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COM (79)469
Vol.1979/0162

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)469final
Brussels,17August1979\c-'-v"""
-Ao \-&\
- -T*
«·- ..-ο=i r-v «■■'l
r,.^r>~|
FIRSTHALF-YEARLY REPORT ONTHESTATEOFTHE
SHIPBUILDING INDUSTRY INTHECOMMUNITY
(submitted totheCouncil bytheCommission )
COM(79)469final

FIRSTHALF-YEARLY REPORT ONTHESTATE
OFTHESHIPBUILDING INDUSTRY INTHE
COMMUNITY
SUMMARY
I Theaimofthisreport,thefirstofthehalf-yearly reports
h-enceforth tobesubmitted totheCouncil,istoshowpresent
developments intheshipbuilding industry andtoassessthe
effects ofmeasures takeninMemberStates.
II(a)Thegeneralstateoftheshipbuilding industry isstillmarked
byadecreasing orderintake,reducedorderbooksandcontinuous
declineofemployment .SincetheCommission 'sCommunication to
theCouncilofDecember 1977thesituation oftheindustry has
worsened .Theindustry'sreserves arecomingtotheend.
Developments inthissectorhavetendedtobemoreseriousthan
expected .
(b)Since1976thelevel .ofnewordersrepresents only50-60percent
ofcompletions ,although theshipyards' outputhasbeenreduced
by25-30percentsince1976.
(c)Theshipyards' workforce wasreduced bysome50,000between 1975
and1978(newbuilding sector).Furtherreductions inemployment
canbeexpected,especially ifthepresent new-order intakecon­
tinuesatitslowlevel.
(d)Theshipbuilding crisisisclosely connected withtheshipping
crisis,whichgenerally isstillmarkedbyovercapacity .The
tankerfleet,forexample,increased bysome50percentbet­
ween1973and1978,whereasoiltransport (measured inton
miles)increased onlyby9percent ,overthesameperiod.Even
thoughslowsteaming hasreducedfleetproductivity ,andthere­
forealsotheovercapacity ,itisclearthattheenergycrisis,
withitsconsequences forgrowthratesandhenceforworld
commerce development andtransport needs,maycontribute to
prolong anddeepentheshippingcrisis.Inconsequence ,thelow
demandfornewbuilding maycontinue .

II
III
IVAccording tomarketforecasts,theshipbuilding crisiswillextend
wellintotheeighties andasubstantial marketupswingcannotbe
expected before1982/1983.Evenin1985estimated shipbuilding
production (some18,0millioncgrt)willbebelowtheaveragefor
theperiod1975-1977 .
Restructuring measures arenecessary tomaintain ortore-establish
withintheCommunity ahealthy andcompetitive shipbuilding in­
dustry.Firstresultsofrestructuring efforts canbeseen:In
particular theCommunity hassubstantially reducedtheproduction
andtosomeextentthecapacity ofshipyards .Nevertheless ,it
mustbesaidthatmuchhasstilltobedoneandthatrestructuring
isaprotracted process whichcanonlybeachieved underalong-
termstrategy .Thebasiccondition isthattheremustbeatleast
someordersfornewbuilding inordertoallowminimumcapacities
tosurvive.
Considering alltheseaspects,theCommission hasexamined ways
andmeansofimproving thedemandsituation .ACommunication re­
garding aproposal forascrap-and-buiIdprogramme willbesub­
mittedtotheCouncil.Thisprogramme wouldhavealsofavourable
socialimplications forthesectorsinvolved .
CONTENTS
1.Introduction 1
4.Structural Developments3.MarketForecasts2.Situation ofthesector
2.1.General Remarks
2.2.Production andNewOrderIntake
2.3.OrderBookandWorkload Situation
2.4.Employment
2.5.Developments inShipping
5.Outlook andActiontobeconsidered2
2
3
6
8
10
13
15
18

FIRSTHALF-YEARLY REPORT ONTHESTATE OFTHESHIPBUILDING INDUSTRY INTHE
COMMUNITY
1.•Introduction
IntheCouncilResolution of19September 19781)regarding thereor­
ganization oftheshipbuilding industry/theCouncilnotedthatthe
Commission willpreparehalf-yearly reports onthestateoftheship­
building industry andontheprogress madewithitsreorganization .
InitsCommunication totheCouncil of9December 19772)whichled
totheCouncilResolution of19September 1978,theCommission analyzed
thecausesofthepresentcrisiswhichtheshipbuilding industry is
facingaswellasthemarketprospects andtheimpactwhichthese
develoDments willhaveontheemployment situation .Itwasstatedthat
thefirstobjective ofCommunity policyonshipbuilding mustbeto
makeitsyardscompetitive ontheworldmarketandthatthegravity
ofthesituation requires astrategy forthereorganization ofthis
■sector.
Sincethenthesituation oftheindustry hasworsened anditcanbe
assumedthatthecrisissituation willcontinue duringthecoming
years.
Theaimofthisfirsthalf-yearly reportistoshowtheactual
developments andtoevaluate theeffectsofmeasures takeninMember
States.Inthisconnecticnitmaybenotedthatthelong-term character
oftheshipbuiIdingcrisis .makesitnecessary tomonitorverycare­
fullytheeffectsofmeasures takeninordertoallowforaneffective
andsmoothadaptation ofthequantitative andqualitative capacity
oftheshipbuilding industry .
Itisalsothepurposeofthesehalf-yearly reportstoverify
continuously whether,andifsoinwhatdirection ,additional action
wouldberecommendable fortherestoration ofahealthy and
competitive shipbuilding industry withintheCommunity .
1)OJC229/1of27.9.1978
2)Supplement 7/77toBulletin oftheEuropean Communities

