CESA Annual Report 2004- 2005

8/3/2019 CESA Annual Report 2004- 2005

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ANNUAL REPORT

2004-2005


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Shipyards represented by CESAor full contact details please refer to http://www.cesa-shipbuilding.org)

1 Antwerp Shiprepair N.V.

1 Fr.Fassmer GmbH & Co.KG

1 Lrssen Bardenfleth GmbH & Co.KG

1CON-MAR Ingenieurtechnik GmbH & Co.Handels KG

1 Elsflether Werft GmbH & Co. KG

1Abeking & Rasmussen GmbH & Co.KG, Schiffsund Yachtwerft

2 Aker Warnemnde Operations GmbH

2 Neptun Stahlbau GmbH

3 Aker MTW Werft GmbH

4 Arminius Werke GmbH

5 Binger Schiffswerft Ing.Dieter Schaefer GmbH

6 Blohm + Voss GmbH

6Heinrich Buschmann & Shne GmbHSchiffswerft

6 J.J.Sietas KG Schiffswerft GmbH & Co.

6 Julius Grube KG GmbH & Co

6 Schiffswerft M.A.Flint GmbH

6 Schiffswerft von Clln GmbH & Co.

6 SSB Spezialschiffbau Oortkaten GmbH

7 Bodan-Werft Metallbau GmbH & Co.KG

8 Cassens Werft GmbH

8 Nordseewerke GmbH

8 Schiffswerft Diedrich GmbH & Co.KG

9 Detlef Hegemann Rolandwerft GmbH & Co.KG

9 Fr.Lrssen Werft GmbH & Co.KG

10 Deutsche Industriewerke GmbH

10 Mitschiffs Service mss GmbH

11Erlenbacher Schiffswerft Maschinen- undStahlbau

12Flensburger Schiffbau-Gesellschaft mbH & Co.KG

13 Gebr.Friedrich KG Schiffswerft

13 Howaldtswerke-Deutsche Werft AG

13 Lindenau GmbH Schiffswerft & Maschinenfabrik

14 Krger Werft GmbH & Co.KG

14 Nob iskrug GmbH

15 Hitzler Werft GmbH

16Husumer Dock- und Reparatur GmbH & Co.KG

17 Jos.L. Meyer GmbH18 Klner Schiffswerft Deutz GmbH & Co.KG

19 Ktter-Werft GmbH

19 Schulte + Mller Schiffswerft GmbH

20 Lloyd Werft Bremerhaven GmbH

20 SSW Schichau Seebeck Shipyard GmbH

21 Lux-Werft und Schiffahrt GmbH

22 Meidericher Schiffswerft GmbH & Co.KG

23 Mtzelfeldtwerft GmbH

24 Neue Jadewerft GmbH

24 Turbo-Technik Reparatur-Werft GmbH & Co

25 Neue Oderwerft GmbH

26 Peene-Werft GmbH Wolgast

27 Peters-Schiffbau GmbH

28 Schiffswerft Hermann Barthel GmbH

28 Schiffswerft Bolle GmbH Derben

28Schiffbau- und EnwicklungsgesellschaftTangermnde

29 Schiffswerft Wilhelm Fleischhauer

30 Volkswerft Stralsund GmbH

31 Werft und Servicezentrum Mittelrhein GmbH

DE 32 Schiffswerft Laubegast AG

DK 1 Aarhus Shipyard Ltd.

DK 2 Danyard Aalborg Ltd.

DK 3 Karstensens Shipyard Ltd.

DK 4 Odense Steel Shipyard Ltd.

DK 5 Orskov Yard Ltd.

DK 6 Soeby Shipyard Ltd.

ES 1 Ast il leros Gondan ,S .A.

ES 1 Astil leros Armn Navia

ES 1 Astil leros Armn Puerto de Vega

ES 2 Astil leros Armn Burela

ES 3 Ast il leros Barreras

ES 3 Construcciones Navales P.Freire

ES 3 Factoras Vulcano

ES 3 Metal sh ips & Docks ,S .A.

ES 3 Ast il leros Armn

ES 3 Factora Naval de Marn

ES 4 Diques Navales Pasaia

ES 4 Astil leros Balenciaga

ES 5 Astilleros Canarios (ASTICAN)

ES 6 NAVANTIA Fene

ES 6 NAVANTIA Carenas Ferrol

ES 6 Astil leros Jos Valia

ES 6 Astil leros y Talleres Ferrolanos

ES 7 Astilleros SICAR

ES 8 Ast il leros de Murueta

ES 8 Ast il leros Zamakona

ES 8 IZAR Sestao

ES 9 Astil leros de Huelva,S.A.

