ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)515
Vol.1979/0178

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f
COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)515 final
Brussels,14November1979
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REPORTFROMTHECOMMISSION TOTHECOUNCIL .
SHIPREPAIRING SECTORINTHEEEC
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1.BACKGROUND
1.1.TheFourthCouncilDirectiveof4April1978onaidtoshipbuilding
(78/338/EEC)laysdownthegeneralobjectivesfortheCommunityship-
repairingindustryinthesecondparagraphofthepreamble:"asound
andcompetitive ship-conversion andshiprepairingindustryisofvital
interesttotheCommunity andcontributes toitseconomicandsocial
development,byproviding asubstantial marketforarangeofindus­
tries,includingthoseusingadvancedtechnology,andasanemployer ■
inanumberofCommunityregions;whereasthisisalsotrueofship-
conversion andship-repair". '
1.2.However,shiprepairingiscoveredbyonlycertainarticlesofthe
Directive asatthetimeofpreparation theCommission'spictureof
thesectorwasnotsufficiently cleartoenableittobedealtwith
fully"intheDirective.Hence>havingdefinedbothshiprepair and
ship-conversion forthepurposesoftheDirective,itmerelyprovides
forthecollection ofinformation oninvestment inthesector(Article
4(2)),forrescuemeasuresofindividual undertakings (Article5),
etc...,withoutoffering asolutioninvolvingcrisismeasures.
A •-•
1.3.Consequently ,astatemententeredintheCouncilminutesdealingwith
theFourthDirectivenotedthat"whilerecognising thatthisproblem
(oftheshiprepairing sector)isofsomeurgencyincertainMember
States,theCommission does'notfeelableatpresenttoproposethat
aCommunity-wide solutionbeincludedintheArticleoftheDirective
dealingwithmeasurestocombatthecrisis".Thestatementalsocom­
mitstheCommissionto"examinetheproblemsofshiprepairing with
theMemberStateswithoutdelayandtosubmitareporttotheCouncil,
togetherwithproposalsbasedonthatexamination".Furthermore,the
Commission statedthat,inviewofsubsidisedthirdcountrycompeti-
./.

tion ,itwasprepared togive sympathetic consideration toany aid
-project proposed byaMember State forthereorganization ofthe
sector .
2.SUBSEQUENT STEPS
2.1 .TheCommission hasanalysed theshiprepai ring sector after seeking
detailed information from Member States .The main conclusions ofthis
analysis ,which isembodied intheannexed report drawn upbythe
Commission inconsultation with Member States ,aresummarized inpara­
graph 3below .
2.2 .Since the adoption ofthe Fourth Directive certain Member States have
•put forward aid-schemes for shiprepai ring .
2.2.1 .Netherlands -On18January 1979 theCommission accepted an
aid-proposal whose objectives wasthe restructuring ofship-
repairing intheport ofAmsterdam ,under which employment
would bereduced by35%and 3out of5floating docks would be
sold off .(Ref .SG(79)D /434 ).
2.2.2 .France -On14August 1978 theCommission approved aFF17mil­
lion package ofemergency rescue measures fortheTerrin Group
atMarseilles .Furthermore ,on3May1979 theCommission autho­
rised measures involving aid ofFF38million which (1)consti­
tute salvage fortheTerrin Group aswell asfor Flandres -
Industries andZiegler atDunkirk ;and (2)encourage regrou -
pings toprovide 2repair yards per port .(Written procedure
E418 /79)(SEC(79)674 ):Commission's letter réf. SG(79)D /5506 ).
3.ESSENTIAL POINTS OFTHE COMMISSION 'SANALYSIS OFTHE SECTOR
3.1 .Situation ofthe industry
The industry ismarked bythefollowing major characteristics :
(i)poor dock-occupancy rates ,together with asignificant loss of
employment since 1975 ,anotable drop inturnover inreal terms
and atransition from profit toloss which hasbeen particularly
serious insome Member States .However ,this hasbeen somewhat

alleviated bydemandforfacilitiesforsmallervesselsarising
fromlocaltraffic,fishing-etc. !
