From the magazine – European dredging companies are more concerned than ever about Chinese competition in the global market and in particular in the European home market of the four largest European dredging contractors, Boskalis, Van Oord, Jan De Nul and DEME. In public tenders for large dredging projects, CCCC-CHC-CDC, a Chinese state-owned company, bids at prices that are sometimes 31.8 per cent lower than those of European competitors.
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 February 2024 issue, he goes into the unfair competition from China that European dredging companies are being confronted with.
Several large infrastructure projects in dredging, bridge construction, and motorways in eastern Europe in particular, have already been carried out by the Chinese, and they are also increasingly successful at acquiring large, strategically important infrastructure companies, especially container terminals in ports such as Piraeus and Genoa, but also a Spanish company developing solar parks, a large Portuguese construction company with € 3.8 billion in turnover in 2022, and the German manufacturer of industrial robot systems Kuka in Augsburg.
On 21 November 2023, the European Dredging Association (EuDA), the European interest group for dredging companies, celebrated its thirtieth anniversary, but not without concerns about the future, especially about competition from China. ‘Unfair trade practices are like coastal erosion: if left untackled, they can wear out even the most resilient companies,’ said Paris Sansoglou, EuDA’s secretary general in his presentation “European dredgers’ challenges inside and outside Europe”.
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European home market and a closed Chinese market
European dredging companies point out that the European home market is the foundation on which export markets are built. Without a home market, European dredging companies will lose out in no time, the EuDA warns. Especially now that since 2009, Chinese activity in Europe has increased sharply with 2020 being a record year.
After that, Chinese competition was inhibited by the Covid epidemic, but last year, the Chinese again made frantic attempts to get their hands on major European infrastructure projects in Poland, Romania and Portugal. For example, the Chinese container shipping company COSCO recently bought into a major Hamburg container terminal.
In the first decade of this century, European dredging contractors still got the occasional job in China. Think back to 2007, when Boskalis’ megahopper W.D. Fairway was severely damaged after being struck amidships by the MSC Joanna in China, while it was in the port of Tianjin dredging the shipping channel. But since then, European dredgers have been unable to get around in China and, in fact, legislation has simply made it impossible for foreign companies to take dredging contracts in China.
Chinese dredging companies have now grown so large that they are also taking on more and more work abroad. Since the beginning of this decade, Chinese dredging companies have also been bidding on projects in Europe. And then it comes down to whether European governments can keep their backs straight in the face of their seemingly very tempting offers.
Over the past decade, Chinese dredging companies have increased their market share in the world outside of China from seven to 21 per cent. In Africa, they have even managed to double their market share from 28 to 56 per cent. This growth has come at the expense of European dredging companies.
Foreign Subsidies Regulation
Since 2019, a core majority of European member states and politicians realised the ambiguity of the relationship with China, which they described as a ‘cooperation partner’, ‘negotiating partner’, and ‘economic partner’ as well as a ‘systematic rival’. The problem until now has been that EU states have had no means, in terms of laws or regulations, to counter anti-competitive state subsidies from non-EU states to favour their own companies or industries. But since the middle of last year, the Foreign Subsidies Regulation (FSR) has been in place in EU countries.
Its aim is to combat the most distortive foreign subsidies in the EU in acquisitions and public tenders and to create a level playing field. Distortive state subsidies include interest-free loans, unlimited guarantees, capital injections, tax exemptions, tax breaks and other forms of financial support.
The FSR applies to acquisitions worth more than € 500 million and public tenders worth more than € 250 million. When the FSR is applied, the forms of anti-competitive subsidies are examined. If necessary, acquisitions or the award of public contracts may be prohibited.
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Big difference
An example of how the Chinese operate is the tender for dredging work to deepen the Elbe River. In May 2021, European contractors were surprised by the Chinese dredging combination of CCCC-CHEC-CDC with a bid (€ 31.93 million) that was 31.88 per cent lower than the number two, the combination of Belgian DEME (€ 46.87 million). Jan De Nul and Boskalis were slightly above with bids of € 50 million and € 50.4 million respectively.
In the end, DEME got the project, partly because of the deployment of modern, more sustainable vessels. But such a big difference in bids means that the Chinese dive below cost price made possible by Chinese state subsidies and unlimited financing.
European companies, which do not have access to solid government support, can no longer compete with that. This is also evident from the presentation at the dredging conference on 21 November by Prof. Cind du Bois, professor of economics at the Belgian Royal Military Academy. According to her, Chinese competition is about “economic statecraft” as a “new” form of warfare. With economic statecraft, China tries to create economic security and independence for itself by controlling strategic markets and wiping out competition.
Dangerous dependence
Europe, and the European Commission in particular, seems to finally have woken up after it appeared to be completely dependent on Chinese industry, especially during the Covid crisis such as for something as simple as face masks. And now once again, Europe is proving unable to carry its own weight when it comes to defence and the manufacture of ammunition, leaving Ukraine in the lurch by not being able to supply the required ammunition.
So, according to Du Bois, it is high time for Europe to develop a European economic security strategy. European countries should arm their economies with government intervention, state aid and coercive measures to guard against economic dependence. Strategic businesses should therefore no longer be sold off to Asian potentates. Supply chains must be flexible and resilient and must no longer become dependent on countries that are economically or politically unreliable.
Critical infrastructure
Security of critical infrastructure must be high on the agenda, says Du Bois. Thus, China should not have a say in European ports. Europe must also ensure that its economy remains technologically secure by investing in its own high-tech. Influence, investments and takeovers from politically unreliable states must be prevented. Europe must strengthen and enhance its innovative power and technological and industrial capacities by protecting strategically important companies.
But if ports, waterways and flood defences are identified as critical to European security, Du Bois argues that the services industry is also critical to strategic autonomy. And by the services industry, we are talking about dredging and offshore companies like Van Oord, Boskalis, DEME and Jan De Nul. Companies that are also important for the extraction of rare earth materials through deepsea mining.
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Challenges and opportunities
As far as Du Bois is concerned, the European interest in economic safety presents both challenges and opportunities for European dredging companies, of which the big four have also set up major offshore divisions. Du Bois states that a strong European dredging sector is the answer to a range of economic safety risks.
And those who want safety should not shy away from protecting their crucial economic sectors. Cooperation between policymakers and industry is crucial here, Du Bois believes.
Now, it is by no means the case that the European dredging sector is already in the danger zone, on the contrary. Sixteen European dredging organisations are members of EuDA, which was set up in 1993. So among the around ninety companies they represent are besides the world’s top four, De Boer/Dutch Dredging, Van den Herik, Van der Kamp, and several sand dredging companies.
50,000 jobs in Europe
EuDA’s member companies, through their national interest groups, comprise a combined fleet of 750 seagoing dredgers, notably the large trailing suction hopper dredgers and self-propelled cutter suction dredgers. Offshore installation vessels are not included in this, as Boskalis alone has a fleet of more than 900 vessels. EuDA member dredging companies had a combined turnover of € 10.6 billion in 2022. They accounted for 25,000 direct jobs in that year and indirectly for 48,300 jobs with suppliers. Service companies employed more than 50,000 Europeans.
Minus the growing market share for the Chinese, European dredging companies still play an important role in the world with a market share of close to eighty per cent and a combined turnover of € 8.6 billion (2021 figures). Of all the dredging work performed by European contractors, seventy per cent takes place outside Europe with ninety per cent of profits flowing back to Europe.
Picture (top): Teunis Huibertus performing dredging work off the Dutch coast (by Flying Focus).
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