-2-
.Situation ofthesector
2.1.General remarks
Thegeneralstateoftheshipbuilding industry isstillmarked
byfurtherdecreasing production levels,reducedorderbooksand
continuous reduction ofemployment .Theneworderintake,which
isanindicator forfutureemployment ,felltoonly2millioncgrt*)
in1978andremained atthislowlevelduringthe'firstquarter
of1979.Thisisbelowthelevelof2.4millioncgrt,theCom­
mission'sinitialproduction forecastfor1980,whichwasatthat
timeregarded asapessimistic figure.However,actualdevelopments
tendtosurpassthisestimate .
Aquantitative andqualitative adaptation oftheindustry tothe
longertermprospects forthemarkethasbeencarried outinmost
MemberStates,mainlyintheformofreducing employment andpro­
duction,butitseffectsareingeneralbeingoutstripped by
marketdevelopments .
Againstthisbackground onecanfurtherstatethatthecompetitive­
nessoftheindustry asawholehasnotimproved sincetheCom­
mission'scommunication totheCouncil inDecember 1977.
Onthecontrary,thesharpdeclineofshipbuilding production ,as
aconsequence ofdecreasing orderintakes,hasledtoageneral
under-uti lization of*buildingfacilities .Inaddition,theintense
competition hastheeffectofpreventing shipyards from
concentrating onanoptimumproduction programme ,thusinducing
extracostdisadvantages .Thesedevelopments -through which,
together withdepressed newbuilding prices,itissometimes not
evenpossible tocoverthecostofmaterial-willinthelonger
termalsoaffecttheshipyards' competitiveness andabilityto
developinnovations .
Thedangerexiststhat-ifacertainstability ofneworder
intakes cannotbeachieved-theindustry maycomeintoastate
whichwouldbedetrimental toasmoothqualitative
andquantitative adaptation ofthesector.
*)cgrt=compensated grosstons,tonnage whichtakesintoaccount
theshipbuilding workforavessel,calculated onthebasisof
thegrtandofspecialcoefficients fordifferent shiptypes
andsizes(grtxcoefficient =cgrt).Newcoefficients forthe
calculation ofcgrtwereagreeduponintheOECDin1977.
Figuresfor1976arebasedonAWESoefficients ,whichwerethe
basisfortheOECDcoefficients (butnotfullycomparable ).

2.2.Production andNewOrderIntake
Thefollowing ,tableshowsthedevelopment ofnewbuilding completions
andoftheneworderintakeintheEuropean Community (in1000cgrt)
Complétions in1000*1>cgrt
1stqu.
1976 1977 1978 1979
Belgium 139.8 82.2 165.2 32.2
Denmark 560.6 496.0 362.5 116.4
France 672.4 609.6 430.6 95.2
Germany 1468.0 1364.6 1029.1 139.1
Ireland 20.3 21.7 5.0 15.0
Italy 353.9 462.0 305.2 61.4
Netherlands 940.0 556.4 513.9 146.4
UnitedKingdom 985.1 782.8 718.4 141.7
TOTALCommunity2)5140.16i4375.2 3529.9 747.3
NewOrderIntakein1000cgrt
Belgium 75.0 115.2 59.4 21.5
Denmark 317.1 '281.0 263.8 38.9
France 63.6 61.6 214.1 103.5
Germany 726.1 707.7 535.8 154.7
Ireland 19.2 5.0 3.0
Italy 301.5 ' 148.9 330.0 4.1
Netherlands 626.4 732.4 376.5 39.7
UnitedKingdom 627.6 489.3 230.2 41.6
TOTALCommunity 2756.6 2540.9 2012.6 403.9
Source:Lloyd'sRegister ofShipping
Thefollowing tableshowstheratiobetweencompletions andneworder
intakeintheCommunity :
■1)1976:cgrtbasedonAWEScoefficients
from1977:cgrtbasedonnewOECDcoefficients
2)Estimated production onthebasisofnewOECDcoefficients :about
4.8millioncgrtin1976.