ES 10 Astilleros de Mallorca

ES 11 Astilleros de Santander

ES 12 NAVANTIA Carenas Cartagena

ES 13 NAVANTIA Carenas Cdiz

ES 13 NAVANTIA Puerto Real

ES 13 NAVANTIA Carenas San Fernando

E S 1 4 I ZAR G ij n

ES 14 NAVAL GIJON

ES 15 IZAR Sev il la

ES 16 Unin Naval de Barcelona

ES 17 Unin Naval de Valencia

FI 1 Aker Finnyards

FI 2 Turku Repair Yard LtdFI 2 Aker Finnyards

FI 3 Aker Finnyards

FI 4 Technip Offshore Finland OY

F I 5 U ki Wo rk bo at

FR 1 Alstom Leroux Naval (Lanester)

F R 1 D. C. N. Lor ie nt

FR 2 Chant ier P ir iou

FR 3 Chantiers de lAtlantique

FR 4 Constructions Mecaniques de Normandie

FR 4 D.C.N.Cherbourg

F R 5 D. C. N. Bre st

FR 5 SOBRENA

FR 6 D.C.N.Toulon

FR 7 SOCARENAM (Boulogne-sur-Mer)

FR 8 ARNO- Dunkerque

FR 9 CMR

GB 1 A & P Birkenhead Ltd

GB 1 Northwestern Shiprepairers & Shipbuilders Ltd

GB 1 McTay Mar ine

GB 2 A&P Shipcare - Chatham

GB 2 L&M Sh ipyards Ltd

GB 2 A&P Shipcare - Tilbury

GB 3 A&P Falmouth Limited

GB 3 Pendennis Shipyard Ltd

GB 4 A&P Shipcare - Dover

GB 5 A&P Shipcare - Ramsgate

GB 6 A&P Southampton Ltd

GB 7 BAE - Barrow in Furness

GB 8 BAE Systems - Yarrow Yard

GB 8 BAE Sys tems - Govan

GB 9 Buckie Shipyard Ltd

GB 10 Dunston (Ship Repairers) Ltd

GB 11 Fleet Support Limited

GB 11 VT Shipbuilding

GB 12 Harland and Wolff Holdings Plc

GB 13 Macduff Shipyards Ltd

GB 14 Milford Haven Ship Repairers

GB 15 Richards Dry Dock & Engineering Ltd

GB 1 5 S ma ll & Co

GB 16 A&P Tyne Limited

GB 16 Pallion Engineering Ltd

GB 17 A&P Teeside

GR 1 Elefsis Shipyards

GR 2 Hellenic Shipyards Co.

GR 3 Neorion New S.A.Syros Shipyards

HR 1 3M Maj Shipyard

HR 1 V.Lenac Shipyard (under bankruptcy)

HR 2 Brodosplit Naval&Special vessel Shipyard

HR 2 Brodosplit Shipyard

HR 3 Brodotrogir Shipyard

HR 4 Shipyard Kraljevica

HR 5 Uljanik Shipyard

IT 1 Navalimpianti S.p.A.

IT 1 T.Mariotti Cantiere Navale

IT 1 Fincantieri Sestri Cantiere Navale S.p.A.

IT 2 Fincantieri S.p.A.- Stabilimento di Palermo

IT 3 Cantiere Navali Vittoria S.p.A

IT 3 Fincantieri Cantiere di Marghera

IT 3 Cantiere Navale De Poli SpA

IT 3 Cantiere Navale Visentini S.r.l

IT 4 Cantiere Navale Di Pesaro

IT 5 Cantiere Navale E.NOEIT 6 Cantiere Navale F.l li Giacalone

IT 7 Fincantieri Cantiere di Ancona

IT 8 Cantiere Navale di Trapani SPA

IT 9 Cantiere Ravenna S.r.l .

IT 9 Naviravenna

IT 9 Rosetti Mar ino SpA

IT 10 Cantiere San Marco S.r.l

IT 10 Fincantieri Cantiere di Muggiano

IT 11 Fincantieri Cantiere di Castellammare

IT 11 Cantiere del Mediterraneo SPA

IT 11 Palumbo S.r.l.

