Report from the Commission on the overall impact of the measures provided for in Council Regulation (EC) No 844/94 of 12 April 1994 extending until 28 April 1999 the 'old for new' arrangements in the context of the measures to promote structural improvements in inland waterway transport introduced under Council Regulation (EEC) No 1101/89 of 27 April 1989
Date: 1997-11-03
Institutions: European Commission
Subjects: industrial restructuring, inland waterway shipping, transport capacity, transport policy, vessel

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 03.11.1997 
COM(97) 555  final 

REPORT FROM THE COMMISSION 

on  the  overall  impact  of  the  measures  provided  for  in  Council  Regulation  (EC) 
No  844/94  of  12  April  1994  extending  until  28 April  1999 
for  New" 
arrangements  in  the  context  of the  measures  to  promote  structural  improvements  in 
inland  waterway  transport  introduced  under  Council  Regulation  (EEC)  No  1101/89  of 
27 April  1989 

the  "Old 

REPORT FROM THE COMMISSION 

on  the  overnll  impact  ~f  the  measures  provided  for  in  Council  Regulation  ( EC) 
No 844/94  of  12  April  1994  extending  until  28 April  1999 
for  New" 
arrangements  in  the  context  of the  measures  to  promote  structural  improvements  in 
inland  waterway  transport  introduced  under  Council  Regulation  (EEC)  No  1101/89  of 
27 April  1989 

the  "Old 

1. 

Introduction 

Council  Regulation  (EEC)  No  1101/89  of  27 April  1989 1,  as  last  amended  by  Council 
Regulation (EC) No  2254/96  19  November  19962,  introduced  two  sets  of measures  designed 
to  reduce the structural  overcapacity  clearly evident in  the  inland  waterway  transport  market 
(for a more detailed description of the main points of Regulation No  1101/89, see section 2): 

(a) 

the  granting,  under  Article 5,  of  scrapping  premiums  with  a  view  to  reducing  the 
capacity of the active fleet in the inland waterway transport sector,  and 

(b)  measures,  under Article 8,  designed  to  curb  investment  in  additional  vessels  during  the 
coordinated  scrapping  scheme.  These  measures,  generally  referred  to  as  the  "Old  for 
New"  arrangements,  were  temporary  in  nature  and  \Vere  due  to  expire  on  28.4.1994. 
On  the basis  of a  reasoned  report presented  by the Commission  (CO:\1(93)  553  final  of 
16  November  1993),  this  scheme  was  extended  by  five  years  until  28.4.1999  under 
Council Regulation No 844/94 of 12  April  19943. 

In  accordance  \Vith  Article  10(5)  of Council  Regulation  No  1101/S9,  \Yhich  stipulates  that 
"the  Commission  shall  submit  ~  report  to  the  European  Parliament  and  the  Council  by 
31  December  l 996  evaluating  the  overall  effect  of  the  measures  pro,·ided  for  by  this 
Regulation,  together  with  proposals  if appropriate",  the  present  report  therefore  sets  out  to 
assess  the  impact on  the  inland  waterway  transport  market of the  application  of the  "Old  for 
New" arrangements since the  launch of the scrapping scheme in  1990  and,  in  particular,  since 
its  extension (in April  1994) until the end of 1996. 

OJ No L  116,  28.-l.1989,  p.25. 
2  OJNoL30-l. 27.11.1996,p.1. 
3  OJ No  L  98.  16A. l 99-l,  p. l 

This  report  cannot  afford  to  ignore  the  implications  of  a  comprehensive  analysis  of  the 
reduction  in  structural  overcapacity  as  a  result  of  the  successive  coordinated  scrapping 
measures  implemented  at  Community  level  from  1990  to  1996. 
Indeed,  these  scrapping 
measures  are  part and  parcel  of the "Old for  New"  arrangements  which  seek to  contain  the 
existing  overcapacity,  while  at the  same  time  preventing  the  creation  of new  overcapacity. 
Together,  these  measures  and  arrangements  constitute  what  is  known  as  "structural 
improvements in inland waterway transport".  Lastly,  this  report represents  an  initial  attempt 
to  tackle the problem of whether or not to  maintain the status quo  by  adapting  a  system  for 
regulating  the  market  (of the  "Old  for  New"  type)  following  the  total  liberalisation  of the 
market by the year 2000. 

2. 

Background to  the scrapping schemes and  procedures for  their implementation 

The  aim  of  Council  Regulation  (EEC)  No  1101/89  and  Commission  Regulation  (EEC) 
No  1102/89  of  27  April  19894,  as  last  amended  by  Regulation  (EEC)  No 241/97  of 
10 February  19975  laying down certain measures for  implementing the Council Regulation,  is 
to  remove  the  structural  imbalance  between  supply  and  demand  in  the  inland  waterway 
transport  sector.  The  main  points  of  what  is  commonly  known  as  the  Community's 
"scrapping scheme" are set out below: 

a)  Within  a  harmonised  Community  framework,  national  Scrapping  Funds  have  been  set 
up  in  each of the Member States whose inland waterways  are linked to  those of another 
Member  State  and  the  tonnage  of whose  fleet  is  above  I 00  000  tonnes.  The  Member 
States  directly  involved  are  Belgium,  Germany,  France,  the  Netherlands  and,  since  its 
accession  on  1 January  1995,  Austria.  Vessels  registered  in  other Member  States  (such 
as  Luxembourg)  but  operating  within  the  same  network  must  belong  to  one  of the 
Scrapping Funds. 

b) 

c) 

d) 

The  scope  of the  scrapping  scheme  shall  extend  to  the  entire  active  fleet  of inland 
vessels  using  the  interlinked  inland  waterways  and  registered  in  a  Member  State, 
although  a  limited  number  of exemptions  is  provided  for  under  Articles  2(2)(b ),  2(3) 
and  3 (I) of the abovementioned Regulation. 

