Shipyard CEOs’ Manifesto
By Marek Grzybowski (text and photo)
Business leaders from the European shipbuilding and maritime technology industry call for an urgent EU strategy for maritime industries to strengthen the European shipbuilding industry and maintain its technological leadership in the maritime industry – informs SEA Europe.
On 19 July, 34 prominent business leaders from the European maritime technology industry (shipyards and marine equipment manufacturers) sent a letter to Ursula von der Leyen. In it, they ask the European Commission to develop and implement a “new European Maritime Industry Strategy to adequately support the sector”. They call the appeal sent to the European Commission: “Urgent call for a European Maritime Industry Strategy”.
The CEOs stressed that “urgent political action is needed to protect Europe’s strategic autonomy and strengthen its industrial capacity and technological leadership in the maritime field”, informs SEA Europe.
Satisfaction with the declaration
– I note with great satisfaction that the European Commission has reiterated our call from last week in our cover letter to Commissioner-designate Tzitzikostas, announcing the development of a new Maritime Industrial Strategy to increase the competitiveness, sustainability and resilience of the European maritime manufacturing sector – said Christophe Tytgat, Secretary General of SEA Europe. – This initiative will be part of the mandate of the Commissioner-designate for Sustainable Transport and Tourism and follows similar calls made by several EU institutions over the past two years – emphasises Christophe Tytgat.
In their letter to the President of the European Commission, the business leaders attached the SEA Europe manifesto, outlining “a strategic plan to strengthen Europe’s global leadership in the complex shipbuilding and maritime equipment manufacturing industry by 2035, while recovering strategic or emerging shipbuilding and ship repair segments for the European blue economy”.
Urgent call
Managers of European corporations emphasize that “European shipyards are integrators of (advanced) systems, devices and technologies produced by the supply chain of European manufacturers of marine equipment and technology suppliers”. These companies operating in the European economic area have an established position and “solid experience in the field of [design and construction – MG] fixed and floating platforms, including for wind energy”. European manufacturers have indisputable competences in performing maintenance, repairs, conversions and modernization of ships.
In the SEA Europe published in April this year, it proposed an ambitious strategy for maintaining the activity of the shipbuilding industry. As a result of its implementation, it is assumed that a path will be entered that will allow the construction of 10,000 ecological and computerized ships in Europe by 2035.
According to the latest data from SEA Europe, the European marine technology industry includes about 300 shipyards and over 28,000 manufacturers of equipment for marine structures. These companies generate an annual production value of EUR 128 billion and provide 1.1 million jobs. It should be emphasized that it is increasingly difficult to find high-class specialists to perform the profession of a shipbuilder or equipment assembler for the maritime industry.
– With 9% of annual turnover invested in research, development and innovation, it is one of the most innovative industries in Europe. European shipyards are world leaders in the construction of technically complex commercial and marine vessels – says SEA Europe in “SEA urope’s Call For a European Maritime Industrial Strategy”.
Ship and ship manufacturers also have “solid experience in the field of fixed and floating platforms for the oil & gas sector and offshore wind farms. At least 70% of the value of a complex ship is made up of materials, devices and systems, in which European manufacturers of marine equipment have almost 50% of the global market share. The strong point of the European marine technology industry is that the plants operating in it “offer a wide range of systems, devices and services contributing to decarbonization and digitalization”.
Referring to this potential and competences, the CEOs of European shipbuilding concerns emphasize the possibility of joining the general policy of the European Union focused on decarbonization and digitalization. However, there remain “challenges related to competitiveness and security that the maritime sector is currently facing”. And this is the weakest point of the entire economic policy of the European Union, as well as of individual countries. Practically only Germany, Great Britain, Finland and the Scandinavian countries strongly protect their economies from penetration, although here too significant gaps can be noticed. For years, clearly visible in the shipbuilding industry, but also in consumer electronics, the automotive industry and household appliances, the chemical industry.
Europe in the shadow of China and South Korea
In the shipbuilding industry, Europe has long been the tail, or rather the tail end, of the global shipbuilding industry, or rather the Chinese and Korean industry. And there is something to fear. In the summer of 2024, shipyards in South Korea briefly regained the position of market leader in ship contracting. July 2024 is another month of advantage over Chinese competitors. It is emphasized that this is the result of Seoul’s commitment to defending the shipbuilding industry. This business has been treated by the government of the Republic of Korea as a strategic industry for years.
South Korean shipbuilders obtained 40% of the global portfolio of new ship orders in one summer month in the middle of the year. This ensured a total of 2.37 million compensated gross tonnage – BusinessKorea reported, citing information from Clarksons Research.
China fell to second place with 24% of 570 thousand CGT of orders obtained in one summer month. It is recalled that South Korean shipyards also outstripped Chinese manufacturers in terms of ship orders in February this year. However, China outstripped its neighbors in terms of the number of orders. It received contracts for 30 ships, compared to 18 orders placed in South Korea.
However, China maintains its leading position thanks to new orders for 25.54 million gross tonnage in the first seven months of this year. This is a 63% share of the global market (823 ships), compared to 8.11 million gross tonnage for South Korea (176 ships), which translates into a 23% share of the new construction market.
CEOs call for quick action
The CEOs of shipbuilding concerns call for “quick action to ensure the maintenance and consolidation of the strong potential of the maritime industry, both civilian and military”. There have been many such appeals over the last 20 years.
