For the debt-laden Dutch shipping company Vroon Shipping in Breda it all comes too late, but many fellow shipowners have made so much money in the past year that they can both pay off their debts and invest in new ships with more sustainable propulsion. However, according to SWZ|Maritime’s editor-in-chief Antoon Oosting, building these ships in Europe will become a huge challenge as European politicians are strangling their own shipyards with the ever-restrictive financing of shipbuilding.
In every issue of SWZ|Maritime, SWZ|Maritime’s editor-in-chief Antoon Oosting writes an opinion piece under the heading “Markets” about the maritime industry or a particular sector within it. In the January 2022 issue, he argues that shipowners may now finally have the money to build ships that use cleaner fuels like still fossil-based LNG, methanol, ammonia, hydrogen, or a hybrid combination of fuels with fuel cells or batteries, but that the European shipbuilding industry is still very much under threat of its Asian competitors.
The latest victim in European shipbuilding is the German MV Werften that filed for bankruptcy on 10 January. This not only directly puts at risk the 2200 jobs of its own staff, but also those of the many thousands of suppliers and subcontractors. One job at a shipyard leads to many more jobs in adjacent sectors and with subcontractors. With a multiplier of 6.4 (scientific research in India), in terms of employment, shipbuilding is one of the most economically labour-intensive and productive sectors.
The German federal government endorses the importance of shipbuilding for the economy and employment and has offered 600 million euros in aid for MV Werften with the demand that the owners, the Malaysian leisure group Genting, also invest 60 million. But so far, Genting, itself hit hard by Covid, has refused to come up with the requested ten per cent contribution. With the declaration of bankruptcy, the appointed trustee can now look for a solution for the group that had large shipyards in Wismar, Warnemünde, Stralsund and Bremerhaven (Lloyd Werft).
Last major branch
That other major German builder of large cruise ships, the Meyer Werft headquartered in Papenburg, is also in turmoil. The management of the company has indicated it wants to cut costs by 1.3 billion euros. This would lead to the loss of 600-1800 jobs. In 2020, the Meyer Werft already suffered a loss of 180 million euros, and another loss of the same magnitude is expected for 2021.
This is not a good development as a lot of knowledge, experience and a qualified workforce is doomed to be lost forever. People that are made redundant in shipbuilding tend to seek future jobs elsewhere, never to return to a shipyard.
Besides naval shipbuilding, the building of cruise ships is in fact the last major branch of commercial shipbuilding in Europe. After first the tankers, bulk carriers, container ships, multipurpose carriers and offshore suppliers, lately also a big chunk of the European ro-ro ferries and a lot of short-sea ships are now built in China, South-Korea and upcoming India.
And with shipbuilding, the delivery of equipment will follow. Major engine manufacturers like WinGD and Wärtsilä have already transferred a big part of their production to China. Caterpillar recently announced it is closing its MaK branch in Germany.
EU ban on shipbuilding merger
The European Commission recently put a ban on the merger between the two South Korean shipbuilding mega yards of Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries Holdings. The merger between the two shipbuilders would have created a dominant position by the new merged company and reduced competition in the worldwide market for the construction of large liquefied gas (LNG) carriers (LLNGCs). The parties did not formally offer remedies to address the Commission’s concerns, an official press release of EU Commissioner Margarethe Vestager said.
But what sense does this ban have? The last large LNG carrier built in Europe was recycled on the beach of the Indian subcontinent long ago. Like all the other bigger types of commercial ships, except for cruise ships, these markets have already long been taken over by the Asians.
The only one to benefit from the EU ban on the South Korean mega shipbuilding merger would be the People’s Republic of China, the biggest competitor of the Koreans in shipbuilding. Once again the Europeans help China to misuse all the benefits of the liberalised global market in shipbuilding. So, the EU ban is once again too little, too late and doesn’t help to keep up a European shipbuilding industry.