The  aim  of the  Community's  first  scrapping  programme  was  to  withdraw  from  the 
market,  between  1.1.1990  and  1.12.1990,  10%  of the  dry-cargo  vessel  fleet  capacity 
and  15%  of the  tanker vessel  fleet  capacity.  The  latest  scrapping  programme,  planned 
over three  years  from  1996  to  1998  as  a support  measure  in  the  process  of liberalising 
the  market  (Council  Directive  96/75/CE  of  19 November  19966),  seeks  to  reduce  the 
capacity of the Community fleet by a further  15% or so. 

The "Old for New" scheme ( cf.  Article 8,  Regulation No  1101/89) was set up to  prevent 
the gains  from  the scrapping scheme being cancelled  out by  extra capacity  coming  into 
service  at  the same time.  This  means  that the  owners  of vessels  wishing to  bring  extra 
capacity into service must at  present: 

4  OJ No  L  116 ..  28.--1-.1989 ..  p.  30. 
OJ  No  L -rn ..  11.2.1 1)97. p.  11. 
OJ No  L 30--1-,  27.11.1996.  p.  12. 

6 

3 

* 

* 

either scrap a tonnage of carrying capacity equivalent to  one and  a- half ti"mes  that 
of the new vessel without receiving a scrapping premium; 
or,  where they decide to  scrap  no  tonnage,  pay  into  the  Scrapping Fund  a  special 
contribution  equivalent to  one and  a  half times  the  scrapping  premium  fixed  for 
the type of vessel brought into service. 

e) 

f) 

g) 

The  total  amount  required  for  the  granting  of scrapping  premiums  under  the  1990 
scheme was  made  available  to  the  Scrapping  Funds  by  the  governments  concerned  in 
the form  of interest-free loans.  As  far  as  tanker capacity  is  concerned,  these  loans  had 
been paid off by  1995  by the industry  in  the form  of annual  contributions  paid  into  the 
Funds  and  calculated  ~n  the  basis  of tonnage  and  type  of vessel. 
In  the  case  of dry 
capacity, they should be paid off in the course of 1997. 
The  1996-1998  programme  is  being  cofinanced  from  the  Community  budget  ( 1996 
only), from  contributions from  the industry  and  from  the budgets  of the Member States 
concerned (I 996,  1997 and  1998). 

There is  a system of mutual financial  support between the Funds  in  order to  ensure that 
the  time  limit  for  repayment  of the  interest-free  loans  is  the  same  in  all  the  Member 
States  concerned.  This  mutual financial  support also  extends  to  all  the expenditure and 
all  the  resources  of the  Scrapping  Funds  (Community  budget,  contributions  by  the 
industry and budgets of the Member States concerned). 

Over  the  same  period  the  Swiss  authorities  have  adopted  similar  measures  for  their 
fleet.  Operations  under the  Swiss  fund  have  been  coordinated  with  those  of the  other 
funds  at Community level. 

Given that the scrapping scheme is  governed by Community rules,  all  decisions  relating to  its 
operation  are  taken  at  Community  level  under  Regulation  No  1101/89,  and  it 
is  the 
Commission  that  is  responsible  for  determining  the  various  procedures,  the  rate  of  the 
scrapping  premiums  for  the  different types  of vessel,  the  rate  of the  annual  contributions  to 
the Funds, the detailed rules governing mutual financial support,  etc. 

In  addition,  the  Commission  holds  regular  coordinating  meetings  with  the  representatives  of 
the States concerned and with the Scrapping Fund authorities,  in  order to  ensure that the  rules 
are applied uniformly.  Regular consultations are also  held with the inland waterway  industry. 

3. 

Effects of the scrapping scheme measures since 1990 

As  a  result  of Council  Regulation  (EEC)  No  1101/89,  Commission  Regulation  ~EEC)  No 
3690/92  of 21  December  19927,  Commission  Regulation  (EC)  No  3039/94  of 14  December 
19948,  Council  Regulation  (EC)  No  2819/95  of 5  December  1995 9,  Commission  Regulation 
(EC)  No  2839/95  of  8  December  1995 10,  Council  Regulation  (EC)  No  2254/96  of  19 
November  1996 11  and  Commission  Regulation  (EC)  No  2326/96  of 4  December  1996 12 ,  the 
scrapping scheme measures as  a whole have had the follO\ving  effects: 

7 

9 

OJ No L  374,  22.12.1992, p.  22. 
OJ  No  L  322.  15.12.1994, p.  11. 
OJ  No L  292.  7.12.1995, p.  7. 
10  OJ No  L  296.  9.12.1995, p.  4. 
11  OJ  No  L  304,  27.11.1996. p.  1. 

Table  1 : 

overview  of  all  scrapping  scheme  measures  between - 1.1.1990- and 
31.12.1996 

number 

tonnage 

kW 

average 
tonnage 

/kW 

dry cargo carriers 

2.406 

1.498.769 

tanker vessels 

• pusher craft 

471 

97 

442.091 

623 

939 

72.404 
.. 

746 

GRAND TOTAL 

2.974 

1.940.860 

72.404  675 

These figures  should be compared with the total  fleet subject to  the  annual  contribution as  at 
1. 1. 97  as against the corresponding situation on  l . I . 90. 

Table 2: 

comparative position of the fleet as at 01.01.1990 and as  at 01.01.1997. 

number 

tonnage 

kW  average 
tonnage 

/kW 

dry cargo carriers 

12.421 

10.429.729 

10.109 

9.518.446 

tanker vessels 

. pusher craft 

1.881 

l._366 

507 

455 

2.046.965 

1.775.421 

839 

941 

1.088 

1.300 

384.183 

354.476 

757 

779 

TOTAL 01.01.90 

14.555 

12.476.694 

384.183 

TOTAL 01.01.97 

11.930 

1 t ._293.867 

354.476 

872 

947 

.,._.  .-

12  OJ No L 316.  5.12.96, p.  L~. 

It is  clear from  this  table that the  reduction  in  capacity  has  been  accompanied by  an· increase 
in  the  average capacity of the fleet,  and  hence  an  improvement in  productivity,  especially  as 
far· as  tanker capacity is  concerned. 