IT 12 Fincantieri Cantiere di Monfalcone

IT 13 Fincantieri Cantiere di Riva Trigoso

IT 14 Nuovi Cantieri Apuania

NL 1 Scheepswerf Peters B.V.

NL 1 A.& L.Hoekman B.V.

NL 2 Akerboom Yacht Equipment

NL 3 Alblasserdam Yachtbuilding B.V.

NL 3 Werf Alblasserdam B.V.

NL 3 Scheepswerf Hoebe B.V.

NL 3 Scheepsbouwbedrijf Het Anker

NL 3 Scheepswerf & Machinefabriek t Ambacht B.V.

NL 3 Scheepswerf v/h C.Buitendijk B.V.

NL 3 IHC Holland Dredgers B.V.

NL 3 Smits Machinefabriek en Scheepsreparatie B.V.

NL 3 Van Grevensteins Scheepswerf B.V.

NL 3 Breko Nieuwbouw B.V.

NL 3 Breko Reparatie B.V.

NL 3 Scheepswerf Slob B.V.

NL 3 D.van de Wetering B.V.

NL 3 Damen Shiprepair Van Brink Yard

NL 3 Maatschappij De Maas B.V.

NL 3 Scheepswerf Hoogerwaard B.V.

NL 3 Serdijn Ship Repair B.V.

NL 3 Keppel Verolme B.V.

NL 3 Damen Shiprepair Niehuis Yard

NL 3 Damen Shiprepair Rotterdam United Yard

NL 3 Nicoverken Holland B.V.

NL 3 IHC Holland Beaver Dredgers B.V.

NL 3 Scheepswerf L.J.Boer Sliedrecht B.V.

NL 3Gebr.Kooiman B.V.Scheepswerf en Machine-fabriek

NL 3Scheepsreparatie en Constructie- bedrijfH.Niessen B.V.

NL 4 Volharding Shipyards Harlingen B.V.

NL 5 Ame ls B .V.

NL 5 Schelde Marinebouw B.V.

NL 5 Scheldepoort B.V.Repair & Conversion Yard

NL 6 Amsterdam Ship Repair B.V.

NL 6 Oranjewerf Scheepsreparatie B.V.

NL 6 Vosta LMG B.V.

NL 6 Scheepswerf Vooruit B.V.

NL 7 Scheepswerven Gebr.G. & H.Bodewes B.V.

NL 7 B.V.Scheepswerf De Kaap

NL 7 Scheepswerf Wout Liezen B.V.

NL 7 Bodewes Binnenvaart B.V.

NL 7 Scheepswerf Geertman B.V.

NL 8 B.V.Scheepswerf Maaskant

NL 8 Dokmaatschappij Padmos Stellendam B.V.

NL 9 B.V.Scheepswerf en Machinefabriek Vahali

NL 9 Scheepswerf Grave B.V.

NL 9 Scheepswerf Gelria B.V.

NL 9 Scheepswerf De Hoop Lobith B.V.

NL 10 Ceelen Shipyard B.V.

NL 10 Barkmeijer Stroobos B.V.

NL 10 Damen Shipyards Bergum

NL 11 Bijlsma Shipyard B.V.NL 12 Niestern Sander B.V.,Royal

NL 12 Volharding Shipyards B.V., locatie Foxhol

NL 12 Bodewes Shipyards B.V.

NL 12 Scheepswerf Ferus Smit B.V.

NL 13 Damen Dredging Equipment

NL 14 Nederlof Scheepsbouw B.V.

NL 14 Damen Shipyards Gorinchem

NL 14 Damen Shipyards Hardinxveld

NL 14 Merwede Shipyard B.V.

NL 14 Scheepswerf Jac.den Breejen B.V.

NL 14 Shipyard K.Damen

NL 14 Instalho B.V.

NL 15 Marinebedrijf Divisie Platform

NL 15 Scheepswerf Visser B.V.

NL 15 Luyt Groep B.V.

NL 15 Texdok bv

NL 16 Maaskant Bruinisse B.V.

NL 16 Machinefabriek Padmos Bruinisse B.V.

NL 17 Scheepswerf De Schroef B.V.

NL 18 Scheepswerf en Machinefabriek Maasbracht N.V.