.!(ii)strongcompetition fromcertainlow-wagethirdcountries.This !
problemisparticularly severeformediumtolargeshipfirstly !
becauseofcompetition fromSpanishandPortuguese yardswhich .j
arewell-placed toexploittherepairmarketfortankersin '
particular ;andsecondlybecauseoflowfreightratesandcon-.
sequently lowshipimmobilization costs,whichtendtomake •
lower-priced thirdcountryyardsmoreattractivetoshipowners;
(iii)thevariedstructures oftheindustrythroughout theCommunity.
Thecausesoftheindustry'sproblems
Thefollowingwereidentified asthemajorcausesofproblemsforthe, ;
Community'srepairindustry:
<i)cyclicaldependence onmaritimetranpsort,togetherwiththe
-relatively lowwageoftheworldfleetandrecenttechnological <
advancesinshipdesigntorequirelessmaintenance ; ;
(ii)Thehighwageratescomparedtothose.ofthemaincompetitors -
whogenerally donotadheretothesocialstandardsoftheInter- •
'nationalLabourOrganization ;theburdenofsocialcontributions falling
onemployersandthepaymentofcontributions /wagesforidletime;in
-certainmemberstatesDoorproductivity andtheexistenceoflabour
^relationsproblems. .'',
<in)incertainMemberStates,outmodedequipment andunsuitablelocation;
<iv)incertainMemberStates,inefficient structureswithamulti­
plicityofverysmallfirms;insomeothers,adverseeffects
ofcloseintegration withshipbuilding indepressedmarketcon­
ditions,althoughtherecanbeshort-term advantages.

-4-
4.SOLUTIONS
4.1.Inviewofthemarkeddiversityofthecircumstances oftheindus-
(1)tryintheCommunity,measurestobetakenwouldnecessarily vary
fromcasetocase.However,themajorpointsofasectoralstrategy
wouldincludethefollowing.
4.2.Itwouldclearlybedesirabletoincreasethecompetitiveness ofthe
industrybyretainingthoseareaswhereCommunityyardsarealready
competitive,viz.facilities gearedtohandleshipsinthe20-
80,000DWTcategory,sophisticated repairsandmajorconversions ;
whilenotencouraging investmentinlargeryardswhetherbysectoral,
regionalorotheraidmeasures.
4.3.Aidwheregrantedshouldgenerallycontribute toanincreaseinpro­
ductivitytocounteract low-wagethirdcountrycompetition,moderni­
sationandreductioninemployment,Such ;astrategyshouldhaveasocial
dimensiontheessential *aimofwhichwouldbetoallowtheindustryto
increaseitscompetitiveness inthemostfavourable socialconditions .
5.XRITERIA FORSTATEAIDS ■
5.1.Investment aid f
Investmentaid,whetherundersectoral,regionalorothermeasures,
wouldbepermittedonlyifitdidnotentailanyincreaseincapaci­
tyandgenuinelycontributed toincreasedcompetitiveness .
5.2.Salvagemeasures
ThesearealreadyprovidedforbyArticle5oftheFourthDirective,
whichrequiresthatsuchaidshouldbeintendedasatemporary mea­
sure,pendingadefinitivesolution,inordertodealwithacute
socialproblems.
(1)MemberStateshavewithoneexceptionagreedthat,sinceshipconver­
sionislargelyundertaken inrepairratherthannewbuilding yards,
aidstotheconversion ofshipsshouldfalltobeconsidered under
policytowardsrepairingratherthannewbuilding aids.TheFederal
RepublicofGermanyconsidersthatonlysmallerconversions shouldfall
underpolicyonshiprepairing,whilelargerconversions (asdefinedin
Article 1oftheFourthDirective onaidtoshipbuilding )shouldfall
underthatDirective. -

5.3.1.Inviewbothofthehighlevelofintra-Community competition
rinshiprepairing,andtheexcesscapacitywhichcurrently
existsinthesector,productionaidswouldnotbeconsidered
compatiblewiththecommonmarketinthepresentmarketcir­
cumstances .