If account  is  taken  of the  added-value  coefficients,  the  reduction  in  capacity  achieved  as  a 
result  of the  Community  scrapping  measures  between  1.1.1990  and  31.12.1996,  in  tonnage 
equivalent, is  as  follows: 

Table 3: 

reduction  in  capacity  achieved  between  1.1.90  and  31.12.96  (in  tonnes 
equivalent): 

Active fleet 91 

Scrapping 

% 

(a) 

(b) 

(b:a) 

(b:c) 

Active fleet as 
at 31.12.1996* 
(c) 

7.819. 964  t.eq 

1.116. 746 t.eq  14,3 

15,2 

7.338.125  t.eq 

dry cargo 
earners 

tanker vessels 

1.710.625  t.eq 

372.284 t.eq  21,8 

23, 1 

1.611.059 t.eq 

pusher craft 

330.171  kW 

72.404 kW  22 

20,4 

354.476 kW 

* 

including the Austrian fleet and new construction,  but not the Swiss fleet. 

Nevertheless,  it must be pointed  out that,  in  these  tables,  the  various  types  of vessel  are  not 
classified  according  to  their  notional  productivity.  Indeed,  the  new  capacity  placed  on  the 
market  during  this  period  (more  than  530 000  tonnes  dry  capacity  and  more  than  200 000 
tonnes  tanker  capacity)  have  a  notional  capacity  clearly  exceeding  the  older  capacity,  by 
virtue of their modern equipment and fittings.  It is  therefore clear that the impact of the new 
tonnage on supply  is  not the  same  as  that of the old  tonnage  equivalent  in  scrapped  volume, 
and the results obtained to date therefore need to  be placed in a relative context. 

Mention  should  also  be  made  of  the  measures  taken  by  the  French  Government  under 
Article 2(3)  of Council  Regulation  No  1101/89,  whereby  Member  States  may  exclude  their 
vessels  with  a  dead  weight of less  than  450  tonnes  from  the  scope  of the  Regulation  if the 
In  such  cases,  an 
economic  and  social  situation  ir1  the  sector  of those  vessels  so  requires. 
alternative  plan  must be drawn up  by  the Member  State concerned.  France  has  iny_o_ked  this 
option and has  communicated to  the Commission a national  improvement plan  in compliance 
with  the  state  aid  procedures  stipulated  under  Articles  92  to  94  of the  Treaty.  The  French 
"economic and social plan"  is  designed  to  exclude from  the  market a considerable propo11ion 
of the small vessel fleet.  It provides for scrapping premiums  and  social  support measures  for 
owners  who  leave  the  inland  waterway  market.  Provisions  have  also  been  incorporated  to 
prevent  distortion  of  competition  vis-a-vis  owners  covered  by  the  Community  scrapping 
scheme.  This  means  that the  owners  of vessels  covered by the French "economic and  social 
plan"  will  also  be  required  to  pay  annual  contributions  at  a  rate  comparable  to  the  rates 
applied under the Community scheme. 

As  at 3·1. 12.1996,  the French  economic and  social  plan still  covers  1 773  vessels  with  a  dead 
weight of 804 685  tonnes.  Among  these  vessels,  I  604  have  a  dead  weight of less  than  450 

tonnes (exclusively dry capacity) and a total dead weight of 563  926 tonnes.  Since the raunch 
of the  economic  and  social  plan,  949  scrapping  applications  covering  a  tonnage  of 398  890 
tonnes have been accepted. 

4. 

a) 

Financing of the scrapping measures 

The total expenditure under the Funds for the payment of the scrapping premiums in the 
context of the joint action under the  1990  scrapping scheme  (including  the fleet of the 
former  GDR)  amounted  to  104 401  576  ECU,  consisting  of 66 041  893  ECU  for  dry 
cargo vessels and pusher craft and 38 359 683  ECU for tanker vessels. 

These amounts have been made available to the Scrapping Funds by the governments of 
the  Member  States  directly  concerned  in  the  form  of interest-free  loans.  The  inland 
waterway  operators  are  in  the  process  of  repaying  these  amounts  through  annual 
contributions  calculated  according 
The  special 
contributions  paid  by  inland  waterway  operators  who  bring  new  vessels  into  service 
without scrapping a  correspmiding tonnage  in  terms  of old vessels  ( cf.  "Old for  New" 
rule  described  in  point 6)  have  provided  a  second  source  of revenue  for  repayment 
purposes. 

tonnage  and  vessel 

type. 

to 

The  breakdown  of  the  total  receipts  earmarked  for  the  repayment  of  the  amounts 
prefinanced by the five Funds since the start of the  1990  Community scrapping scheme 
is  as  follows: 

Table 4: 

Receipts (ECU) 
1990 
1991 
1992 
1993 
1994 
1995 
1996 
Total 
* 

Dry capacity 

Tanker capacity 

9.620.185 
9.694.580 
9.825.993 
8.469.878* 
7.895.989 
8.155.972 
8.086.813 
61.749.410 

5.801.845 
7.908.491 
15.570.928 
5.074.711 
4.669.349 
balanced account 
-
39.025.324** 

Since  1.1.1993  special  contribution  receipts  have  been  eannarked  for  new  applications  for  scrapping 
applications pursuant to  Regulation No  3690/92. 
The amount received in ECU is  slightly higher than the prefinanced amount  (38  359 683  ECU)  so  as  to 
pennit repayment in full  in t11e  national currencies. 

