LNG Vessels & Mergers
The European Commission has blocked the proposed merger between Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries on the premise that a monopoly would be established in the construction of large Liquefied Natural Gas (LNG) vessels which are an integral component of the LNG supply chain and ensure energy security. Moreover LNG contributes to the diversification of Europe’s source of energy strengthening and energy security. As no remedies were submitted the proposed merger would have led to fewer suppliers and higher prices for large vessels transporting LNG.
Large LNG carriers are highly sophisticated vessels carrying large quantities of cryogenic LNG , at a temperature of -1 62° C. Over the past five years the global market for the construction of large LNG carriers represented up to Euros 40 billion with European customers accounting for almost 50% of all orders.
Smart Shipbuilding in EU
A new EU funded Smart European Shipbuilding project (SEUS) has been launched recently sponsored by a consortium of industrial companies and academic institutions and aims to establish a framework for data – driven shipbuilding by developing an integrated digital platform that incorporates ship design systems, data management and collaboration software.Such a digital platform is likely to reduce the time needed for ship engineering by 30 % , cut assembly times by up to 20 %, incorporate the latest practices in human – centric knowledge management combined with data-driven AI design elements to create an ‘Industry 5.0’ concept for shipbuilding. Another outcome of this four year project is to spur the growth of a European workforce that is highly skilled in the deployment and use of advanced computational tools in shipbuilding particularly with respect to the integration of new digital technologies. The SEUS consortium includes eight organisations from five countries.
Shipbuilding Generates Employment
The EU shipbuilding industry is dynamic and competitive both commercially and socially comprising of approximately 300 shipyards where civilian and naval ships as well as platforms and other hardware for maritime applications are crafted. Shipbuilding remains a major and critical business in many EU countries and is vital to regional industrial infrastructure and national security. In the year 2021 around 2.7 % of global ships were built in the EU an increase of 2.3 % over 2020. Allied sectors such as transportation, security, energy, research and the environment are also involved in shipbuilding. In 2020 around 305,500 persons were directly employed in the sector and 85 % of jobs were attributable to the ship building industry whilst the remaining were linked to related activities such as equipment and machinery. Total wages and salaries amounted to EUR 12.1 billion, in line with the previous year, and the annual average wage was estimated at EUR 39,000, down 3% on year-to-year.
Factors which Impact on Shipbuilding
The COVID-19 pandemic followed by Russia’s unprovoked invasion of Ukraine distorted the economics of the shipbuilding and repair sector. The industry is shifting towards eco friendly or green vessels to mitigate climate change in line with the European Commission (EC) directives and the trend towards digitalisation is heralding the advent of unmanned and autonomous vessels. Decarbonisation and digitalisation may permanently change maritime business models and industries.
Allied Shipbuilding Activities
The shipbuilding and repair sector includes various sub-sectors and activities including building of floating structures, pleasure and sporting boats, repair and maintenance of ships and boats , equipment and machinery, manufacture of cordage, rope, twine and netting, manufacture of textiles other than apparel, manufacture of sport goods, manufacture of engines and turbines and manufacture of instruments for measuring, testing and navigation.
Global Shipbuilding Scenario
While the EU is the top producer of cruise ships in the world and one of the leading players in high-tech and complex vessel types the EU industry received fewer shipbuilding orders than China, South Korea and Japan in the year 2021. The EU has diligently pursued the route of investments in research and innovation of diesel engines, turbines, propellers and blades followed by Korea, China and Japan . In the marine diesel engine production the EU’s revenues soared to Euros 11.7 billion of net exports between 2019 and 2020. However , the turnover reported for 2020 was Euros 55.7 billion displaying a 4% decrease over the previous year. The EU is encountering unfair competition from Asian shipbuilding nations namely China and South Korea and if this state of affairs persists in a decade the shipbuilding industry in Europe will be history. Lacking the capacity to construct ships including naval ships will threaten the security of supply chains for European industries and consumers by raising logistic and freight costs .Although the global demand for new ships has doubled orders placed in Europe have declined last year by 20 %. In the year 2021 85 % of global orders went to China and Korea. It is an open secret that China and South Korea subsidise their maritime industries massively . Japan maintains a relatively high domestic demand yet barely contributes 10 % to the global order intake today. Europe’s overall market share has dropped to less than 4 %. China’s dominance in shipbuilding and related industry is evident by the fact that it produces 96 % of all containers and 80 % of all ship-to-shore cranes. China’s enormous influence on global freight transport has become evident in the context of the current disruptions due to Covid induced port lockdowns.
Chinese Naval Ships Constructions Surpasses US
And if it was not enough that the European shipowners let down the European shipyards the EU governments have also cut back on naval construction. The association of German shipbuilders has calculated that German politics has collected a peace dividend of 450 billion euros in defence spending. Germany now has about 65 commissioned ships. The number of newly built naval ships has shrunk to one third of what it was in the eighties (numbering around 200). Presently German Navy sails with some fifty-year old ships and with an armada of 355 ships the Chinese Navy is bigger than that of the US.
Greening
Trends towards green shipping and green shipbuilding provide new market opportunities for the European shipbuilding and marine equipment sectors and these opportunities must be quickly availed by EU shipbuilders. Generally the maritime transport sector is being incentivised to improve its environmental performance as a result of both market driven and regulatory greening trends. This greening trend is spurred by global regulation on NOx and SO2 emissions of ships, increased energy efficiency of new ships, ballast water management and an increased demand for offshore renewable energy generation. The European shipbuilding and marine equipment sectors are in an enviable position and have a head start in high value and high complexity segments being well poised to contribute to the greening trends. The global greening market potential for the next decade is estimated to be around Euros 15 billion annually.
Authored by Nadir Mumtaz
Source/Credit ;
https://blue-economy-observatory.ec.europa.eu/eu-blue-economy-sectors/shipbuilding-and-repair_en
https://swzmaritime.nl/news/2022/07/08/theres-just-ten-years-to-go-for-shipbuilding-in-europe/
https://cedelft.eu/publications/green-growth-opportunities-in-the-eu-shipbuilding-sector/
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