18. SITUATION IN WORLD SHIPBUILDING
(23991)
14443/02
COM(02) 622
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Sixth Commission Report on the situation in world shipbuilding.
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| Legal base: | —
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| Document originated: | 13 November 2002
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| Deposited in Parliament: | 20 November 2002
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| Department: | Trade and Industry
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| Basis of consideration: | EM of 4 December 2002
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| Previous Committee Report: | None; but see (23421) 8689/02: HC 152-xxxvii (2001-02), paragraph 11 (17 July 2002)
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| To be discussed in Council: | Not known
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared
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Background
18.1 The Commission is required to report regularly to
the Council on the situation in world shipbuilding and the effects
on the EU shipbuilding industry. We cleared the Commission's fifth
report of May 2002 on 17 July 2002.[54]
The document
18.2 This document is the Commission's sixth report,
presented to the Council last month. In it the Commission analyses
the global shipbuilding market. It notes:
- orders for new ships worldwide in the first half of 2002 were
down by almost two thirds on 2000;
- in the EU orders were down by almost four fifths — many
EU yards are running out of work;
- a number of EU yards have recently gone out of business or
have laid off workers;
- some yards are at risk of closure (the Explanatory Memorandum
says this includes UK yards, notably Appledore, Devon);
- the market segments most affected are container ships and
cruise ships;
- only in the product tanker segment is demand comparatively
stable, but not many EU yards (and none in the UK) build these
types of vessel;
- for cruise vessels (another vessel type not built in the UK)
the market is still depressed following the significant drop in
demand for cruises after 11 September;
- in the LNG (Liquefied Natural Gas) carrier market orders are
well below 2000/1 projections but still above the average of previous
years;
- new ship prices continue to decline, by about 15% since mid2000,
and are now at the lowest level for more than a decade;
- the biggest reductions occurred in midsize container
ships, large bulk carriers and large oil carriers — the
market segments on which Korean yards traditionally focus;
- this has led to fierce competition amongst the major Korean
yards for the few remaining orders, keeping prices at very low
levels or falling further;
- some Korean yards may find it difficult to meet their financial
obligations if their order intake is not increased soon;
- higher-value ships built in Europe also saw price falls;
- Japanese shipbuilding is undergoing massive restructuring,
helping Japanese yards to stay competitive, especially for series
production of bulk carriers; about 50% of the Japanese order intake
comes from domestic demand, currently mainly for bulk carriers;
- these orders are almost inaccessible to other shipbuilding
countries and therefore provide a captive market for Japanese
yards;
- China's market share has continuously increased in recent
years and there are concerns that Chinese yards are expanding
beyond both the requirements of the market and the need to upgrade
existing facilities.
18.3 The Commission reports on its ongoing cost
investigations in relation to Korean shipbuilders and on seven
new investigations. The results continue to confirm that Korean
yards sell ships at prices substantially below full costs. The
Commission notes that, attempts in August and September 2002 to
secure a negotiated settlement of this unfair competition having
failed, WTO action against Korea was started in October 2002.
This has been accompanied by the introduction of a temporary defensive
mechanism (limited shipbuilding subsidies).
The Government's view
18.4 The Minister of State for Employment Relations,
Industry and the Regions, Department of Trade and Industry (Alan
Johnson) reminds us that for some time WTO action was delayed
by a blocking minority of Member States, including the UK, resisting
the Commission's wish to accompany action with subsidies and that
this block was broken when the Commission offered France the prospect
of such subsidies being extended to the LNG carrier market segment.
18.5 On the present report the Minister says:
"The report was presented at the 26 November meeting of the
Competitiveness Council, primarily for information since with
the launch of WTO action the main decisions on tackling Korea
have now been taken.
"The Government welcomes the Commission's decision to finally
launch WTO action against Korea and will give them our full support
in their efforts to bring this matter to a satisfactory conclusion.
We are however aware that the WTO procedure is likely to be a
long process, perhaps up to 18 months. We are naturally disappointed
that the EU has reintroduced limited subsidies, but the important
point is that WTO action is at last fully underway.
"It should be noted that the UK industry shares the Government's
view that WTO action is the best way to tackle Korean unfair competition
and that the trade association, the Shipbuilders and Shiprepairers
Association, is equally opposed to the subsidy proposal, not least
because the shiptypes covered in the new subsidy regime
have not been built in the UK for many years."
Conclusion
18.6 As we have said previously, ensuring a level
playing field for European shipyards against competitors such
as the Korean industry is important, and we are glad to see WTO
action against Korea in the WTO finally started, albeit with unnecessary
accompanying subsidies. We clear the document.
54
See headnote to this paragraph. Back
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