COMMISSION OF THE EUROPEAN COMMUNITIES

	Executive Surmmary	3
1.	Introduction	4
2.	Market analysis	5
2.1.	Market shares	5
2.2.	Price developments	9
2.3.	Detailed price analysis	11
3.	Detailed cost investigations	13
3.1.	Update of previous investigations	13
3.2.	New investigations	16
4.	Conclusions	19
5.	References	20

Article 12 of Council Regulation (EC) No 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding¹ requires the Commission to present to the Council a regular report on the market situation and appraise whether European yards are affected by anti-competitive practices. Accordingly, the Commission has presented to the Council three previous reports on the situation in world shipbuilding², outlining the serious difficulties the shipbuilding sector is facing and providing detailed information on the unfair commercial practices of Far East competitors. This fourth report is in continuity with the approach and the findings of the first three reports. A separate Commission report will be issued in May 2001 on the alleged subsidisation of Korean shipyards under the TBR examination procedure initiated on 2 December 2000³.

　

The year 2000 has seen a significant expansion in orders for new ships. Nearly 56 % more orders were placed as compared to 1999. The larger part of this increase in ordering has been to the benefit of South Korean shipyards which have seen market share increase again. EU yards also benefited considerably from the higher demand for ships, although orders for cruise ships may have played a dominant role here. In 2000, South Korea has consolidated its position as the largest shipbuilding country/region in the world, accounting for more than 35 % of all tonnage ordered world-wide.

　

The market share for the EU shipbuilding industry has remained stable in 2000 as losses in some market segments were compensated by additional orders for cruise ships. Half of the volume (in compensated gross tons - cgt) Produced in Europe in 2000 concerns these ships for which there is as yet no Far East competition. However, only a limited number of EU yards produce cruise ships. The largest part of the EU shipbuilding yards continue to compete against Far East yards on standard merchant vessels. Including cruise ships, the market share for the EU and Norway is ca. 18 % (in cgt). If orders for cruise ships are excluded from the overall figures, the market share of EU yards for new orders in 2000 is below 10 %.

　

In 2000 prices for new ships were reported to recover in certain market segments from the very low levels seen after the Asian crisis in 1997. To gain a more accurate picture and confirmation of these reported developments, prices in South Korean shipyards have been monitored on a contract by contract basis. The analysis clearly shows that the upward tendency of prices seen in autumn 2000 was not sustained, leading to the conclusion that overall price levels have not recovered and are still significantly lower than before the Asian crisis of 1997. There are no indications that Korean shipbuilders managed to raise price levels across the board as repeatedly announced by Korean sources. Therefore the Commission maintains its view that significant over-capacities in South Korean shipbuilding, combined with an ongoing need to generate new orders in order to assure sufficient cash flow, prevent a recovery of prices and the market in general.

　

Since the Commission's last report seven more detailed cost investigations for orders placed in Korean yards have been undertaken. In no case it has been concluded that any of the contracts examined has been priced at an economically viable level, i.e. covering operating costs, profits and debt repayments. Losses, calculated in this way, on these newly investigated orders are l4 % on average.

　

The Commission will continue its market monitoring and cost investigations.

　

　

Article 12 of Council Regulation (EC) No 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding⁴ requires the Commission to present to the Council a regular report on the market situation and appraise whether European yards are affected by anti-competitive practices. Accordingly, the Commission has presented to the Council three previous reports on the situation in world shipbuilding⁵, outlining the serious difficulties the shipbuilding sector is facing and providing detailed information on the unfair commercial practices of Far East competitors. This fourth report is in continuity with the approach and the findings of the first three reports. Therefore this report should be seen in conjunction with key elements of the earlier reports, in particular regarding

　

　

Nevertheless, the information contained in the first three reports is updated in the present report as appropriate, and essential elements are repeated where necessary. This concerns in particular the detailed cost investigations for shipbuilding orders awarded to Asian yards as the underlying cost model is re-run whenever new or better information is obtained.

　

This fourth report updates information on market shares and price developments. Moreover, new cost investigations for specific orders placed in South Korean yards have been undertaken since the last report and the results are presented in this report.