-4-
Completions NewOrderIntake %
1000cgrt 1000cgrt
1976 ,5140,1 2756.1 53.6
1977 4375.-2 2540.9 58.1
1978 3529.9 2012.6 57-0
1s.tqu.1979 747,3 403.9 54.0
Source:Lloyd'sRegister ofShipping
Fromthesetablesitcanbededucedthatsince1976theneworderlevel
represents only50-60percentofcompletions ,although theoutputof
shipyards hasbeenreducedby25-30percentoverthesameperiod.
However,neworderintakes haveshownaconcomitant decline.
Thefollowing tableshowsthedevelopment ofmarketsharesofprincipal
shipbuilding regions:^
1976
1000cgrt'%1977
1000cgrt1978
1000cgrt
COMPLETIONS
EC-9
RestAWES1)
(Western Europe)
Japan
Eastern Block 2)
OtherRegions5140.1 23.3
3145.7 14.2
<8285„8)<37.5
8348,.037.8
)5444.4"24.723.34375.2
14.23278.6
<37.5X7654.1 )
37.8 "8358.0
2472471'32698.120.6 3529.9 21.3
15.5 2303.1 13J?
<36.1)<5832.9) <35.2)
39.5 6120.5 37.0
11.7 2132.3 12.9
12.7 2461.1 14.9
100.0 16546.7 100.0 WorldTotal 22078 ,.2100.021181.5
NEWORDERINTAKE
EC-9
RestAWES1)
<Western Europe)
Japan
Eastern Block 2)
OtherRegions2756.6 17.2
1903.0 11.9
<4659.6)<29.1
7337.5 45.9
)3985.3 24.917.22540.9
11.92076.6
<29.1X4617.3 )
45.96245.9
24.91207*81969.618.1 2012.6 18.6
14.8 1367.8 12.7
<32.9)<3380.6) <31.3)
44.5 4333.9 40.1)
8.61146.8 10.6
14.0 1935.0 17.9
100.0 10796.7 100.0 WorldTotal 15982.4 100.014040.7
1)AWES:Association ofWestEuropean Shipbuilders .Membersoutsidethe
European Community areshipbuilders' associations ofFinland,Sweden,
Norway,SpainandofPortugal .
2)Information incomplete
Source:Lloyd'sRegister ofShipping <cgrt-coefficients :1976AWES,
from1977OECD)

_5-
Acomparison between the situation oftheshipbuilding industry ofthe
Community andthat ofJapan ,theleading shipbuilding country intheworld
shows that the share oftheneworder intake intheCommunity tends to
belower than theshare ofdeliveries *,whereas theJapanese share of
neworders ishigher than themarket share ofitsdeliveries .Other
•shipbuilding regions were able toobtain a28„6 per cent share ofall
neworders placed intheworld in1978 .This structural development ,
mainly due tothesetting-up ofmodern shipbuilding facilities in
developing countries ,narrows further the scope for thetraditional
shipbuilding areas and this process iscontinuing .
Inthis respect there arealso some qualitative aspects tobecon­
sidered .The fact that theCommunity shipbuilding industry wasable
more orless tomaintain its relative market share cannot beregarded
asasuccess but,onthecontrary illustrates ,thedwindling competitive­
ness ofthe industry .AstheEuropean shipyards have atraditionally
higher share ofthe market for special ships and formore sophisticated
types ,sectors inwhich the general decrease isnot assignificant as
foroiltankers andbulk carriers ,theCommunity industry should have
been able toincrease its relative market position .The following
analysis for ships other than oil tankers andbulk carriers shows
thedevelopment inthis specif ic.sector (calculated onthebasis of
grt):
EC Rest
AWESJAPAN OTHER
REGIONSWORLD
TOTAI .
Completions *
1977 1000 grt 2344.6 815.0 3161 .4 1944.8 8265.8
% 28.4 % 9.9 % 38.2 % 23.5 %100%
1978 1000 grt 2151 .4 848.4 2790.3 2371 »4 «161 .5
7. 26.4 % 10.4 % 34.2 % 29.1 % 100 %
New Order Intake
1977 1000 grt 1341 .6 1021.6 3025.4 1586-7 6975.3
% 19.2 % 14.6 % 43.4 % 22.7 %100%
1978 1000 grt 1163.4 453.0 2088.5 1652.4 5357.3
% 21.7 % 8.5 % 39.0 % 30.8 %100%
– =>-
*excluding bulk carriers and oil tankers
Source :Lloyd 'sRegister ofShipping