5.3.2.Nonetheless,whereMemberStatesareconfrontedwithparticu­
larlydifficultsituations,theCommissionwouldexamineadhoc
crisismeasuresproposedbyMemberStates.Incaseswhichthe
Commission wasabletoauthorise,itwouldspecifycertaincondi
tionsincludingdegressivity ofaidandalinktorestructuring
objectives,whichincurrentcircumstances mayclearlybetaken
tomeanareductionincapacity,includingemployment.
6.FURTHERACTION
yItwasagreedthat:
(1)regularmultilateral discussionandexaminationoftheshiprepairing
sectorwouldcontinue,whileaidschemesandproposalswouldbecon­
sideredbytheCommissiononanadhocbasis;
■N>(2)theannexedreportbeupdatedannuallyindiscussionwithMember
States;
(3)areport,ofwhichthismemorandumrepresentsthedraft,betrans­
mittedtotheCouncil.
<1)TheCommissionacknowledges MemberStates'viewsthat,inindividual
shirepairingcontracts,itmaybenecessaryexceptionally toofferaid
inordertomatchcompetingthird-country offers,subjecttoprior
agreementbytheCommission. "-

ANNEX
THESHIPREPAIRING SECTORINTHEEEC
1.WORLDSITUATION
1.1.Inresponsetotherapidincreaseindemandforoilandbulkseatransport
inthe1960'sthetonnageoftheworldfleetmorethandoubledbetween
1965and1975,whiletheincreaseinthe-numberofshipsofover5,000
deadweighttonswasespeciallymarked.-Thisexpansionintheworldfleet,
andparticularly inlargeships,wasaccompanied byadramaticincrease
ininvestmentinshiprepairfacilities :overtheperiod1966-1976the
numberoflargedrydocksCie.dockscapableofrepairingvesselsover'
50,000DWT)morethandoubled,whilethetotaldeadweightcapacityofdry-
docksincreasednearly3.5times.Withinthisdevelopment averysubstan­
tialproportionoccurredinnon-membercountriessuchasJapanandthe
IberianPeninsula.
,1.2.However,inrecentyearstherehasbeenamarkedfallindemandforrepair
facilitieswhichhaslargelystemmedfromthereductionintheaverageage
oftheworldfleetafterthelargenewbuildingprogramme,technological
advanceswhichhasreducedtheneedforrepairingandalsothepost-1973
shippingrecession.Inconsequence,thecurrentpositioninthesectoris
oneofworldimbalanceofsupplyanddemand,particularly infacilities
forvesselsofover50,000DWT.
Ithasbeenestimatedthat,iftotalworlddemandhadbeenspreadevenly
overworlddrydockcapacityforshipsover50,000DWTin1976,therewould
havebeenatotaldockoccupancyrateofonly39%.Withinthisfigure,
however,itisincapacityforshipsover300,000DWTthatdock-occupancy
rateswerelowest(8%).Similarly,estimatesofoccupancyratesofdocks
ofallsizesinEuropewereapproximately 707.in1976,flailingtoonly
50%to60%in1978. ,
'2.SITUATION OFSHIPREPAIRING INTHEEEC
2.1.Sincethemid-1970'stherehasbeenamarkeddeclineinshiprepairing in
theEECasshownbythefollowingaspects:
Ci>"'employment.Directemploymentinshiprepairing fellby4,700<7'/.)
fromapprox.67,400to62,700between1975and1977.However,within
thisaverage,largedeclinesareconcealed,eg.33%inBelgium,
17%inFrance.Indirectemploymenthasalsodeclinedsignificantly.'
However,inHolland,DenmarkandIreland,employmenteitherremained
stableoractuallygrewovertheperiod1970-77.Furthermore,deve-
/ lopmentsinthecourseof1978havecontinuedthereductionin *
employment.AtMarseille(France),_+2,000jobshavealreadybeen
-lost,whileafurther_+500jobsareatrisk.IntheNetherlands,itisenvisagedthat>1,200jobswillbelostoverthenextfew
years.IntheUKWesternShipbuilders wascloseddown<_+1,200jobs).
