Report By The EUROPEAN COMMISSION To The EUROPEAN COUNCIL On THE SITUATION IN WORLD SHIPBUILDING

　

Version[3.3]

Brussels, 20 October 1999

The world market for merchant ships and the world shipbuilding industry are facing serious difficulties, with shipbuilding prices plummeting and future demand likely to remain weak for some years. Overcapacity in the shipbuilding industry is expected to grow in coming years, due to a combination of the coming on line of new facilities (also in emerging shipbuilding nations such as China), the potential conversion of naval shipyards to commercial production and increased productivity.

A competitive shipbuilding industry is important to the European Union and contributes to its economic and social development by providing a substantial market for a range of industries and by maintaining employment in a number of regions, many of which are already suffering a high rate of unemployment.

Shipbuilding also employs a number of advanced technologies for products and production and therefore is an important element in a developed industrial culture.

Unfortunately all efforts to create a sustainable environment for EU shipyards have been severely hampered by the impact of the Asian crisis, and by the fact that the OECD Agreement "Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry" of 21 December 1994 did not enter into force - an Agreement which the Community ratified, believing that it would be the best option to enable Community shipyards to compete under fair trading conditions. In particular, Korean yards have , mainly between 1994 and 1996, expanded shipbuilding capacities in a way that is not justified by global market conditions, and they now need to fill these surplus capacities.

The Council Regulation (EC) No 1540/98 establishing a new set of rules for state aid to the sector for the period 1999-2003 was designed to address the global question of the future of the EU shipbuilding industry in a context where, in absence of the OECD Agreement, international disciplines in this sector are not to be expected soon. The regulation also requires the European Commission to present to the Council a report on the market situation and appraise whether European yards are affected by anti-competitive practices. If it is established that anti-competitive practices of any kind are causing injury to industry, the Commission is, where appropriate, to propose to the Council measures to address the problem.

This report analyses the current market situation, especially concerning the production in Asian shipyards, and presents a first set of possible lines of action that could address problems from individual damaging shipbuilding contracts or non-market business practices by Far-Eastern competitors. It thus responds to the request laid down in Council Regulation (EC) No 1540/98. As this report is the first in this respect and others will follow, it does not aim to cover the entirety of world shipbuilding in all its technological and economic aspects, but rather highlights the most important and recent problems and developments, thus providing guidance for future actions. Additional measures may be required and would be addressed as appropriate in forth-coming reports.