** 

These figures  show that,  in  the  dry  capacity  sector,  93 .5%  of the  total  expenditure  has 
already been repaid.  In the tanker navigation sector the amounts  had been repaid  in full 
as  at  31.12.94.  As  far  as  the  dry  capacity  is  concerned,  repayment should  be complete 
before  the  end  of  1997.  Bearing  in  mind  that  Article 6( 4)  of  Council  Regulation 
No  1101/89  stipulates  that  the  repayment  period  ( calculatec  from  1990)  shall  not 
exceed  10  years,  compliance with the timetable laid down may be taken for granted. 

b) 

In  1994,  in  a  bid  to  cope  with  the  growing  number  of vessels  for  which  a  scrapping 
application had been made in  view of the  difficult economic situation  facing  the  sector, 
the  Member  States  concerned  made  available  to  their  Scrapping  Funds,  under  their 
national budgets,  the financial  resources  necessary for  granting  a  scrapping premium  to 
the owners of vessels  who  had  submitted  applications  before  1 July  1994  (Commission 
Regulation (EC) No 3039/94 of 14 December 1994). 

In  1995  the Council  also  acted by creating a  legal  basis  for  Community cofinancing,  up 
to  an  amount  of  5 !\1ECU  within  the  Community  budget,  for  vessels  scrapped 
exclusively in  1995  (Regulation (EC) No 2819/95). 

c)  With  a  view  to  supporting  the  Community  programme  for  the  liberalisation  of  the 
inland waterway market by  1 January 2000,  with  the  abolition  of the "first-in first-out" 
systems  and  their  compulsory  fixed  tariffs,  the  Council  called  for  wide-ranging 
structural  improvement  measures  over  three  years  (1996,  1997  and  1998)  in  order  to 
provide lasting guarantees  of the  sector's  competitiveness  and  to  achieve  a  reduction  of 
about  15%  in  the  capacity  of  the  fleet  with  a  total  budget  of  192 ivfECU.  The 
Community budget  is  contributing up  to  20 !\1ECU  exclusively  for  1996  on  top  of the 
contributions  by  the  Member  States  concerned,  calculated  in  proportion  to  the  size  of 
their active  fleets  and  the  extent of their  industries'  involvement  in  the  form  of annual 
contributions paid in  respect of each vessel making up  the active fleet. 

Table 5: 

cumulative financial  involvement,  in  ECU,  of industry,  the Community 
and  the  Member  States  in  the  1990-1996  scrapping  scheme  ( dry 
capacity and tanker capacity) 

1990 

1993 

1994 

1995 

1996 

TOTAL 

Industry 

66.041.893 

188.193 

422.066 

1.213.943 

72.778 

67.938.873 

38.359.683 

2.770.289 

1.296.385 

3.516.302 

7.050.061 

52.992.720 

EC 

Member 
States 

3.650.000 

13.592.000 

17.242.000 

1.3 50.000 

6.408.000 

7. 758.000 

16.636.377 

3.076.978 

27.863.600 

44.499.977 

13.136.400 

16.213.378 

Total 

66.041.893 

188.193 

17.058.443 

4.863.943 

41.528.378  129.680.850 

38.359.683 

2J70.289 

4.373.363 

4.866.302 

26.594.461- - 76.964.098 

TOTAL 

104.401.576 

2.958.482 

21.431.806 

9.730.245 

68.122.839  206.644.948 

5. 

Economic impact of the scrapping scheme 

Accordingly,  during  the  period  from  1 January  1990  to  31  December  1996,  some  l  940  860 
tonnes  of capacity  and  72 404  kW  in  terms  of pusher  vessels  were  scrapped.  On  the  other 
hand,  736 620  tonnes  of  new  capacity  were  brought  into  service  on  the  inland  waterway 
transport market (as  at 31.12. 96),  thereby reducing the total  loading capacity of the fleet from 
12  4 76  694  tonnes  as  at  0 1.01.1990  to  I I 483  072  tonnes  as  at  31.12.1996,  i.e.,  an  overall 

R ' I  

decrease  of 9,2% 13
inland watenvay fleet  has  remained essentially constant (about 420 million tonnes a year). 

.  Over  the  same  period,  the  total  volume  of goods  transported  by  the 

The  clear  point  at  issue,  therefore,  is  how  to  improve  productivity,  while  at  the  same  time 
ensuring  that  transport  demand  can  continue  to  be  met  with  an  ever  decreasing  number  of 
vessels.  Vessels  are  now  bigger,  better  equipped  and  better  adapted  to  the  requirements  of 
transport demand (upright holds,  faster turnaround,  round-the-clock navigation,  etc.).  Taking 
all  types  together,  the  average Community vessel  (see  Table 2)  has  gone up  from  872  tonnes 
to  947  tonnes,  i.e.,  an  increase  of 9%,  although  allowance  has  to  be  made  for  the  effects  of 
the  incorporation  into  the German fleet of several  hundreds of units  of small dimensions  (less 
than  400 tonnes)  belonging to  former East  Germany.  This  increase  is  not uniform,  however. 
Indeed,  it  is  in  tanker  capacity,  which  now  has  an  average  tonnage  of  1 330  tonnes  - as 
compared  with  75%  of the  fleet,  which  has  an  average  tonnage  of about  1 652  tonnes  - that 
the sharpest increase is  found. 

Furthermore,  new specialised vessels  have proved  necessary  as  a  means  of coping effectively 
with  new  channels  of trade  such  as  containers  or  chemical  products,  and  new  vessels  have 
been constructed accordingly.  However, there has been no  structural growth in  the traditional 
bulk  cargo  sector  ( coal,  steel,  agricultural  products,  sand,  gravel,  petroleum  products). 
Neve1iheless,  it  follows  that  this  constant  improvement  in  productivity  on  a  sluggish  market 
must be offset by the scrapping of old vessels  and  that the steps  already taken to  liberalise the 
market will speed up this  process still further. 

The Community scrapping scheme has  had  a major socio-economic impact to  the extent that a 
considerable  number  of owner  operators  have  been  able  to  leave  the  industry  on  acceptable 
financial  terms.  In  addition,  those continuing  in  operation  have  found  themselves  in  a  better 
financial  situation  either  by  virtue of being  able  to  replace  their  vessels  with  the  help  of a 
scrapping  grant  or  thanks  to  the  increase  in  freight  prices  observed  over  several  years  m  a 
particularly depressed market. 