Atotalof1,700jobswerelostintheindustryin1978,whileover
1,000werelostwiththeclosureoftheFalmouthYardinearly
1979.
(ii)turnover.Similarlycashturnoverof1,440m.U.A.in1975fellto
1,306m.U.A.in1977.Moreover,turnoverinrealtermshasfallen
sharplyinmostcountries,eg.48%inBelgium,20XinFrance,32%
inItalybetween .1975and1977,by36%inHollandbetween1974and
1977,by12%between1974and1976intheUK;inGermanyandDenmark,
however,intheperiod1975-1977realturnoverfellbyonly10%
and8/.respectively.
(lii)prof-it/loss.Withfewexceptions,mostMemberStates'industryseems
•tohavegonefromprofittolosssince1975,eg.France,whereprofits
of3m.U.A.in1975becamelossesof17.3m.U.A.in1977.

'' - . '• ' I-2- ' '^
f
2.2.MemberStates'repliestotheCommission'squestionnaire pointtothefollowingma
causesofthecurrentsituationintheEECshiprepairing industry: ^!
(i)intheworldcontextdescribedinparas1.1.-1.2.above,strong ■■
competitionarisesfromlow-wagethird-countries (eg.Singapore, i
Taiwan,Hong-Kong,SouthKorea,Bahrein,Brasil,Portugal,Spain,^.jYugoslavia,Greece,MaltaandcertainMiddle-Eastern countries) I
-wherewiththerecessioninbulkshippinginparticularithasoften !
;beennecessarytocompeteforsmallervesselsthanfacilitieswere |
designedfor-thesizeofvesselswhichEEC.yardsareingeneral
bestequippedtohandle.' v
(ii)lower-freightratesintheshippingmarkethavetwonotableeffects.-
Firstly,theymakepricetheprimaryconsideration intheship-
owner'schoiceofrepair-yard.Secondly,theyhavereducedship jimmobilisation costs,thusenablingshipowners,particularly tramps,-j
tosendvesselstomoredistantportsinsearchofafavourable !repairpricethanusedtobethecasewhenqualityandothernon- i
priceaspectswereoftenofequalimportance.Hencemanythird-
countrycompetitors whoenjoythebenefitoflowwageshaveattrac­
tedasubstantial volumeofbusinessfromEECyardswherewages j
aresignificantly higherinanindustrywhich,moreover,islabour- I
intensive. '-/ .
Onequalification needstobeadded:thisphenomenonaffects
-mostlymedium-to-larger-sizedships,sothatyardsspecialising in
localtrafficandinsmallervesselsarelessconcerned.However,
EECyardssituatedontheMediterranean anddependentonlocaltraffic
appeartobemoreexposedtolow-wagethird-country competition
(Spain,Malta,Greece)thanthoselocatedontheNorth-WestEuropean
seaboardwherewage-costsarehighthroughoutthearea."
(iii)particularproblemsfortankersandlargebulk-carriers .Inthis '/•
1fieldESCyardsarelosingouttothePortugueseandSpanishyards
"which,throughthfeirlocationonmainballast-legs ,areinastrong
positiontoattractbusinessi;nsuchvesselsfromEECyards.
■j ■■, ■
vprom'5o?Tin7:stosimvCTAm??nittdust'iy ...•.
3.1.Problem"relatedtoworkforce 1
3.1.1.Shiprepairing isalabour-intensive industry.VJherelabour-costs are
high,theindustryislikelytobeataconsiderable disadvantage vis–
,a-viscompetingindustriesv)ithlowwages.
>Wagesappeartobe x-highest .inBelgium,Germany *Denmarkand
theNetherlands ,whiletheItalian,.UKandIrishindustrieshadlower
wages.Thehigh-v;agcindustriesnhcn;edahighlabour-costcontentin
repaircontracts,althoughtheItalianindustryhad-thehighestrelative„
labour-cost contentie..inclusiveofsocial ,contributions etc."atapprox..
