“On merchant shipbuilding and offshore, yes, we have lost a lot, the entirety almost. But, in complex ship types, we are still an important player in the world,” underlines to GeoTrends Mr. Christophe Tytgat, Secretary General of the Shipyards’ & Marine Equipment Association of Europe (SEA). In an exclusive interview, Secretary Tytgat highlights the three major objectives of SEA’s manifesto to regain control of a large share of the shipbuilding market, while focusing on SEA’s 2035 strategy of building and retrofitting 10,000 vessels.
– In a SWZ report, it was indicated that the European large shipbuilding industry is declining. In 2022 the European shipbuilding share was less than 10% of the world production in mCGT, slightly more than in 2021.How does the impact of the Chinese shipyard competition reflect on the European shipbuilding industry? And what are the comparative advantages of the Chinese?
What is the big difference between China on the one hand and then Japan and South Korea on the other hand, is that in the case of China, it is much more than the economics. It is a matter of a political decision to be the biggest shipbuilder in the world and to increase its capacity (in recent SEA’s manifesto, it is highlighted that the price difference between Asian shipyards over European yards is 30-40%). So, in fact, the European shipbuilding industry for almost four decades, has been losing quite some market segments.
On the other hand, we are still quite important in what we call the complex ship types, the very sophisticated ship types. Cruise vessels are the most sophisticated ones there. We still have a quite competitive advantage that is based on knowledge and expertise that the others do not have yet.
Consequently, if I summarize it on merchant shipbuilding and offshore, yes, we have lost a lot, the entirety almost. But, in complex ship types, we are still an important player in the world.
– If the European Commission imposes tariffs or bans certain Chinese subsidies, can we regain control of the shipbuilding industry?
The first point is shall the European Commission do something? Until recently, the European Commission and some member states were actually not interested anymore in industry, including the shipbuilding industry. In the last couple of years with the pandemic and the war in Ukraine, you see that the pressure on the policy-makers in Europe is increasing to reindustrialize Europe. And we are benefiting from that in the sense that the important role that shipbuilding plays in Europe and for Europe is now again recognized.
The next question is what are the measures to be taken? We have suggested a number of measures. The big problem in shipbuilding globally is that the subsidies have actually polluted a bit the economics of the sector. So, in fact, instead of going for state aid we should rather reflect on what is a healthy situation for shipbuilding. So, the question will be what the European Commission can do and should do and well incentives will be important, whether that is state aid or something else for the foreseeable time.
– How can we regain the ability to shipbuilding of Europe and which policies/actions should we integrate into the future European maritime industrial strategy?
What we have now done is we have published a manifesto where we have three important targets to consolidate what we have. Firstly, maintain the global leadership position that we have in complex shipbuilding and also in maritime equipment manufacturing.
Secondly, regain certain markets, but not all of them. Regaining markets that are strategic for Europe like cabotage, short sea shipping, fishing, offshore wind vessels, and so on. And the third important part is to make sure that some of the emerging markets like in the “blue economy,” but also the offshore wind or other renewable energies and alternative fuel carriers gain the benefits from that change in the dependency from Asia.
The most difficult one of these three will be indeed how to regain some of the lost markets, because if you look at the situation, for instance, for cabotage, the fleets are relatively old. So that goes for many of the member states. Luckily, there is still a reflex among the shipowners that they need to renew their fleets because of the “green agenda” in the first place, and they would still prefer to do it in Europe if possible.
Furthermore, another issue is that is very difficult to get access to European public money because, in many of the instruments that exist, we are competing for money with other sectors. And the instruments are not always fit for the characteristics of the maritime industry. But it is also very difficult to get access to private money for the simple reason that the maritime business is seen as a risky business. Since the financial crisis of 2008 European banks have applied very strict rules that non-European banks do not have. Therefore, for instance, it is easier for European shipowners to get access to Chinese money than is to get money from a European bank.
Also, we need a legal framework. We need framework conditions that give us the certainty of the investments that we make. If you look at the “European Green Deal,” we know that the European Union wants to be the first in the world to be zero-emission for any economic sector, so also for the maritime industry. But there are still a lot of question marks.
If you look at alternative fuels, the question is which alternative fuels and at what cost will they be sufficiently available? All these questions have not yet been properly addressed by the European legislation. And I hear European shipowners, by the way, also those that are still ordering in Europe who are saying: “We would like to place orders, but we are refraining from it because we do not know whether the investment that we want to make will basically be the right investments because the rules of the game are not clear.”
– The European Union aims to strengthen the “blue economy” with policies in this direction. Emphasizing on the EU’s “green” views, what is your perspective on the transition to the zero-carbon fuels era and whether it is becoming attractive to new investors?
From the side of the maritime equipment manufacturers, we still are very much in support of the “green agenda.” From the side of the European shipowners, needed a bit more time to kind of accommodate the new agenda, but I think they are now also there. The question is how to do it.
There is a lot of potential in there. Basically, the fleets that we have today are either too old or not yet fit for the objectives of the future. Let’s not forget that the ship that is coming into service today will still be in operation in 25-30 years. Thus, all these ships will need to be replaced by new builds. And the more modern ones will need to be retrofitted. So, there is a big business opportunity there.
What we are asking for and the shipowners do the same is that we need an environment where we have certainty on the alternative fuels, the infrastructure, the ability or the access to finance. And to make all these investments, there will be the necessity to do some further research in order to have innovative solutions.
– The steadily intensifying war in Ukraine and the dangers in the Strait of Hormuz have analysts concerned about the potential impact on shipyards. In your estimation, will the war crises affect shipbuilding?
I think the crisis will certainly affect the shipowners and how they operate, which you already see in the Strait of Hormuz, for instance. In general, if the business operations of the shipowner are impacted, that has a knock-on effect on their willingness to place orders or their capability to make investments.
The same happened with the pandemic, for instance, when the cruise industry was very heavily impacted. So, the cruise vessels were laid off and all the orders were postponed and stretched over time. Therefore, if the geopolitical crisis intensifies further, it will have an impact on the operations of ship owners. And there may be then a knock-on effect on shipyards.
– In the last few years, there has been a dynamic in the shipbuilding sector in Greece. Do you think that the “refreshed” Greek shipbuilding industry can contribute to the strengthening of the European shipbuilding industry?
Of course, the revival of the Greek shipbuilding industry will contribute to the strengthening of the European shipbuilding industry.
Firstly, it is a very positive and encouraging signal for the entire European shipbuilding sector and it proves the EU shipbuilding industry’s capability to rebounce.
Secondly, the rationale behind this revival is very interesting in that it is believed to be in relation to a specific Greek shipowner’s need, notably the need to make that shipowner’s fleet green and sustainable through newbuilding and retrofitting.
The Greek example should be a source of inspiration for other EU Member States!
– What shipbuilding targets does SEA expect by 2035?
By 2035, we want to build and retrofit 10,000 vessels. The question will be, which ones will that be? So, the ones we build, the complex vessels, the ones we want to regain, like short sea cabotage, inland navigation, fishing vessels.
And then, for the emerging markets the ones that are operating in the “blue economy.” And these 10,000 ships should be green and also what we call digitalized.