NO 1 Akeryards Brattvaag Skipsverft

NO 1 Fiskerstrand Verft AS

NO 1 Sviknes Verft AS

NO 1 Akeryards Aker Langsten

NO 1 Solstrand AS

NO 1 Kleven Verft AS

NO 1 Ulstein Verft AS

NO 2 Kleven F lor AS

NO 3 Akeryards Aker Aukra

NO 4 Akeryards BrevikConstruction AS

NO 5 Vaagland Batbyggeri

NO 6 Bergen Yards AS

NO 7 F je ll strand AS

NO 7 Eidsvik Skipsbyggeri AS

NO 8Flekkefjord Slipp og Maskinfabrikk AS(Flekkefjord Yard)

N O 8 S im ek A S

NO 9 Fosen Mekaniske Verksteder AS

NO 10 Havyard Leirvik AS

NO 11 Moen Slip AS

NO 12 Myklebust Verft AS

NO 12 Larsnes Mek.Verksted AS

NO 13 Havysund Patentslipp AS

NO 14 Umoe Mandal AS

NO 15 Kimek AS

PL 1 Wisa Shipyard Ltd

PL 1Gdaska Stocznia Remontowa im.J. PilsudskiegoS.A.

PL 1 Stocznia Gdanska-Grupa Stoczni Gdynia S.A.

PL 1 Stocznia Pnocna S.A.

PL 2 SHIPREPAIR YARD NAUTA S.A.

PL 2 Stocznia Gdynia SA

PL 3 Stocznia Szczecinska Nowa Sp.z o.o

PL 4 Morska Stocznia Remontowa S.A.

PL 4 Szczecin Shiprepair Yard Gryfia JSC

PT 1 Estaleiros Navais de Viana do Castelo S.A.

PT 2 LISNAVE,Estaleiros Navais,SA

PT 3 Naval Rocha

PT 4Navalria - Docas;Construes e ReparaesNavais,SA

PT 5 Estaleiros Navais do Mondego,SA

RO 1 S.C.Aker Shipyards Braila S.A.

RO 1 S.C.Damen Shipyards Galatzi S.A.

RO 2 S.C.Aker Shipyards Tulcea S.A.

RO 3 S.C.N avol S.A.Oltenita

RO 4 S .C.Severnav S .A.

RO 4 S.C.Santierul Naval Orsova S.A.RO 5 S.C.Santierul Naval S.A.Constantza

RO 5 S.C.2x1 Holding Cape Midia S.A.

RO 6S.C.DMHI (Daewoo Mangalia Heavy Industries)S.A.

RO 6 S.C.Mangalia Shipyard S.A.

Large shipyards

Shipyards undertaking exclusively repair andconversion

Other shipyards


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CESA 2004 - 2005

European shipyards have marked a path of most dynamic development.What was seen as primarily a labour intensive industry in the past hasbecome a community of knowledge based and capital intensive high-techfactories. 43% more output with 36% less the workforce as explained inchapter one is perhaps the clearest indication of the dynamism. The factthat European shipyards invest on average 10% in research, developmentand innovation proves the high-tech content. The anticipation of marketrequirements and priority for total customer satisfaction are the focalpoints for European yards.

The challenging business environment of world shipbuilding offered

exciting opportunities as well as demanding problems in 2004. After theweak demand had bottomed out at the end of 2002, European yards could nearly double their or-der intake for the second year in a row in 2004. The positive trend has further continued into 2005,with the CESA market share in new orders reaching almost 20% of the world market.

Today, the global shipbuilding market enjoys a balance of supply and demand, which was absentfor two decades. However, we are aware that this situation will not last forever. The encouragingdevelopments are accompanied by worrying forecasts of even increasing structural overcapacitiesin world shipbuilding. But the consensus in Europe within the industry as well as regards policymakers is a solid fundament resulting in the right framework enabling success. The LeaderSHIP 2015initiative has launched a new era in this respect. Europe is determined to succeed.

CESA invests much of its energy in developing international cooperation within the shipbuildingindustry. The constructive dialogue among leading shipbuilders worldwide advances common goalsand underlines mutual respect.

Consensus is required to progress further also as regards a safe and environment-friendlymaritime industry. We owe our children a cleaner world and improved sustainability. CESA recog-nises its responsibility and is dedicated to enhancing the eco-balance of the sector. EuropeanShipyards technical excellence and innovative power will significantly contribute to smartersolutions for waterborne transport and other maritime operations. The European Union hasunderlined with a number of recent initiatives, such as the Maritime Task Force, the WaterborneTechnology Platform and plans to reform the EU engagement at IMO, that it is prepared to takeglobal leadership on maritime affairs.

