Looking at the average prices for certain important shiptypes in the years 1997 to 1999 it is clear that the increased demand from 1998 to 1999 (see Fig. 3) generally had no positive impact on prices. On (numerical) average prices for new ships have declined by 17% since 1997.

The notable exceptions are Capesize and Panamax bulk carriers which have seen a slight price increase since 1998 by 12% and 14%, respectively. Nevertheless prices for these shiptypes are still considerably lower than in 1997. The reasons for this movement in prices for bulk carriers could be seen in the situation of the South Korean Halla yard which has a focus on the production of these vessels. Halla has played the role of a price leader, offering extremely low prices in order to fill the massive capacities created at the Samho production site. As elaborated in Annex II of the first report Halla has been in financial difficulties since 1997. To solve these problems and save the yard, the Hyundai group has agreed to a management co-operation scheme in which Hyundai would take over management responsibility in return for a fixed share of future profits. Moreover, Halla would receive more debt reduction through the domestic creditors (mostly government-controlled banks) before Hyundai would take over Halla fully. In this context Hyundai has demanded from Halla to renegotiate ship prices which were considered as too low even by Korean standards. It is not known in how far Halla has been successful in the re-negotiation but this could have had an impact on prices for these particular shiptypes.

All other important shiptypes have seen further price erosion and prices for the end of 1999 are again lower than the yearly averages for some shiptypes (Capesize bulk carrier: 35 Mio. USD; Panamax bulk carrier: 22 Mio. USD; VLCC: 69 Mio. USD[prices for December 1999; source: Clarkson World Shipyard Monitor]).

As discussed in the first report, container vessels represent the largest market segment in commercial shipbuilding in terms of cgt and container ships have been a major product of Japanese and EU yards in the past. The first report also stated that Korean yards have made very significant inroads into the market for container vessels since 1997. This trend has continued and concerning this particular market segment the situation presents itself as follows:

South Korea has consolidated its dominant position in the building of containerships and has further cut into EU and Japanese market shares. It has also taken market share from the group of "others" which in this segment is represented by countries such as China, Taiwan and Poland. Although most of the market share gained seems to be at the expense of Japanese yards it should be noted that most of the orders in question come from EU operators. In the meantime price levels have further deteriorated as described above which has led two Japanese operators of container lines (K-Line and NYK) to place major orders in Korea. Given the traditional preference of Japanese owners for domestic ordering this clearly shows that Korea's low offer prices have been changing the market dramatically. The EU position seems to weaken constantly in this market segment, only slightly offset by the 20% decrease in the value of the euro since January 1999. As the Yen has seen a significant appreciation in the past year this has added to the problems encountered by Japanese yards. It should be kept in mind that an appreciation of the euro would quickly bring the EU shipbuilding industry into an equally dramatic situation as the yards in Japan. On the other hand an appreciation of the Korean Won may not necessarily shift market share away from Korea if it is not accompanied by a behavioural change on the side of the Korean shipyards.

The general market analysis within this second report from the European Commission confirms the findings of the first report, namely that