Under  the  Commission's  market  observation  system,  freight  cost  and  price  trends  affecting 
the various segments  of the inland waterway market are monitored every three months  (in the 
form  of  a  quarterly  study  produced  by  NEA  Transport  Research  and  Training:  "Market 
observation  system  inland  navigation  - cost,  price  and  waiting  time")  for  the  competent 
Commission  departments.  These  studies  devote  particular  attention  to  the  Rhine  market 
,vhich  is  the  most important of these  market  segments  in  that  it  covers  more than  half of all 
inland waterway transport in the Community.  However,  experience has  shown that there is  a 
marked  interaction between the various  submarkets  in  the  sense that,  whenever there  is  a  fall 
in  demand  on  a  specific  sub market  entailing  a  downturn  in  prices,  a  number  of- carriers 
operating  in  this  market  fall  back  on  other  submarkets  offering  a  higher  return.  These 
markets  act like  communicating vessels,  as  it were,  with  a tendency  to  cancel  out  differences 
in  economic performance. 

In  order  to  form  a  true  picture  of  the  irn pact  of  the  scrapping  measures,  it  is  therefore 
necessary to  examine cost and  price trends over the last few  years  ( 1989  to  1996) both on  the 
Rhine  free  market  and  in  the  context  of No1ih-South  services  (free  or  subject  to  rotation 

13  To  the  736  620  tonnes of new  cap;:icity  must be added the vessels of  the former GDR and Austria. 

arrangements)  in  respect of dry and  liquid cargoes,  with  1989 as  the reference year (cf.  Tables 
6 and  7). 

Table 6  :  Cost index trends (in  ECU,  1-1-1989 = 100). 

Date 

Rhine upstream 

liquid  dry 

Rhine downstream  North-South free 
liquid  dry 
liquid 

dry 

100 
102 
110 
105 
115 
111 
113 
115 
119 
122 
124 
128 
129 
131 
133 
137 

01.01.89 
01.07.89 
01.01. 90 
01.07.90 
01.01.91 
01.07.91 
01.01. 92 
01.07.92 
01.01. 93 
01.07. 93 
01.01.94 
01.07.94 
01.01.95 
01.01. 96 
01.07.96 
01.01.97 

dry 

100 
114 
108 
119 
142 
127 
151 
113 
111 
109 
106 
103 
129 
13 1 
132 
138 

01.01.89 
01.07.89 
01.01 .90 
01.07.90 
01.01.91 
01.07.91 
01.01. 92 
01.07.92 
01.01.93 
01.07.93 
01.01. 94 
01.07.94 
01.01.95 
01.01.96 
01.07.96 
01.01.97 

100 
102 
110 
106 
114 
112 
114 
115 
119 
121 
123 
123 
126 
130 
128 
130 

100 
101 
109 
106 
115 
112 
114 
116 
120 
123 
125 
129 
130 
132 
133 
135 

100 
102 
109 
106 
113 
112 
114 
115 
119 
121 
123 
124 
126 
127 
128 
128 

100 
102 
110 
107 
113 
111 
113 
115 
119 
122 
124 
125 
127 
127 
126 
126 

100 
102 
108 
107 
112 
112 
114 
114 
119 
121 
123 
123 
125 
125 
126 
126 

1.00 
172 
283 
210 
241 
341 
312 
170 
155 
105 
124 
126 
139 
160 
181 
110 

100 
105 
89 
102 
108 
103 
130 
102 
108 
91 
93 
91 
110 
116 
122 
124 

100  100 
147  101 
16'1  105 
198  104 
202  109 
262  108 
263  111 
148  110 
153  118 
87  117 
89  109 
89  114 
98  118 
100  116 
113 
101 
95  120 

100 
110 
125 
137 
189 
182 
206 
127 
125 
114 
155 
122 
141 
144 
146 
]59 

North-South 
"by rotation" 
dry 
100 
101 
108 
107 
114 
1 11 
115 
116 
121 
125 
128 
129 
130 
130 
131 
132 

North-South 
"by rotation" 
dry 
100 
101 
105 
105 
106 
107 
110 
110 
119 
124 
125 
126 
129 
13 l 
132 
130 

Table 7:  Price index trends (in  ECU,  1-1-1989 = 100). 

Date 

Rhine upstream 

Rhine downstream  North-South free 
liquid 
liquid  dry 

liquid  dry 

Analysis of the dry cargo transport sector: 

As  can be  seen from  Tables 6 and  7,  the  overall  increase  in prices has  exceeded that of costs 
(at  least in most of the  major  submarkets  such  as  the  Rhine,  which  has  been  weighted  along 
with the other submarkets) over the  following  years:  1989,  1990,  1991  (especially  as  a result 
of the  upstream  Rhine  traffic)  and  for  half of 1992.  Subsequently,  the  economic  climate 
deteriorated abruptly  in the  second half of 1992  in  all  sectors  of the  European economy,  and 
especially  in  1993  and  1994  (with  building  construction,  coal,  steel  and  even  the  chemical 
industry experiencing severe output falls).  The price indices for dry cargo then reached levels 
close  to  those  of 1989,  except  in the  case  of the  market  governed  by  the  rotation  and  fixed 
price system, whereas costs themselves remained between 20% and  30% higher than those  of 
1989.  Nevertheless,  it  seems  clear  that,  but  for  the  Community  scrapping  measures,  the 
financial  situation  of the  inland  waterway  operators  would  inevitably  have  deteriorated  even 
further.  It  was  not  until  1995  that  the  trend  began  to  be  reversed  and  the  balance  restored, 
albeit still without any real prospect of improvin~ the level of receipts.  On the other hand, the 
situation  prevailing  in  the  second  half of 1996,  coupled  with  the  economic  prospects  for  the 
countries  of the  European  Union  predicted  for  1997-98,  points  to  an  improvement  in  the 
position  which  should  be  further  strengthened  by  the  new  and  wide-ranging  scrapping 
measures planned for these years. 