We are pleased to present the first CESA Annual Report. Succeeding the tradition of the AWESAnnual Reports, CESA, after its merger with AWES in 2004, offers a comprehensive and frankreflection of CESAs scope of activities.

Brussels, June 2005

Patrick Boissier

CESA Chairman

Foreword

Foreword


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Index

1. European market 4

2. World market 6

3. LeaderSHIP 2015 8

4. International relations 14

5. Research, development and innovation 17

6. Safety and environment 20

7. Social Dialogue 29

8. Global shipbuilding requirement and capacity 30

9. Shiprepair sector 33

10. Naval sector 36

11. CESA working groups and committees 37

12. Reports of the National Associations 43

13. CESA social events 67

Annex 1: Statistics 2004 68

Annex 2: CESA Member Associations 74

Annex 3: CESA internal 76

Annex 4: Glossary 80

Annex 5: Picture reference 82

Index


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European Shipbuilding Sector

CESA, representing the shipyards in 15 European countries, covers 99% of the EU shipbuildingproduction and more than 85% of wider geographical Europe including the shipbuilding nationsBulgaria, Turkey and Ukraine. European shipyards offer products in three areas: construction ofmerchant vessels, repair and conversion and naval production.

CESA members hold some 20% of the worldwide production capacity of merchant ships and pro-vide jobs for more than 115,000 highly skilled employees. Roughly 70% of the total production issourced across Europe in a network of more than 9.000 sub-suppliers, mostly SMEs, stimulatingsignificant additional job effects.

The strength of the European Shipbuilding Industry is attributed to dynamic developments.

Within two decades, productionmethods revolutionised. An im-pressive Rationalisation coupledwith active outsourcing strategieshave reduced the total workforcedirectly employed by shipyardsfrom 182,663 in 1985 to 116,696in 2004.

The network of highly specialisedsubcontractors is the result ofthat development. Concurrent

engineering and the use of ad-vance information technologyapplications enables suppliers totake the role as project partners which deliver entire turn-key systems. Innovative solutions areoften developed jointly within the close cooperation on a concrete project.

The European shipbuilding in-dustry is the global leader in theproduction of cruise ships andseveral other high tech niches.Significant market positions areheld with regard to last genera-

tion transport vessels such ascontainerships, product & chemi-cal carriers, multipurpose cargovessels and car carriers as wellas for high value-added vesselsincluding fast ferries, LNG car-riers, off-shore hard-ware, dred-gers, cable- and pipe-laying vessels,heavy lift ships, semi-submersiblecrane vessels and highly specialised smaller vessels e.g. fish production vessels, mega-yachts, inlandwaterway vessels, tugs, multipurpose salvage and environmental protection vessels.

1. European market


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While order intake is comparatively volatile, production output remained fairly stable in Europeover the past decade with an average annual growth of about 2% p.a. in terms of tonnage. Order in-take related to construction of merchant ships saw a v-shaped recovery after a slump two years ago.2004 brought the second highest level of new orders of the past decade. The orderbook provides a

healthy three year production volume. Reflecting the weak demand two years ago, 2004 productionin cgt decreased by 10% compared to 2003.

1

Europeanmarket


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The global shipbuilding market is experiencing a particularly strong period with historical records

regarding production as well as regarding new orders and orderbook volumes.

Deliveries

In 2004, shipyards worldwide delivered 1.729 vessels. Total deliveries amounted to 25,5mill cgt, ofwhich more than three quarters were produced by Asian shipbuilders in China, Japan and SouthKorea. With 16,5% of the tonnage European Shipyards (countries covered by CESA) are the onlycompetitors with a meaningful market share outside Asia. This, all the more so, if the productionvalues are taken into account. Although the European production (in cgt) in 2004 decreased by 10%compared to 2003, reflecting the weak demand two years ago, European yards maintained the lea-ding position in terms of production value.

New orders

The remarkable order frenzy of 2003 was even surpassed in 2004 by 8%. European yards recordedthe strongest increase in new orders from 4 million cgt in 2003 to 6.8 million cgt in 2004. The cor-responding market share rose from 9,6% to 15,1%.