Nevertheless, it is important to maintain what shipbuilding industry Europe still has. Several EU member states still have a shipbuilding industry that (out of necessity) focuses on smaller, but more complex ships. Keeping shipbuilding knowledge and experience up to date is also necessary to be able to build navy ships.
The aggressive expansionist maritime politics of the Chinese in the southern Chinese Sea and Taiwan have proven how necessary it is to maintain a credible naval force and to deter aggressive nations from acting recklessly. This is also the aim of naval exercises where especially India works with other non-Chinese countries that must fear the Chinese supremacy.
In the Netherlands, the maritime industry has put its hopes in a new government with a maritime minister who has his roots in Rotterdam and was responsible for the port as the alderman. So at least he should know the importance of shipping and shipbuilding for keeping up European economic prosperity.
‘The coalition agreement of the new government contains firm ambitions in the areas of sustainability, industrial policy and defence. This offers opportunities for the Dutch maritime manufacturing industry.’ This in short is the response of Dutch maritime trade organisation Netherlands Maritime Technology (NMT).
New submarines of Dutch build
NMT hopes that the sustainability ambitions of the new government will take into account the special characteristics of the shipbuilding sector. For example, shipbuilders and suppliers must not only develop new technologies, but they must also integrate them on board ships. In addition, the greening of trade instruments must not lead to an even more uneven global playing field, NMT says.
A ‘more strategic use of government procurement’, which the new government wants to pursue, offers good prospects for the replacement programmes of the Rijksrederij (government shipping company) and the Royal Netherlands Navy. NMT states that as launching customer, the government can exploit the innovation potential of the Dutch maritime manufacturing industry and thus help preserve this strategic industry for the Netherlands and Europe.
Regarding defence, the coalition promises investments in modern equipment, including new naval capacities. In the coalition agreement, the new government says that it will ‘for our strategic independence, within the EU rules, keep an eye on a vital defence sector in the Netherlands with a more level European playing field’. According to NMT, this is where the opportunities lie for maximum involvement of the Dutch naval construction industry in the acquisition of the new submarines.
Support for the manufacturing industry
The newly formed Cabinet wants to use a clear strategy to ensure ‘a manufacturing industry that leads the way’. Part of this is providing well-educated staff and tackling the shortage of trained employees, offering a stable and predictable business climate and focusing on a level playing field and protection against unfair competition from outside Europe. Naturally, NMT wholeheartedly supports this approach.
‘An initial analysis of the plans paints a positive picture with opportunities for the Dutch shipbuilding sector. There is a firm and ambitious agreement, to which the industry is pleased to make a major contribution. However, it is important to take into account the special characteristics of the maritime manufacturing industry, such as the construction of unique, expensive ships, a highly international market, an uneven European and global playing field and the relatively large role of government procurement. Moreover, more room in the budget is desirable for the implementation of active industrial policy,’ NMT says.
Shipowners in transition
But the energy transition towards more sustainable forms of shipping not only depends on shipbuilders. The technologies for more sustainable or even zero-emission fuels are there, but how to implement them in ships and shipping? Dutch maritime companies are taking three research paths. The first is LNG (with carbon capture systems), in which Heerema Marine Contractors and Anthony Veder as shipping companies participate. In the research project for the use of hydrogen, it is among others shipping company Van Dam that participates.
Yet, as is being done internationally, most Dutch shipowners bet on methanol, which could potentially enable significant greenhouse gas reductions compared to traditional fuels. Within the maritime sector, methanol is seen as one of the most feasible clean fuels that will be available in the coming years for large-scale adoption by the industry.
Danish liner giant Maersk has ordered twelve methanol-ready 16,000 TEU ships for delivery from the first quarter of 2024. Boskalis, Van Oord, Verenigde Tankrederij and Royal Wagenborg are participating in the Dutch R&D project MENENS (Methanol as Energy Step Towards Zero- Emission Dutch Shipping). The biggest Dutch shipping company Spliethoff Group is following yet another path by using biofuels.
So those who dare to say that nothing is happening in shipping are clearly wrong.
Picture (top) by Max Pixel.