Analysis of the liquid cargo transport sector: 

Table  7 shows that tanker transport prices on the  Rhine,  as  on the other submarkets,  began to 
rise during  1989, reaching a record level in the first half of 1991, with prices clearly exceeding 
costs by the end of the first half of 1993.  This recovery came about through a combination of 
factors,  such  as  the  Gulf crisis  (with a  sharp  increase  in  the  prices  of petroleum products),  a 
long  period  of low-water  levels  on  the  Rhine  (first  half of 1990  and  summer  1991)  and  a 
significant  reduction  in  the  capacity  of the  fleet,  whereas  demand  remained  essentially  the 
same  (in  the  region  of 70  million  tonnes).  These  circumstances  enabled  the  tanker  vessel 
operators  to  rectify  their  financial  situation  and  even,  in  the  case  of some  of them,  to  order 
new vessels, not\vithstanding the "Old for New" rule,  since the prospects in the chemicals and 
dangerous materials inland waterway transport sector seemed particularly favourable. 

However, with the economic crisis of 1993-1994, prices fell  sharply to  such an extent that the 
cost-price  ratio  in  July  1993  had  fallen  below  that  of 1989,  coupled  with  the  fact  that  this 
crisis had been accentuated by the commissioning of new vessels ordered in the previous year 
at  a  time  when  market  prices  were  improving.  The  Commission,  in  consultation  with  the 
industry  and  the  Member  States  concerned,  thereupon  raised  the  "Old  for  New"  ratio 
(Regulation  (EC)  No  2814/94  of 18  November  1994)  to  counterbalance  this  overtnvestment 
tendency  and  to  inject  more  money  into  the  quarterly  scrapping  mechanism  so  as  to  ensure 
that the scrapping arrangements offered maximum compensation (see point 6 below). 

As  with the  dry  cargoes,  the  trend  began to  be  reversed  from  the  beginning  of 1995,  and  the 
situation  should  continue  to  improve  in  the  light of predicted  improvements  in  the  economic 
outlook, coupled also  with the new scrapping measures planned for  1996,  1997 and  1998. 

However,  while the cost and  price  indices  constitute a good  indicator of the  market -sitaation 
of the transport undertakings operating the largest vessels,  nevertheless the number of waiting 
days  between  two  transport operations,  as  recorded  by  the freight exchanges,  may  also  serve 
as  a useful  indicator, especially as  far  as  the smallest vessels  are concerned  (the vast majority 
of rotation charter operations  involve vessels of less  than 650 tonnes).  Charts  I  and  2 below 
show  variations  in  the  number  of  waiting  days  in  the  North-South  market  for  transport 
services between the Netherlands and Belgium and also between the Netherlands and France. 

Chart 1 :  Waiting days (rotation system) from  the Netherlands to  Belgium 

zc-------------------,-

20 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . 

. . ............................................... . 

o -L - - - - - - - - - - - - - - - - - 0  
11ac11ac11ac11ac11ac1aac11a,11s,11ac 
, ... I  ttoo  I  tNt  I  1tt.z  I  tta I  , ... I  ,._ I  18"  I  1"7 

Chart 2 :  Waiting days (rotation system) from the Netherlands to France 

21 . - - - - - - - - - - - - - - - : - - - - ,  

10 

.  .  .  .  .  .  .  .  .  .  .  .  .  .  . 

.  .  .  .  . 

.  . . . . . . . . . . . . . . . . . . . . . . . . . • .  

. . .  . . . .  .  .  . . . . . . . . , .......................... - .... . 

12141214111411141114111412~412141114 
1N11  I  1no  I  1"1  I  1n2  I  1ns  I  1n-c  I  1 ... I  1no  I  1997 

The long waiting periods ( 10 to  25  days) recorded by the exchanges provide a clear indication 
of  the  existence  of  substantial  overcapacity  in  the  North-South  market  governed  by  the 
rotation  systems  which,  once they  have  been  abolished  by  1 January 2000,  will  leave on the 
market a  large  number of vessels  incapable of keeping  pace  in  the  context of a  free  market. 
In overall terms,  the scrapping measures  have therefore ·made  it possible to offset the gradual 
reduction  in  loading  demand  in  the  exchanges  (which  now  represent  barely  8%  of the  total 
inland waterway market). 

6. 

The "Old for  New"  rule 

The "Old for New"  rule was  devised  to  counteract the tendency to  overinvest and  to  provide 
protection  against  the  effects  of the  reduction  in  overcapacity.  These  arrangements  were 
introduced  in  1989  for  a  period  of five  years  from  the  date  of entry  into  force  of Council 
Regulation  No  1101/89  with  the  possibility  of  an  extension  for  an  additional  period  not 
exceeding five years.  The Commission report of 16 November 1993  (COM (93)  553  final)  to 
the  Council  and  the  European  Parliament  demonstrated  that  the  "O1.d  for  New"  mechanism 
was  effectively  contributing  to  the  reduction  in  overcapacity,  while  at  the  same  time 
pinpointing the  difficulties  being experienced  by  the  inland  waterway  transport undertakings 
already  severely  affected  by  the  general  economic  recession  which  occurred  in  1992,  1993 
and  1994.  This  recession  was  further  aggravated  as  a result of the  abolition  by  the  German 
Government of the  compulsory tariff regulations  with  effect from  0 1.01.1994 over the entire 
inland  waterway and  roa.d  transport sector.  This  explains why  it was  necessary  to  extend the 
"Old  for  New"  rule  for  a further  period up  to  28  April  1999  (Council  Regulation  No  844/94 
of 12  April  1994). 