-6-
2.3.OrderBookandWorkload Situation
Asaresultoftheshipbuilding crisistheorderbooksoftheworld's
shipbuilding industry havefurther decreased sincetheendof1977.
Thetotalorderbook attheendofMarch1979was22.6millioncgrt,
ofwhichsome40percentfallstoshipbuilding regionsoutside
Western EuropeandJapan,compared withtheirpresentproduction
shareof25-30percent.Thefollowing tableshowstheorderbook
situation intheprincipal shipbuilding regions :
Country/Region TotalorderbooK as
in1000c«rtat31March1979
%
European Communities 4780*7 21.1
Restof.AWES 391S..3 17.3
(Western Europe) (8698.9) (38.5)
Japan 4978.3 22-0
Eastern Block * 2513.5 11.1
OtherRegions 6430.6 28A
TotaL 22621.3 100.0
*incomplete
Source:Lloyd'sRegister ofShipping
TheJapanese shareoforderbooksistraditionally lowerthanthatof
othershipbuilding regions,mainlybecauseofshorterbuilding times
inJapan.
Asfarastheshipyards intheCommunity areconcerned theindustry
haspointedoutthatmorethan40percentofthisorderbookisal­
readyworkedoff,thusreducing theaverageworkload oftrsindustry
tolessthanoneyear'sproduction .Inthiscontextitmaybefurther
notedthattheorderbooksituation differswidelyfromyardtoyard;
thuscertainshipyards arealreadybeingconfronted withacute
employment problems .

-7-
Totalorderbook asat
.t31Marcn1979.in1000cgrt
Total ofwhichtobecompleted during
1979 1980 1981
Belgium 222é5 105.5 117.0
Denmark 485,5 275.8 144.7 " 65.0
France 1022.9 468.1 399.6 155.2
Germany 748.2 521.9 158.7 67.5
Ireland 6.0 3.0 3.0
Italy 750.7 437.6 272.0 41.1
Netherlands 522.4 384.2 123.3 14.9
UnitedKingdom 1022.6 717.8-286.6 • 18.1
TotalCommunity 4780.7 2914.0 1505.0 361.7
Source:Lloyd'sRegister
Theseareonlytentative calculations anditistobeexpected thata
substantial proportion ofshipcompletions during1979willbecarried
outover1980.
Itcantherefore beassumedthatthetonnage completed intheCommunity
willbeintheorderof3.0millioncgrtduring1979(together with
completions duringthefirstquarterof1979).
Inthisconnection,however ,itshouldbereminded,thatamajorpart
oftheworkonshipstobecompleted in1979wsscarriedoutin1978
andthattheindustry 'scurrertworkloadparticularly asregardsthe
secondhalfyearof1979,isdetermined bythelowleveloftonnage
duefordelivery in1980.

-8-
Asaresultofthisdevelopment moreandmoreCommunity shipyards are
havingdifficulties infinding workandinmaintaining aneconomic
production potential .Thesituation affectsmoreorlessallship­
yards,eventhemostcompetitive ones.Another adverseeffectofthe
exhaustion ofordersisthatacontinuous production flowcannot
bemaintained ,withallitsconsequences wherecostsareconcerned .
2.4.Employment
Shipyards areconstantly reducingtheirworkforce .Thefollowing
tableshowsthetrendintheMemberStates:
Employment inshipbuilding intheCommunity
(newbuilding activities only)
1975 1978 1979
Belgium 6138 5140 5120March1979
Denmark 16630 12000 11100March1979
France 2) 27628 22010 218501stqu.79
Germany 1) 46800 32400 26800planned
Ireland 869 840 800estimated
Italy 25000 20000 19800est.March79
Netherlands 28739 22400 21800estimated
UnitedKingdom 1)54550 41050 37950-31000est.
Total 206354 155840 (145220-138270)
(Tablecompiled fromvarious sources)
Inaddition,therearesomeothermeasures whichshipyards haveintro­
duced,suchascuttingoutovertime,short -timeworking andreduced
workinghours.However,thesemeasures havebeentakentoobviateactual
difficulties ;theyare,generally speaking,notpartofalong-term
strategy aimedatadapting thefirminlinewithmarketrequirements .
Inthisconnexionitshouldbenotedthatonly
1)excluding navalshipbuilding
2)employment ofshipyards withaworkforce ofmorethan150

-9-
afewfirmshavebeenabletoswitchtheirnew-building
workforce tootheractivities .Wherestatistics ofemployment innew-
building showareduction of50.500between 1975and1978,statistics of
totalemployment inshipbuilding showasimilarreduction ;itfollowsthat
onlyfewworkersobtained jobsinothersectorsofshipyards .
Inthelightofthepresentoverallsituation oftheshipbuilding industry,
afurtherreduction inemployment innew-building mustbeexpected andthis
I
willhaveserioussocialconsequences .Itcanbeestimated thatmorethan
50.000jobsofmendirectly employed intheshipyards areatriskifthe
presentorderintakeremainsatitspresent lowlevel.
Onthissubject someshipyards havestatedthattheynevertheless have
difficulties insecuringskilledworkersandthatthissituation has
causedproblems asregardscarrying outproduction schedules ontime.
Becauseofthelong-term production process andthevarietyofproduction
sectorsinashipyard,itmayalsohappenthatsomedepartments arework­
ingovertime whileothershavenoworkatall.

