together with expectations that reductions will continue in the medium term means it is impossible to meet production capacity.
In 2009 the sector was already in need of emergency stop-gap measures and interventions to strengthen the sector’s competitiveness, but government expenditures were greatly constrained by the general economic conditions of Ital. Consequently, expected contributions to owners and shipyards failed to materialize as per the laws of 2001-2002 and the availability of systematic support for innovation, which was to our competitors benefit. However, significant progress has been made with regard to financial and insurance instruments for exports thanks to the implementation of the Export Bank, through which also the shipbuilding industry can benefit from CdP financing guaranteed by SACE.
The drop in demand for ships has also affected the naval sector where orders, especially from nations without a self-sufficient domestic industry, have fallen considerably following the dip already recorded in 2009. In Europe the response to reduced budgets has limited expectations for future developments to safeguarding programs which had already been financed, with consequent repercussions on workloads. In contrast is an operational model which involves transferring technologies and know-how abroad, as witnessed by the increasing tendency to build naval vessels in the customer’s country. Our industry is responding with strong marketing campaigns, which have already met with success in the United States and India, while there might be new prospects in Brazil and Canada.
Speaking after the meeting the Antonini, commented further: “In the third year of this crisis, there is no more time to put off deciding. In a market context which has become more complex and difficult no target can be reached without an even greater, united effort on the basis of decisions which are realistic, yet also aware of the need to minimize the social impact. This is all necessary if we wish to overcome the crisis and to be readyfor the recovery, which, although it may still be a speck on the horizon, must find our companies ready to exploit all the opportunities.”