84%. TheFrenchindustryalsohadahigh.labour-
costcontentat56%,especiallyaswagesdidnotseemoninformation
iprovidedtobeveryhigh.IntheUK,ontheotherhand,labour-cost con­
tentofcontractswasrelatively low(37%).Itshouldbe'addedthatthe
partoflabour-costs represented byemployers'socialcontributionis.
animportantfactorincostsincertainMemberStates.Thereisalsoa
widedivergenceinaverageannualworking(ie.productive)hours,net
ofholidays,idletime,etc.(Germany-1,800-2,000hours,.UK1,765,
Belgium1,688,^Denmark1,650,Ireland1,600,Italy'1,550,Netherlands "
1,300-,1,350). .>',

-3-
3-1.2 .Certe,in countries -Italy andtheUK-suggested that poor productivity -
wasamajor handicap (andintheUKmay "bepresumed tohave offset low-
wage advantages ).TheFrench also suggested that underemployment wasa
major handicapping factor intheir industry :between 1974 and 1977 work­
force declined "by19 while working hours diminished by32 >b.
3.1.3 .Inseveral Member States special schems arepro­
vided tocompensate workers for idle time
While many countries didnotcomment onanyadverse effect such
schemes mayhave oncompetitiveness ,some Member States -notably
France ,butalso Italy andtheUK-replied that such schemes had
serious (ifunquantified )effects oncompetitiveness .Other Member States
suggested that theproblem ofidle time wasmitigated ifnotsolved by
transfer ofidle workers into other divisions ofthefirm (see3«3.3 «
below ).
3.2 .ïbuioment andlocation
3.2.1 .Allcountries outItaly said xnat their industry had sufficient equip­
ment asrequired bycurrent safety regulations (eg.fordegassing ).In
theItalian industry lack ofdegassing equipment oftherequired standard
was considered aserious handicap .
3.2.2 .Astothecondition ofequipment ingeneral ,while most countries ,espe­
cially France ,found equipment suited toefficient operations ,Italy ,
theUKand for oneyard Ireland said that the equipment isoutmoded and
may bea'handicap toefficient operation .
3.2.3 .Location poses awider problem .Whereas oneofthe strengths ofthe
French industry isconsidered tobeitsfavourable location ,-'many
German yards arelimited astosize ofship they canhandle bytheir
location onrivers orcanals ,andthe Irish andUKindustries were
unfavourably located atadistance from major sealanes ,eg.Dublin ,
Newcastle ,Belfast .TheItalian industry isalso said tobehampered
bynarrow channels unsuited tomodern ships .
3.2.4 «While repair docks arepublicly owned incertain Member States ,itis
only inFrance where anyform ofconcessionary tarifs areapplied for
their hire ,andthis inanunquantifiable manner since they are re­
quired tocover only borrowing changes andrunning costs which may be
'subject togeneral aid .Furthermore inFrance land onwhich repair
centres lie ispublicly-owned while drydocks andquays for .shiprepair
are inthemain publicly financed .
3.3 .Structure 01repair-firms
3.3.1 .Evidence provided byMember States' replies totheCommission 'squestion­
naire and also available from other sources suggests that Community
capacity isoverwhelmingly ,concentrated inthe .small t®medium range
ofrepair-facilities .Thus only i30docks cantake vessels larger
than 50,000 DWT .
Likewise thebulk offirms concentrate onthe belov ;50,000 DWT range
ofvessels :turnover arising from "ships smaller than this
accounts forthevast bulk ofbusiness (varying from 50 '/ato95'$>)•

-4-
Giventhatexcesscapacityi3nostmarkedinthefacilitiesforlarger
vessels–althoughno"criticaldimension"ofdockcanbereliablysta­
tedbelowwhich,tradingconditionsaremorefavourable-itappears
thatthisstructurehastosonnedegreeshieldedthe'Communityindustry
asawholefroratheconsequeicesofovercapacityforlargevessels.
3«3«2.Oftheapprox.600repairfirmsintheCommunity,informationprovided
suggeststhatthebulsconsistsofsmallcompanies,employingless
than100personnel.Insomecountries,eg.Italy,thenumberofsmall
firmsisconsideredproblematic .However,smallcompanies'turnover
isinmanycasessustainedbyrelativelybuoyantdemandfromcoastaltrafficandfichingvessels(estimatedat5-10>*.of.demand).