-10-
2.5Developments ir)Shipping
Thecrisisintheshipbuilding industryiscloselyconnected withthe
shippingcrisiswhichstartedin1974afterthedevelopments intheoil
sectorandispersisting .
Theimbalance ontheshipping marketismainlytheresultofthenew
ordering boomsomeyearsago,whenitwaswidelyanticipated thatthe
growthofworldseabornetrade,some12%peryearinton-miles from1968
to1971,wouldcontinue duringthedecade.In1973,forinstance,73.6
milliongrt,mainlyoiltankers,wereordered.Thisenormous orderboom
inthelate.sixtiesandduringthefirstyearsofthepresentdecadehas
ledtoarapidincrease inshipbuilding capacities intheworld,mainly
inJapan,resulting inovercapacity intheshipbuilding sector,whichnow
affectsallshipbuilding regionsinthesamewayandwhichisaggravated
byalowlevelofnewordersasaresultoftheovercapacity inshipping .
Theneworderboomofthoseyearsledinparticular toanincrease inthe
tankerfleetbyabout50percentbetween1973and1978,whereasoil
transport,measured inton-miles,increased byonly9percentoverthe
sameperiod.Thefollowing tablereflects thesedevelopments :
WorldSeaborne TradeandCargo-Carrying Fleet
Seaborne TradeinOil
andOil.Products
biIlionton-miles %milliondwt Y.Fleet +
1973
1975
1977
1978ρ10216
9727
11459
11135100 234.3 100
95 313.0 134
112 356.1 152
109 351.8 150
Seaborne Tradeof
otherCargoes
biIlionton-miles %milliondwt XFleet +
1973
1975
1977
1978ρ5187
5636
6020
6120100 205.6 100
109 230.7 112
116 268-5 131
118 281.0 137
+asatendofyear Source :FEARNLEY &EGERS.OSLO

-11-
Total overcapacity ,inshipping wasestimated attheendof1978 tobe
around 100million dwt -orsome 15per cent ofthe total cargo-carrying
tonnage -ofwhich 80million dwt wasdue toovertonnage inthetanker
fleet .These calculations byshipbrokers did not take into account
certain factors which reduce theeffect ofthis surplus capacity onthe
market ,such asthe influence of"slow steaming ".This practice immobi­
lises aconsiderable amount oftonnage and will probably continue .
However ,cargo-carrying capacity isbasically inexcess ofnormal market
requirements .
Inthis difficult situation Community shipowners ,whoarethetraditional
customers o-ftheEuropean shipyards ,have faced severe competition from a
variety ofsources ,andtheCommunity fleet iscurrently declining in
both relative andabsolute terms ,asthefollowing table shows :
All Merchant World I Community %
ships 1000 grt 1000 grt
1.7.1960 129 769.5 Γ 43620.5 33.6 I
1.7.1970 227 490.0 57369.4 25.2
1.7.1975 i342 162.4 74283.3 21.7
1.7.1977 393 678.4 76392.6 19.4
1.7.1978 406 002.0 76930.1 18.9
ICommercial
Trading Types
only
1.7.1978 379 549.9 72411.4 19.1
11.4.1979 383 001.1 68231.4 17.8
excluding N.Antilles (app .1.6million grt)
Source :Lloyd's Register

-12-
Duringrecentmonthssomesignsofarecovery ontheshipping markethave
beenreported,especially forcertainsectors.Itmaybenotedthatlaid-
uptonnagehasbeenreducedsubstantially overthesameperiod.The
following tableillustrates thisdevelopment :
Tonnagelaidup(Merchant Shipsof300grtandover)
N° 1000grt 1000dwt
1978 January 678 23660 43675
April 752 27506 50887
July 765 29651 55289
October 737 25486 47507
1979 January 595 16678 30290
April 526 15048 27395
Source :Institut fürSeeverkehrswirtschaft -Bremen
Takingintoaccountthegeneralaspects,viz.,themerelymarginal increase
inworldseabornetradetogether withtheexisting overcapacity ,itisto
befearedthatinmanymarketsectorsthesedevelopments willbeonlyofa
temporary nature :freightratesmayagaindecrease .Furthermore asubs­
tantialincrease inworldseaborne tradeasaresultofaneconomic recovery
inmajorindustrial nationscannotbeexpected asthedevelopments inthe
oilsectorwillprobably affecteconomic growth.Reduction offleetpro­
ductivity asaresultofslowsteaming isanuncertain factor.Itsimpact
onfuturetonnagerequirements isdifficult toestimate,astheservice
speedcouldbeincreased iffreightratesweresufficient tojustifysuch
anincrease fromaneconomic standpoint .
Itemergesthatinthetankersectorsubstantial tonnagerequirements were
generated bythepresentoilcrisis,leadingtoanincreasing demand,e.g.
transport capacity tocarryspotquantities ,forpart-loadings ofbigger
unitsandforoilstorage.
Inthiscontextspecialconsiderations regarding thetankersectorhaveled
toanumberofordersforthebuilding of80.000dwttankers.Itshouldbe
notedthatnotasingleshipofthistypehassofarbeenordered froma
shipyard intheCommunity .

