Brussels, 15/11/2000 (Agence Europe) - Dumping by Korean shipyards continues to threaten recovery in the shipbuilding sector in Europe and worldwide. This is the main conclusion reached by the European Commission in its third report on shipbuilding in the world, adopted on Wednesday.
Despite the rise in orders for new ships - which doubled between 1999 and 2000, a sign of recovery after the economic crisis of 1997 - the price of new vessels "still remains around 13% below their 1997 levels and is only beginning to return to their 1998 level", notes the Commission. What is worse, in terms of "gross tonnage", 74% of additional orders went to South Korea", specifies the report. South Korea covered 40% of new orders for the first 8 months of 2000, followed by Japan (25%) and the European Union and Norway (16%). In the boost segment of container ships, the South Korean share reaches 60%, as opposed to 4% for Japan, and 8% for the EU and Norway.
The Commission confirms the tendencies highlighted in its report of April 2000, namely that "apart from a few exceptions, the Korean shipyards continue to accept orders at prices that do not fully cover production costs". Such is especially the case in sectors where they hope to conquer market shares, like large container ships and large tankers, leaving European shipbuilding the sector of very specialised ships and internal orders. According to Commission information, "the losses calculated suffered by the Korean yards are between 4% and 39% of the effective construction costs", thus confirming the hypothesis of dumping".
As no progress has been made in the friendly agreement sought with Korea, the European Commission opened, on 24 October, a procedure on the basis of a complaint filed by the European shipbuilding industry in the context of the regulation on trade barriers (see EUROPE of 25 October, p.10). The Commission must decide within two weeks whether it continues with a five-month inquiry that could lead to the opening of procedure at the World Trade Organisation. The association of Korean shipbuilders immediately reacted with a communiqué to protest against such "allegations", giving its assurance that they gained market shares by improving their production costs and through the qualitative effect of investment made over recent years.
Whatever, the Commission report considers the price stagnation all the more alarming as the European Union has radically reduced State aid to shipbuilding. The ceiling for operational aid has been restricted to 9% since 1992, and operational aid should in principle by gradually replaced by other forms of support allowing the development of competitiveness of the European shipbuilding industry. The 1998 regulation governing aid will expire this coming January, recalls the Commission in its report.
The Commissioners' college is expected to hold a detailed discussion on the question of State aid to shipbuilding on 29 November. The matter should also be evoked during the official visit by Chancellor Schröder to the Commission next week, as Germany is at the head of Member States that call for the aid regime to be extended. The Industry/Energy Council of 5 December will also tackle these questions. With a view to this Council, the Commission proposes in its report to: 1) continue to follow market evolution; 2) rapidly examine the complaint filed by the European industry against Korean dumping; 3) remain open to Korean proposals; 4) continue efforts to re-establish fair competition at international level; 5) encourage the IMF to ensure that restructuring of Korean shipyards comes under close surveillance; 6) continue to cooperate with industry on competitiveness issues; 7) and examine with the Council possible proposals for facing up to this problem, without prejudice tot he European rules on State aid to shipbuilding.