It  should  also  be  pointed  out that the "Old for  New"  rule  has  never sought to  put a  brake on 
all  investment  in  the  new  capacity  sector.  Indeed,  far  from  freezing  tonnages,  the  "Old for 
New"  rule  has  not  hampered  the  necessary  modernisation  of the  fleet.  Even  though,  on 
aggregate,  the  market  is  stagnant,  certain  submarkets,  such  as  the  container  or  chemicals 
In 
transport  sector,  nevertheless  require  modernisation  in  order  to  ensure  their  expansion. 
practice,  it  has  been  noted  that  an  adequate  number  of new  vessels  of this  type  have  been 
commissioned  over  the  last  few  years  (see  Table 8).  This  is  why  the  restrictions  on 
investment have been relatively weak,  all the more so  as  the opening-up of the CEEC markets 
allowed new vessels to  be constructed at low cost,  which in  turn made it necessary to  raise the 
"Old for New"  ratio (Commission Regulation (EC) 2812/94 of 18  November  1994 14  ). 

On  the  basis  of the  data  provided  by  the  six  Scrapping  Funds,  Table  8  (see  below)  gives  an 
overview of all  operations subjected to  the "Old for New" rnle.  For the  purposes of analysing 
these figures,  a distinction must once again be drawn between the  dry  cargo  vessel sector and 
the tanker vessel  sector: 

"Old for New"  rule:  Special contributions and compensation tonnage destined for scrapping 
"Alt for Neu"-Regel  : Spezialbcitrage und zum  Abwrack augebotener Schiffsraum 
(Period : 28.04.1989 - 31.12.1996) 
(Zeitraum : 28.04.1989 - 3 l.12.1996) 

Tahlc 8 

Type of 
vessel 

r 

New construction, etc. 
Neubauten,  usw. 

Number 
Anzahl 

Tonnage 

Extensions 
V erHingeru11gen 

Number 
Anzahl 

To1rnage 

Special contributions (ECUS) 
Spezialbcitrage (ECUS) 
Total 
already 
contributions 
received by 
the 
due -Total 
der Spezial-
Fund - davon 
bcitrage 
schon ein-
kassiert 

Compensation tonnage 
Kompensationstonnage 
Total 
already 
scrapped-
davon schon 
abgewrackt 

Dn  c;1pacitv 

- self propelled 
- barges 
• lighters 

Total 
T;mkcr ca12acitv 

- self propelled 
- barges 
- lighters 

Total 
Pusher vessels* 

*/ kw 

83 
113 
23 

219 

83 
9 
0 

92 
7 

182.569 
306.491 
10.143 

499.203 

174.759  I 
18.857 
0 

193.616 
10.813 

165 
5 
I 

171 

41 
2 
0 

43 
16 

33.285 
420 , 
109 

2.575.741 
3.535.179 
104.754 

1.841.221 
3.343.719 
104.754 

220.156 
236,245 
477 

220.156 
236.245 
477 

33.814 

6.215.674 

5.289.694 

456.878 

456,878 

9.200 
787 
0 

9.987 
2.779 

23.242.474 
l.108.518 
0 

... 

21.910.383 
l.108.518 
0 

24.350.992 
453.633 

23.018.901 
294.993 

82.817 
25.613 
0 

108.430 
13.649 

82.817 
25,613 
0 

108.430 
13.649 

-

in  the dry  cargo vessel sector,  533  017 tonnes  in new capacity or extensions were -added  to 
the fleet.  This represents an  average annual  rate of expansion of some 60 000 tonnes,  i.e., 
0.6% per year of the total capacity of the fleet (10 million tonnes).  This figure is  relatively 
low  if one compares  it with the  year  1988  alone,  when 210  117  tonnes  were  added  to  the 
Community fleet.  Furthermore, the new capacity coming into  service was offset to  a large 
In  the  case  of the 
extent  (85%)  by  the  scrapping  of 456 878  tonnes  of old  capacity. 
. uncompensated new tonnage,  special  contributions were paid  into the Funds  amounting to 
a  total  of 5  911  734  ECUS.  This  amount  helped  to  finance  the  partial  repayment of the 
interest-free  loans  up  to  O 1.01.1993.  Since  that  date,  all  the  special  contributions  have 
been  earmarked  for  scrapping  under  the  Funds  (Regulation  No  3690/92),  resulting  since 
1996  in  the  offsetting  of more  than  100%  of new  construction  through  scrapping.  The 
"Old for New"  rule is  operating effectively  and  has  become even  more  effective since the 
raising of the ratio (from  1: 1 to  1: 1.5) under Commission Regulation (EC) No 2812/94. 

Chart 3: 

New construction  (and  extensions)  in  tonnes; 
Compensation tonnage  -dry  cargo-

■ Series 1  Compensation tonnage 

m Series2  New construction 

1994 

120000 
100000 
80000 
60000 
40000 
20000 
0 

2 

3 

4 

5 

6 

S2 

-

in the tanker vessel sector,  203  603  tonnes in new construction or extensions were added to 
the fleet.  This  corresponds to  an  annual  expansion rate of about 24  000  tonnes, Te.,  1.2% 
per  year  compared  with  the  overall  size  of the  tanker  vessel  fleet.  This  approach  was 
dictated  by  the  situation  of the  market  in  1991  and  during  the  first  six  months  of  1992. 
When,  in  1991,  prices for transporting liquids were continuously on the increase,  a number 
of tanker  vessel  operators  decided  to  have  new  vessels  constructed.  The  increases  in  the 
prices  of second-hand  tanker  vessels  and  the  low  construction  prices  quoted  by  the  East 
European  shipyards  have  helped  to  promote  investment.  Because  of  the  high  prices 
fetched  by  second-hand  vessels  at  that  point  in  time,  it  was  more  profitable  to  pay  the 
special  contribution than to  scrap,  and  this  explains why the rate of compensation was  low 
during this  period. 