-13-
3.MARKET FORECASTS
.Duringthepastyearvariousmarketforecasts havebeenpublished .
Although thesestudiesdifferintheirbasicassumptions andconse­
quentlyintheirresults,theyallagreeonthepointthattheshipping
crisiswilllastwellintotheeighties andthatdemandfornewtonnage
maydecrease evenfurtherintheforthcoming years.
According toastudyprepared bythemarketforecasting groupofthe
AWES(Association ofWestEuropean Shipbuilders )in1978,asubstantial'
marketupswingcannotbeexpected before1982/1983.Thismarket
recovery willbebasedmainlyonreplacement requirements ,asmostof
thetonnagebuiltinthesixtieswillbecomeobsolete fromthattimeon.
Itisexpected thatafter1985thecombinedeffectoftonnagerequire­
mentsforreplacements andforfleetexpansion asaresultofgrowing
seaborne tradecouldleadtoahighlevelofnewordersagain.
Thefollowing tableshowstheprincipal resultsofthismarketforecasts :
TypeofVessel Contracting Requirements 1978to1985
m.grt (m.cgrt)
OïlTankers >10.000dwt 20.0 <9.3)
« <10.000dwt 1.4 (3.4)
BulkCarriers 13.0 (6.0)
General CargoShips 29.2 (34.7)
GasCarriers 7.5 (5.2)
Miscellaneous 9.9 (27.1)
Total 81.0 (85.7)
AnnualAverage
(Jan.'78tomid'84
=6.5years) 12.5 (13.2)

-14-
Itcanbealsoeducedfromthisstudythatestimated worldship­
building production in1985(some18.0millioncgrt)willremainbelow
thelevelof1975-1977 .
However,thestudydoesnottakeintoaccountuncertain factorsresult­
ingfrompresentdevelopments intheoilsector.
Twofurtheraspectsaretobeconsidered inthiscontext :Allmarket
forecasts arebasedoncertainassumptions ,onekeyassumption being
thatthenecessary adaptations tothemarketsituation -wi11bemade,
bothinshipping andinshipbuilding .
Consequently ,theoutlookforamarketrecovery inthelateeighties
shouldinnowayserveasanexcuseforfailingtoundertake necessary
adaptations ofcapacities .
{•
Thesecondaspectisthatastagnation intheshipping marketleadsnot
onlytoacontraction oftheamountofordersforfleetexpansion
projects,butalsotothewithholding ofreplacement orderswhichwould
havebeenplacedifshipowners hadhadamoreoptimistic viewoffuture
developments .Furthermore ,cut-throat competition narrowsthescope
forinnovations ,ashigher-priced newbuilding wouldhavetocompete
witholdshipsoperated atlowcostsandatlowsocialandtechnical
standards .
Inviewofallthesedevelopments ,thereislikelytocontinuetobe
verylittlescopefornewbuilding orders,anditwillbedifficult for
shipbuilders world-wide ,andmoreparticularly forCommunity shipbuilding ,
toobtainenoughordersonthemarkettokeepeventheviableyards
running.

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4.Structural Developments
Against thebackground oftheexisting overcapacity inshipbuilding
and ontheassumption that thecrisis will probably continue over
thecoming years ,intensified restructuring efforts arenecessary
inorder tomaintain ortore-establish within theCommunity ahealthy
andcompetitive shipbuilding industry .
Itcanbeargued that ship production andemployment have already
been reduced intheCommunity byclosing down production units and
diversification ,butmainly through elimination oftemporary labour ,
abolition ofovertime andnatural wastage .However ,itshould be
pointed out that such measures canonly reduce production byunder -
utilization ofequipment andbuilding facilities ,which widens the
gapbetween actual cost andmarket prices .Ittherefore seems inevi­
table that more facilities will have tobeeither converted toother
acitivities outside shipbuilding oralso closed down .
This adaptation isfirst and foremost theresponsibility ofthe
industry itself .However ,the reserves ofmany shipbuilding firms are
coming toanend asmarket prices have forsome time -since 1975 -
been below European costs .Taking this into account ,various Member
States have introduced shipyard support scheme inorder topermit
smooth adaptation ofshipbuilding facilities .
TheBelgian government isconsidering whether aidmay begiven toits
only twomedium-sized yards engaged inbuilding ocean-going ships in
order tomaintain its industries ataminimum viable level .Nodecision
has been taken sofar .
The Dani shgovernment has noplans concerning the restructuring of
theshipbuilding industry .Thegovernment recognizes that aconsiderable
reduction ofcapacity isunavoidable ;theactual extent should ,however ,
bedecided upon bythe industry itself .Employment innewbuilding has
been reduced from 16630 in1975 to12000 in1978 .
France ,which has reduced thenumber ofshipyards building ocean-going
ships during the last decade ,will continue with itsrestructuring
efforts .
InMay 1979 anewprogramme wassubmitted totheCommission and is
currently being examined .Under this programme ,production aids are
envisaged forneworders uptoamaximum of435000 cgrt in1979 and
420000 cgrt in1980 .This ceiling corresponds to76per cent ofthe
average production for1974 -1975 .
These aids ,however ,will bestrictly related totherestructuring
policy ,aiming atstabilizing the industry 'ssituation onasubstantially
reduced butviable level ofactivitiy .
TheGerman aidscheme waspresented totheCommission inJanuary 1979
andapproved bytheCommission inJune 1979 .TheGerman government has
approved theobjective oftheshipbuilding industry 'sreport onstructural
developments fortheshipyards building ocean-going ships .According to ,
this report ,anemployment reduction isenvisaged forthebuilding ofnew
merchant ships (from 32391 in1978 to26851 in1979 and 23507 in1980 ;
employment in1975 :46839).