3•3•3-InDenmark,GermanyandIrelandthemajorrepairfirmsareofteninte­
gratedwithshipbuilding concerns,whereasinFranceandtheUKrepair-
yardsarenotnormallyintegratedwithotheractivities,eg.shipbuil­
ding,marine'andgeneralengineering .IntheremainingMemberStates"
thedegreeofintegrationvariesasdoesthefieldofactivitycom­
binedwithrepairing.Manyofthosefirmswhichareintegrated seem'
toenjoya/1vantages,eg.inflexibilityof,manpowerdeployment,which
enhancetheirabilitytowithstand "periodsofrecessioninshiprepairing .
-However,insomeMemberStates,eg.theNetherlands ,firmsengaged
onlyinrepairandhavingnobuildingactivitieswereinastronger
positionbecausetheyhadbeenunaffectedbythecurrentbuilding
crisis. -
4.C0!?'?T.USI0.'?3 x'
'0
4.1.Clearlythemajorcharacteristic oftheCommunityshiprepairing industry
isitsdiversity;,offacilities ,ofstructuresand,partlyasaconse­
quence,oftheproblemsconfrontingit,as.wellasdiversityofnational
viewsofthenatureandgravityofthecurrentmarketdifficulties .
4.1.1,InsomeMemberStates,demandismaintainedata-satisfactory level *,
byreasonoftheindustry'sconcentration onsmallervesselsandlocal
andfishingtraffic,whileinotherswherefacilitiesaregearedto
largerchips,,eopeciallytankers,,theeffectsoftheourrentmarketsituationhavebeen,moresevere.(Thisaspectismorefullytreated
inpara4»2.below.) -
4.1.2.Thereisalsostructuraldiversity.WhileinmanyMemberStatesinte­
grationwitheg.buildingconcernsisregardedashavingapositive
effect,thisisnotalwaysthecasethroughouttheCommunity.Likewise,
thestandardofequipment,labour-productivity andtheeffectofloca­
tionvaryfromcountrytocountry.
4.2.Nevertheless ,certaingeneralmarkettrendsareclearlydiscernible .
4.2.1.Thereisarelativelystrongandconstantdemandforrepairsstemming
fromcoastalandfishingtraffic,ie.mostlyinsmallervessels.Demand
issimilarlystronginmajorports,witha.captivemarketsituation,
'eg.Hamburg,Rotterdam,"Antwerp,withbothsmaller-andmedium-sized
"shipsbeinghandled.However,withgreaterpricecompetition andwidespread
tendering,theadvantagesofacaptivemarketseemtobediminishing .
4.2.2.Thereisasecondtypeofdemand,largelyii:medium-sized vessels.
V.'hileworld-imbalance ofsupplyanddemandmaybelessinthissector
thanforlargevessels,Communityyards,withhighwage-ratesina
labour-intensive industry,faceincreasinglystiffcompetition from.
low-wagethird-countries inbothMediterranean areaandtheParEast.

-5-
Thi3isexacerbated bythecurrentshippingclimatewhichhasmadethe
priceofrepairsthepredominantfactorinshipowner'schoiceofyard.
Itisinthisarea,hov.'ever,thatintra-Comnunity competitionisalso
greatestandthat,consequently ,aidsgranted°JMemberStatesareliable
tocausegreatestdistortion .
4.2.3»Inthemarketforlargerships,particularly tankersandbulkers,world
overcapacity isgreatestandtheprice-advantage offeredbythird"country
yardsismostmarked.Consequently ,thirdcountryrepair-yards ,parti­
cularlyintheFarEast,butalsoinPortugalandSpainlargelyon
accountoftheirfavourablegeographical position,lowwagecostsand
modernyards,provideverystiffcompetition .However,itisinthis
fieldthatCommunitycapacityisleastandthishaspartlyshieldedthe
Communityindustryasawholefromtheworstconsequences ofovercapa­
city. .