– We therefore call on the next European Commission to urgently issue a new European Maritime Industry Strategy in order to properly support the sector – write the CEOs. They refer to the fact that this proposal was also supported by the Council of the European Union in its conclusions on “A competitive European industry driving our green, digital and resilient industrial future” in the declaration of 24 May this year. The European Parliament also expressed its opinion on this matter in the resolution on “Building a comprehensive European ports strategy” published on 17 January this year.
Can resolutions and manifestos change the practically established state of affairs? European shipowners, who control almost 40% of the world fleet, have been choosing Asian shipyards for years to renew and modernise their fleets. The price differences between a product manufactured in Asia and a ship manufactured in Europe are estimated at 30 to 40%.
Many ships built in Asia still have bridge and engine room equipment and equipment manufactured in Europe. Increasingly, the rapidly learning Chinese economy is taking over European technologies and eliminating European equipment from the market.
Banks and shipowners turn their backs on European shipyards
SEA Europe also emphasizes the low level of support for the shipbuilding industry from European banks. This could be seen recently in Germany. There was no response to the need to support the indebted Mayer Werft. The private shipyard had to be rescued by the federal and state governments. On the other hand, production in South Korea or China is eagerly financed.
An example are Norwegian gas carriers with Polish names, which were financed by a French bank. Thus, the “Polish” LNG tanker was built in the Republic of Korea (in Hyundai Samho Heavy Industries), its home port is Marseille and it sails under the French flag (registered in the Registre International Francaise) and with a French crew, and has a Norwegian operator, Knutsen LNG France (belonging to Knutsen OAS Shipping).
Chinese banks offer European shipowners very attractive ship financing and favourable financial incentives for shipowners, which Polska Żegluga Morska also benefits from. However, SEA Europe also notices a threat that the European Commission and the governments where shipowners are headquartered do not notice. SEA Europe states that Chinese banks, by granting loans for ship mortgages, “retain ownership of the ships that they lease to shipowners (including European ones)”. European shipowners, who have long been building series of ships in shipyards in South Korea and China, also dislike European shipyards. Now they are also choosing shipyards in India, and building smaller units in Turkey.
European Technologies in the Asian Production Chain
According to SEA Europe, “the fact that Chinese banks own ships sailing in European waters poses a significant risk to Europe’s economy and trade. Furthermore, the decline in shipbuilding capacity in Europe poses a serious threat to its defence and security”.
It is therefore worth recalling once again that Europe’s dependence on maritime trade is very high. Around 80% of international trade and 40% of domestic trade is carried by sea. In this situation, energy security and the stability of supplies for EU industries can be at risk in any case. We have seen this during the Covid-19 pandemic and after Russia’s invasion of Ukraine.
Ships and platforms built in Europe – using European technologies, systems and equipment – enable the safe, efficient and environmentally friendly transport of goods, energy and people and are essential for emerging sectors of the maritime economy (such as renewable energy sources at sea). Throughout their long service life, ships need to be periodically modernised in ship repair yards to comply with new regulations and integrate the latest green and digital technologies.
It is not very groundbreaking to state that “to effectively build and sustain advanced naval forces, a strong commercial shipbuilding supply chain is crucial” for the security of European Union countries. As a result, “by gaining commercial dominance in global shipbuilding, China has been able to build a maritime shipbuilding capacity that far exceeds that of Europe and the United States combined,” emphasizes Sea Europe’s Call For A European Maritime Industrial Strategy.
The SEA Europe Manifesto is a strategic program “to maintain Europe’s global leadership in complex shipbuilding and marine equipment manufacturing by 2035.” As a result, it is assumed that strategic and new segments of shipbuilding and ship repair will be regained.
The four legs of the shipbuilding industry
The plan is based on the following building blocks:
1. Industrial sovereignty and competitiveness: Introduce a “made in Europe” requirement in strategic public procurement markets and provide financial and fiscal incentives for shipowners to build and modernise ships in Europe, in order to secure a critical domestic mass of shipbuilding, thus strengthening Europe’s security of supply.
2. A supportive regulatory framework: Establish an industrial alliance and a maritime industry act to support the business case for green and digitalised ships and create the necessary framework for cooperation to succeed.
3. Technology leadership: Continue to support research, development and innovation in maritime technologies through dedicated funding mechanisms to ensure that Europe remains at the forefront of maritime technologies.
4. A skilled workforce: Promote workforce retention, upskilling and mobility across Europe through targeted initiatives and educational programmes.
In a letter to the European Commission, the CEOs of European shipbuilding groups emphasise the urgency of action. “Urgent political action is necessary to secure Europe’s strategic autonomy and strengthen its industrial potential and technological leadership in the maritime industries,” we read in the letter published by SEA Europe.
And we can say that a projection of further processes is also formulated here. The CEOs state: “A lack of decisive action risks losing our critical industrial potential and endangering our economic and defence interests.” For over 30 years, the EU has been losing its competitive position in important industrial sectors. Some of them have been completely lost. It is impossible to implement a maritime industry development policy in isolation from a comprehensive industrial policy for the entire EU. And as we know, there is no such policy. Including in maritime industries.
The CEOs of the corporations, when writing a letter to the European Commission about introducing economic autarky, were certainly motivated by concern for their companies and the economic security of the EU. However, observing the economic reality on a global scale, one should not expect that the economy will be fixed by administrative means. And this will certainly not be done by the European Commission, acting without haste, and the European Parliament, slowly grinding legal regulations.