-16-
TheIrishgovernment hasannounceditsintention tohelptheonlyship­
yardcapableofbuilding deep-sea vesselstomaintain aminimumviable
size.Aprogram ;,:iforsubsidies onordershasbeensubmitted andapproved
bytheCommission;' theprogramme alsoprovidesforaidsfordiversification
purposes .
TheinitialItalianaidprogramme forsubsidies onorderscoversaperiod
endingSeptember 1978.TheItalianparliament hasstilltodecideupona
newrestructuring planfortheshipbuilding industry presented bythe
government /leadingtoareduction of25%ofthe1975capacity .Employ­
mentinnewbuilding hasinthemeanwhile beenreduced from25000in
1975to20000in1978,andtheobjective isafurtherreduction of
3000.
Therestructuring plansoftheDutchgovernment envisage theclosing
downofanumberofproduction units.Support hasbeengivenforthe
concentration ofnewbuilding production ,fortheregrouping ofship­
yardsandforconverting capacities toactivities outsideshipbuilding .
Employment innewbuilding hasbeenreduced fromesome29000in1975
toabout22000in1978.Furthermeasures whichmayeventually leadto
acapacity reduction of50percentoftheindustry'sinitialcapacity
as.compared withpre-crisis yearsareunderconsideration andthe
Dutchgovernment hasnotified theCommission thatthelargestnewbuilding
shipyard,nearRotterdam ,willstopitsactivities asnewbuilding shipyard .
TheUnitedKingdomgovernment hasdecidedtoapproveoption 2oftheCorporate
Planwhichwassubmitted byBritishShipbuilders attheendof1978.The
approval ofoption2impliesthattheproduction capacity ofBritishShip­
builderswillbereducedto430.000cgrtperyearin1980/1981.Total
employment innewbuilding ofmerchant ships(including independent shipyards )
hasbeenreduced from54550in1975to41050in1978andsome37950-31000
in1979.
Itmaybenoted,however,that,generally speaking,restructuring policies
lagbehindmarketdevelopments .Inaddition toshipbuilding aidsprovided
undertheFourthDirective ,variousspecialaidprogrammes havebeen
introduced topromotetheneworderintake.Theseaidsarespecialaids
fornational shipowners ,extended creditfacilities forordersfrom
developing countries andthetaking-over ofshipyard'slossesinsome
MemberStates.Furthermore ,evenspecialfinancial support hasbeen
madeavailable forsomeorders.Despiteallthesesupport measures,numerous
shipyards arealreadybeingconfronted withacuteemployment problems .
Thesituation outsidetheCommunity issimilar.Japanhasintroduced
certainproduction ceilings foritsshipbuilding industry for1979and
1980.Incompliance withtheseproduction ceilings,themaximumoperating
ratiosoftheprincipal shipyards willvarybetween 34and49percent
(according tothegroupofshipyards )ascompared withtheirpeakpro­
ductionlevel.Asalong-term measure,shipbuilding capacitywillbe
reduced by35percent,withtheaimofdecreasing totalnewbuilding
capacity by3,4millioncgrt.
Inaddition,publicfinancial supportisavailable forthescrapping ,
freezing ortransfer ofexcessshipbuilding facilities (applicable to
building docksandberthswithacapacity ofmorethan5000grt).
Underthisprogramme shipbuilders cansellbuildingfacilities toan
organization established bytheJapanese governsit.