As  soon  as  the  Commission  obtained  the  figures  relating  to  the  trends  described  above,  it 
decided,  in  consultation  with  the  Member  States  concerned,  the  Scrapping  Funds  and  the 
industry,  that  the  "Old  for  New"  mechanism  could  be  improved  by  earmarking,  for  the 
granting  of scrapping  premiums,  the  special  contributions  paid  into  the  Funds.  Thus,  the 
special  contribution  should  no  longer be used  solely  for  the  early  repayment of the  interest 
free loans but should extract an equivalenttonnage from the market.  This new procedure was 
introduced  under  Commission  Regulation  (EEC)  No 3690/92  and  entered  into  force  on 
1.1.1993.  From  that  date  onwards,  the  vessel  owners  were  once  again  able  to  submit 
applications  for  scrapping  premiums  as  a  result  of the  availability  of financial  resources, 
consisting  both  of  the  special  contributions  and  the  tanker  capacity  dues  following  the 
repayment,  at  the  end  of 1994,  of the  amounts  prefinanced  in  1990  by  the  Member  States 
concerned. 

Any validly submitted scrapping applications that could not be accepted by the Funds because 
of lack of financial  resources were entered on a waiting list.  In this  sector,  too,  the raising of 
the  "Old  for  New"  ratio  ensured  that  a  maximum  level  of  compensation  (+I 00%)  was 
obtained since  1994. 

Chart 4: 

New construction (and extensions)  in tonnes; 
Compensation tonnage -tanker cargo-

I II Series 1  1  ompensation' tonnage 
I OJ  Series2 

L._ __  ___, 

1992 

70000 
60000 
50000 
40000 
30000 
20000 
10000 
0 

2 

3 

4 

5 

6 

S2 

Table 9: 

Overview  of the  operation  of the  "Old  for  New"  regulation  since  the 
beginning of 1993: 

Years  1993  to 
1996 
(cumulative) 

New 
construction 
and extensions 

Compensation 
tonnage 

Scrapping by the 
Funds 3690/92 

%of 
compensation 
in  1996. 

Dry capacity 

Tanker capacity 

Pusher vessels· 

(tonnage) 

(scrapped by 
the investor) 

333.616 

112.902 

8.173 

301.472 

70.232 

8.185 

45.529* 

81.514* 

8.259* 

+100% 

+100% 

+100% 

* 

These  figures  do  not take  into  account the  1996  scrapping  scheme  under  Commission  Regulation  No 
2326/96 of 4 December 1996. 

Conclusions : 

On the basis of the "Old for New"  arrangements,  extended until 28  April  1999 under Council 
Regulation  (EC)  No 844/94  of  12  April  1994  in  the  context  of the  structural  improvement 
measures for the inland waterway sector, the following conclusions may be drawn: 

The  scheme  provides  the  best  way  of regulating  the  market  thanks  to  the  automatic 
offsetting  of new  capacity  by  scrapped  capacity,  while  in  no  way  inhibiting  essential 
investment, notably in the carrier sectors. 
This  scheme  is  supported  by  the  entire  industry,  which  currently wants  to  extend  it  on 
the  grounds  that  it  is  seen  as  a  form  of security  in  terms  of the  future  of the  inland 
navigation market and,  in  particular,  provides  a guarantee against losing the benefits  of 
the  improvement  measures  in  which  the  industry  will  have  invested  more  than 
150 million ECU ( cumulative total  up  to  1999).  At the same time,  the sudden abolition 
of the "Old for New" rule could have the effect of simultaneously triggering a sharp fall 
in  the  value  of the  equipment,  with  grave  economic  and  social  consequences  for  the 
undertakings  concerned,  and  sparking off a  new wave  of construction  that would  soon 
wipe out the beneficial effects of the improvement measures. 
This  mechanism  does  not  require  any  financial  intervention  either  on  the  part  of the 
Member States  concerned or of the European Community,  since it  is  financed  solely by 
the  industry  itself on  the  basis  of special  contributions.  Consequently,  the  industry  is 
responsible in its own right for regulating the market. 
With  a view to  the total  liberalisation of the inland waterway market by  1 January 2000 
and  to  the  extent that the current economic climate permits,  it  could  prove necessary,  if 
this  is  the unanimous desire of the industry,  to  restore the "Old for New"  ratio  to  1: 1,  so 
as  to  remove  all  constraints  from  the  free  market,  without  thereby  jeopardising  the 
results of the improvement measures,  and  in  this way mobilise market forces  in  order to 
increase the  efficiency  and  profitability  of the  inland  waterway  sector.  In  the  years  to 
come,  this  regulatory  mechanism,  if it  is  maintained  beyond  1999,  should  be regarded 
as  a monitoring mechanism  and should offer the enhanced flexibility  needed to  respond 
more  rapidly  to  market  developments  and  to  economic cycles,  which  nowadays  appear 
increasingly ephemeral. 

Accordingly,  the  Commission  intends  to  examine,  on  the  basis  of arguments- set  out  by  the 
industry,  the  socio-economic  groupings  and  the  Member  States  concerned,  the  following 
proposals: 

a  proposal  for  a  Commission  Regulation  reducing the  ratio  in  1998  (whereby  the  new 
ratio will be fixed  in the light of the findings  of the market analysis  conducted  after the 
scrapping measures of 1997); 

a proposal for a Council Regulation seeking to  maintain a regulatory mechanism  of the 
"Old for New" type after 28  April  1999. 

In  addition,  the  Commission  is  currently  engaged  in  a  study,  along  with  all  the  players 
involved in the  inland waterway transport sector,  on "the future of inland waterway transport 
after  I  January 2000".  A report on this subject could be presented in the course of 1999. 

The  Council  and  Parliament are  asked  to  take  cognisance  of the  present  report  and  to 
make known their views on  the Commission's approach, as  set out in  the conclusions. 

ISSN 0254-1475 

COM(97) 555  final 

DOCUMENTS 

EN 

07  17  08 

Catalogue  number  CB-C0-97-572-EN-C 

ISBN  92-78-26318-4 

Office for Official Publications of the European Communities 

L-2985  Luxembourg