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EU shipbuilding strategy advancing as Europe boosts industrial policies to counteract Chinese might

A long-term strategy for European shipbuilding is gathering pace

China’s dominance of global shipbuilding is a risk for shipowners that are dependent on Chinese shipyards and finance should China become a hostile country to the West, says Sea Europe’s Vincent Guerre

PROGRESS on a long-term strategy for shipbuilding in Europe appears to be gathering pace following European elections in June.

Europe-based shipbuilding associations, led by shipyard and marine equipment association Sea Europe, have been building a case for the EU and national governments in Europe to formalise central policies aimed at countering the dominance of Asian shipbuilders and to refocus “green” funding paid to shipowners towards vessels built in Europe.

Since European elections in June, which saw the re-election of Ursula von der Leyen as president of the European Commission the following month, progress has been very encouraging, Sea Europe director of trade and competitiveness Vincent Guerre told Lloyd’s List.

“EU member states are more positive about the potential for an EU shipbuilding strategy even though they are not certain what the strategy is yet,” said Guerre.

Guerre said a new industrial policy for European shipbuilding was essential to modernise the industry with more efficient shipbuilding facilities and to provide a stronger trade policy to counteract what local shipbuilders saw as the dumping of state-subsidised ships, chiefly by China.

Von der Leyen’s commitment, following her re-election, to push for more investment in strategic technologies, including “clean tech” and increased spending on research and innovation as part of the EU’s climate action strategy, fitted well with Sea Europe’s demands for increased support for the European shipbuilding sector, he added.

“Shipbuilding is precisely positioned within the new Clean Industry Deal, which aims to both decarbonise and reindustrialise,” Guerre said.

He suggested that any future EU shipbuilding strategy could emulate the successful European Chips Act, which launched in 2022 and has already delivered results in strengthening Europe’s semiconductor industry by attracting both state and private investment.

“What the EU did with chips they can also do for ships,” he said. “With the semiconductor sector, the EU said look at the business case and then asked what are the constraints?

“The Chips Act has succesfully channelled both private and public money with an aim to scale up production in Europe and insists on certain targets for manufacturing in the EU.”

Guerre said the same strategy could be applied for attracting more orders for the construction of the complex ships, such as cruiseships, offshore vessels and dredgers, at which Europe still excels.

As Europe awaits an EU shipbuilding strategy, the South Korean government recently promoted a multi-billion dollar financing boost, in partnerships with South Korean investment banks, to promote the ordering of high technology vessels at its shipyards. 

Meanwhile, EU financial assistance is already available, via the EU’s Horizon Fund, tax breaks and the Green Deal amongst others.

Shipbuilding, however, has to compete with other industrial sectors. Funding is not targeted and is too fragmented via various sources. Sea Europe is arguing for a single maritime fund to enable money to be better targeted. 

“In an ideal world we wouldn’t want subsidies but public support is needed,” said Guerre. “This is not just for shipbuilder operational costs but to enable the scale up on new fuels. The green deal is delivering subsidies to shipowners which are then ordering ships in China; this is a political failure.”

While there was no clear timeline on the European shipbuilding strategy, Guerre said the EU could deliver very quickly when it needed to, despite a reputation for being a slow-moving bureaucracy. He cited the Net Zero Industry Act, which was concluded in February and was delivered within 12 months, as an example of the EU’s potential to deliver on new policy relatively quickly.

Guerre suggested that money from the EU’s Emissions Trading System could be utilised to support shipbuilding. However, could this risk the wrath of China, which could argue against its shipowners supporting European shipbuilders and via lobbying the World Trade Organisation for action.

“Most of EU ETS revenues from shipping are paid to member states; it is up to them to decide how this money is invested, and they should reinvest it in the maritime sector,” Guerre said.

“China has taken advantage of its membership of the WTO by launching investigations against other countries — but China is good at hiding its own subsidies through state ownership of shipyards and state-backed ship finance.”

However, Guerre does not believe the EU intends to follow the US in investigating claimed unfair competition by China in shipbuilding.

“The EU has for years claimed that it is assertive at looking at anti-competitive behaviour in shipbuilding, but they don’t even collect the basic evidence. Unlike the US, the EU is shy in implementing its trade defence and anti-dumping instruments for shipbuilding.”

But Guerre warned that China’s dominant market share in global shipbuilding was a risk for shipowners that have become dependent on Chinese shipyards and finance, particularly if China becomes a hostile country to the West.

“China’s agenda is to have dominance in maritime industries. This is not only a risk for shipowners but is also a big risk for equipment manufacturers that are forced to transfer technology to China through local joint venture manufacturing.” 

While it is not realistic for Europe to return to building large bulk carriers, containerships or gas carriers, it can focus on high-value vessels where European shipyards can bridge the cost gap by building new more efficient shipyards.

“We have to tap more into our technology know how. China is now trying to enter the cruise market and is taking this very seriously. If Europe loses its commercial vessel shipbuilding market it then becomes heavily dependent on taxpayers money for naval vessel construction.” 

Guerre said the paradox of the US investigation in to Chinese shipbuilding was that it had had almost nothing in the way of a commercial shipbuilding sector since the 1980s.

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