-17-
Itmaybenotedthatshipyards whichhadgonebankrupt werenotfinally
closeddown,but/onthecontrary,started upagainwithshipbuilding
activities whenthecompany wasrestored undertheJapanese rehabili­
tation law.
Asameasure onthedemandside,Japanhasintroduced financial support
forthebuilding ofshipsforJapanese owners.Inaddition,financial
support hasbeenmadeavailable forthescrapping ofshipsinJapanese
shipyards .
Although insomecasesrestructuring efforts havenotprovedquite
sufficient ,anditmaybefearedthatcapacities willberevived when
thedemandfornewlybuilttonnagerisesagain,thesemeasures
constitute astepintherightdirection .Againstthisbackground
itmustbereported thatcountries suchasKorea,BraziL,Taiwan
andtheEasternBlockCountries ,andinparticular Poland,arestill
expanding shipbuilding capacity .
Somecountries ,andespecially Poland,wereabletogainordersat
pricelevelswellbelowthecostapplied byitsFarEasterncompetitors .
Theresultisthatcountries outside Western EuropeandJapannowhave
amarketshareof40percent,calculated onthebasisoftheirorder-
books.
TheCommission isawarethatrestructuring isalonganddifficult
process andtobecarriedoutasalong-term measure.Anessential
prerequisite forthesurvival ofaminimumshipbuilding capacity inthe
Community isacertainbasiclevelofnewbuilding orders;otherwise
shipyards willhavetoclose.Inmostcasesthiscanonlybeachieved
withtheprovision ofaidsbyMemberStates.However,thedangerexists
thatsuchaidswilldrivebackmarketforces andthattheeconomic
selection ofthemostcompetitive yardwillbecome amatterofonly
secondary importance .Furthermore ,asituation shouldbeavoided where
shipsforwhichthereisnocommercial demandarebuiltonthebasis
ofanuneconomic accelerated aidlevel,suchasbuilding shipsfor
stock.
Ontheotherhand,thereshouldbenodoubt,andthisisexpressed in
theCouncilResolution of19September 1978,thattheshipbuilding in­
dustryisofstrategic importance fortheCommunity andthatahealthy
andcompetitive shipbuilding industry whosescaleofactivity is
consistent withthesizeoftheCommunity 'smaritime tradeshould
bemaintained .However,thiscannot meanemployment •
guarantees foreverysingle .firm,butitdoesmeanthatattention will
begiventoimproving thesector'sposition andthatsomeframework
ofnational measures,whichhavetocomplywiththeprinciples of
theCommonMarket,may~beintroduced inordertogivetheviable
partoftheshipbuilding industry achanceofsurvival .

-18-
5.Outlook andactiontobeconsidered
ItisobviousthatinmostMemberStatesthisLong-term strategyforthe
sectoristobeaccompanied byadditional short-term andmedium-term
measures,mainlyonthedemandsideandinthesocialandregionalfield.These
•measures aretobetakenfirstandforemost bytheMemberStateswithin
thelimitsoftheirexisting economicpotential andincompliance with
theprinciples oftheCommonMarket.
TheCommission willcontinue tomonitor theseactivities .Asfaras
socialaspectsareconcerned ,theCommission hasdiscussed thesewith
thetwosidesofindustry .
Inthiscontextitmaybenotedthatthesocialandregional implications ofthe
shipbuilding crisisareoftheutmostimportance .Itthesituation of
thesectorcannotbestabilized toacertainextent,thereisareal
dangerthattheproblems involvedwillnotbesolvedwithoutserious
socialunrest.
In1978,anamountof20million EUAwasmadeavailable underArticle
.375oftheBudgetformeasures insupportofcrisissectors.This
amounthasbeentransferred tothe1979Budget,butsofartheXom-
munityhasnotbeenabletoavailitselfofthisamount,pendingthe
Council'sdecision concerning adoption oftheregulations proposed by
theCommission .
Thepresentsituation oftheindustry canbesummarized asfollows :
-SincetheCommission submitted itsCommunication totheCouncil
inDecember 1977regarding thereorganization ofthesector,the
situation hasworsened toagreaterextentthanwasexpected at
thattime.
-Employment foranimportant partofthepresentworkforce isat
riskunless acertain .minimum neworderintakebyCommunity ship­
yardscanbemaintained .
<
-Theeconomic situation ofshipyards hasworsened,newbuilding
pricesstillbeingdepressed andshipyards' reserves runningout.
-Thedangerexiststhatimportant partsoftheindustry mayrundown
abruptly .
-Restructuring isalongprocess andaminimum workload isnecessary
forsmoothadaptation ofcapacity .
Inthelightofresultsinrelation tothevariousmarketforecasts ,
alreadypublished ,however,itmustbeconsidered ,thatonlyvery
limitedprospects existforarecovery oftheshipbuilding market
intheshort-term .Thedevelopment oftheorderbooks inMember
Stateshasshownthatinthepastsingleshort-term projects were
insufficient togenerate thenecessary neworderintakeforthe
shipyards inspiteofthehighsubsidies provided frompublicsources.

-19-
Considering alltheseaspects,theCommission intendstocontinue and
intensify itsrelations withMemberStatesaswellasitsinformal
contacts withthecirclesinvolved (shipbuilders ,shipowners ,unions)
inordertoidentify suitable measures thatcouldbetakeninthe
particularly difficult situation withwhichthesectorisconfronted .
TheCommission hasalready examined waysandmeansofimproving the
demandsituation andacommunication regarding aproposal forascrap-
and-buiIdprogramme willbesubmitted totheCouncil.Thisprogramme
wouldalsohavefavourable socialimplications forthesectorsinvolved .