Global shipbuilding has in recent years been characterised by a high level of new orders, a high level of production and by continued growth in shipbuilding capacity. The expanding shipbuilding capacity is seen as a major factor behind the unusual combination of a high level of new orders being placed and the very weak pricing trend.

 The price level for new ships in 2002 was at its lowest level for many years, even lower than in 1999 when prices dropped to a historical low level. These low prices have served to stimulate ordering of new ships ahead of requirement.

　

　

 The main part of the requirement for new ships to be built is generated by the need to replace obsolete ships and ships removed from the fleet due to accidents and conversions to e.g. FPSO's. Thus, the total tonnage of 409 mill. dwt projected to be deleted over the forecast period corresponds to 74% of the newbuilding requirement foreseen.

 The evaluations of the Working Group show that the need for new ships - as seen from a transportation point of view - together with the need for ships to replace existing tonnage, have not increased in line with the high level of ordering activity in recent years. The element of pre-ordering or speculative ordering which appears to be contained in the ordering activity of recent years is likely to be counterbalanced by a lower level of new orders in the future. This development is illustrated by the worsening tonnage balance which has developed during 2001 and 2002

　

　

 Major accidents like the oil tanker "Erika" in winter 1999 and the oil tanker "Prestige" in winter 2002 focused international concern on safety at sea and related environmental issues. This has resulted in stricter regulations and a market sentiment which together encourage safer ships. This has the effect of bringing forward the replacement of some of the oil tanker fleet.

　

 The volume of new orders placed in the world after reaching a record high level in 2000 declined in both 2001 and 2002.

　

 The volume of new in 2002 was however still at a higher level than needed according to the forecast. Thus further reductions in the volume of new orders are to be expected.

　

 The evaluations of the Working Group indicate that the size of global shipbuilding capacity may continue to grow in future due to increases in production efficiency in existing facilities and due to construction of new facilities and enlargement of existing ones. Such a development will serve to widen the imbalance between the supply capacity of the shipbuilding industry and the need for new ships to be built.

　

 In 2002 a total of 1,539 ships were delivered amounting to 33.4 mGT and 21.4 mCGT, a significant increase compared to the previous year's figures, 1,553 ships, 31.3 mGT and 20.2 mCGT.

　

 The AWES market share in CGT fell from 23.6% in 2001 to 22.9% in 2002, while the Korean share went up to 31.1% in 2002 against 30.2% in 2001 and Japan's share decreased from 32.1% in 2001 to 30.7% in 2002.

　

 The production in AWES member countnes - including Croatia - increased slightly from 390 ships, 4.3 mGT, and 4.7 mCGT to 376, 4.6 mGT or 4.9 m CGT according to the Lloyd's Register Statistics.

　

　

　

 The ordering activity was lower than in the two previous years. New orders decreased sharply from 36.3 mGT and 23.3 mCGT in 2001 to 33.1 mGT and 21.4 mCGT in 2002.

　

 Most affected shiptypes are cruise ships and container ships. Only three cruise ships have been ordered since 11^th September 2001 and the consolidation of the cruise market is expected to continue for some time yet. The ordering activity for container vessels declined from 480,000 teu in 2001 to 450,000 teu in 2002.

　

 Crude oil tankers, chemical carriers and LNG carriers also declined, although to a lesser extent.

　

 Ordering activity has increased only with respect to product tankers and bulk carriers due to replacement of old tonnage following new stricter maritime regulations and stronger domestic demand in Japan and China.

　

 Of all new orders in 2002, 37.1%, 28.3% and 10.9% went to Korean Japanese, and European shipbuilders, respectively.

　

　

　

　

 The orderbook reached at the year-end 2002 was for a total of 2,795 ships, with 74.9 mGT, or 48.4 mCGT.

　

 According to Lloyd' s Register statistics, AWES decreased its market share from 24.4% in 2001 to 20.0%, Korea decreased slightly from 33.3% to 31.4%, whereas Japan increased from 22.7% to 26.9%.

 The demand for new ships is expected to decline in 2003.

 Shipbuilding capacity is estimated to grow by approx. 2.9% per annum in the coming years as Korean and Chinese capacities, representing almost half world output, are assumed to grow.

　

 Japanese and European capacity, representing the other half of world building capacity is expected to decline.

 

　

　

 From June 2002 the European shipbuilding industry has lost considerable market share compared to the Far East shipyards, namely Korean, Japanese and Chinese shipbuilding companies.

　

 European share of new orders in 2002 and in the first quarter of 2003 has been the lowest in many years, in the context of record ordering world-wide.

　

 Within this context, the measures taken by the European Council were not able to change the picture substantially. Based on a formal procedure under the Trade Barrier Regulation, the European Commission found that Community shipyards have suffered adverse effects in the form of material injury and serious prejudice caused by unfair Korean competition. Consequently, the European Council adopted a Temporary Defensive Mechanism which allows Member States to grant contract related support of maximum 6% of the contract price restricted to the following ship types: product carriers, chemical carriers and container vessels. Also LNG Carriers were include in the scheme after the Commission confirmed, on the basis of investigations covering the period of 2002, that the EU shipyards had suffered adverse effects to the same extent as has been found for the other shiptypes.

　

 It remains to be seen how many Member States are going to use this instrument; however, in view of the currency developments of the past 12 months, its effectiveness could prove to be rather limited.

　

 The Temporary Defensive Mechanism is scheduled to expire on 31 March 2004 or before if the dispute settlement proceedings against Korea are resolved or suspended.

　

 In December 2002 the world's principal shipbuilding economies have launched negotiations at the OECD on ways to counter over-capacity and plunging prices in the ailing world shipbuilding industry. For this purpose a Special Negotiating Group (SNG) was created, chaired by Switzerland's Ambassador to the OECD, Wilhelm B. Jaggi.

　

 The SNG expects to finish its work by the end of 2004, which in view of past experiences seems rather ambitious.

　

 The SNG has held meetings in December 2002 and in April 2003.

　

 In the first meeting it was stated that the objectives will cover all measures and conditions inconsistent with normal competitive conditions in the industry.

　

 The scope of the Agreement will include the commercial shipbuilding and shiprepair industry, but not military vessels. The minimum size of ships to be covered has not yet been determined.

　

 Fishing vessels for the international market are expected to be covered while the same related domestic fishing vessels could be a matter for further discussion and decision.