2. World market


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China increased the order intake in line with the global average and maintained a market share of

12,6%. Japanese yards recorded 16,1% more orders with a market share of 30,3%. Korean yardswere not able to maintain the very strong 2003 level and recorded 15, 1% less orders in 2004, how-ever still maintaining the number one position with a market share of 35%.

Price-levels have substantially improved and, in $-terms, reached the highest level since more thana decade. However, taking the strong euro into consideration, price developments have only beenmoderately positive.

Product Portfolio

The world orderbook at the end of 2004 reached another all-time record of more than 90 millioncgt which is more than three and a half times the current annual out-put level. The firm demandsentiment is perhaps best reflected by the substantial increase in orderbook length, i.e. in compari-son with the annual production.

2

Worldmarket


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CESA 2004 - 2005

Introduction

In the perception of many shipyards inEurope, Community policy toward the sectorfocused during the 1990s almost exclusivelyon the enforcement of the stringent state aidregime. Only a limited number of yards wereengaged in EC R&D framework programmesand trade policy stalled as everyone waitedfor US ratification of the 1994 OECD agree-ment. Thus, a comprehensive and clear stra-tegic approach for the sector that would linkthe different policy fields and establish con-crete action did not exist neither on the

side of policy makers nor within the industrycommunity.

Shipyards acknowledged that the challenges inthe world market could no longer be solvedwithout a coordinated approach at Europeanlevel. Therefore, CESA decided to tackle thissituation and successfully managed a joining offorces of all stakeholders, first within indus-try but soon also involving policy makers. Aconcept outline presented to the EuropeanCommission in early 2002 was well received

and Commission President Prodis supportiveresponse further encouraged the industry tocontinue the initiative with determination. ByOctober 2002, CESA handed over the firstcomprehensive and proactive industry road-map for a successful future of the sector.

Enterprise Commissioner Liikanen, who took the responsibility for LeaderSHIP 2015 on the Com-mission side, was equally determined to press on with the initiative. He established a High Level Ad-visory Group in early 2003 that fully deserved its title. From the European Parliament, the Chairmanof the Conservative party and the socialist Chairman of the Industry Committee participated andno less than seven Commissioners lent their support to the initiative and together with the marineequipment industry and the trade unions. Only nine months after its inauguration, the Group pre-sented its report, which, a few weeks later, was transposed into a Commission Communication. ForCESA, these were crucial decisions because, for the first time, the shipbuilding industry in Europehad been equipped with a comprehensive policy approach which gave the clear signal: Europe isdetermined to succeed and its yards will continue to be important players in the shipbuilding worldin 2015 and further ahead.

These are the issues covered by the LeaderSHIP 2015 report as well as the Commission Commu-nication and the progress achieved so far:

3. LeaderSHIP 2015

LeaderSHIP 2015:determination

to succeed


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LeaderSHIP2015

A Level Playing Field in World Shipbuilding

Problems:

World shipbuilding suffers from a structural imbalance of supply and demand with a shortperiod of relief (as now) and a long period of depression.

Injurious pricing practices add to the distortion of competition. The resulting price depression and price suppression are leading to losses and

ultimately to subsidisation and protectionism in many forms. International trade rules are difficult to apply to shipbuilding.

Recommendations:

Continuation of the present EU trade policy approach with determination. Full enforcement of applicable WTO rules to shipbuilding.

Development of enforceable OECD disciplines through a new shipbuilding agreement by2005 and an unambiguous interpretation of existing rules.

Progress:

The shipbuilding market in 2004-2005 is enjoying for the first time in two decades a period ofequilibrium of supply and demand; nevertheless the problems above are structural andremain unchanged.

The EC indeed vigorously pursued all available avenues to address the issue. The WTO procedures on shipbuilding were finalised in 2005; while confirming the

existence of some prohibited government measures, the procedures also clarified thatthe legal system of the WTO has difficulties in coping with the specific characteristics of

shipbuilding. Effective international rules to be agreed at the OECD have, therefore, become even moreimportant.

Improving Research, Development and Innovation (RDI)

Investment

Problems:

European shipbuilders have to compete internationally through advanced technologicalsolutions, not through low costs. RDI investment is therefore key.

In RDI, shipbuilding differs from other manufacturing industries, but this is not reflected inthe application of the current Community Regulation.

The creation of shipbuilding knowledge, almost always integrated in prototype develop-ment, is not sufficiently supported.

Recommendations:

The European dimension of shipbuilding RDI should be strengthened through integratingand concentrating efforts, with the aim to create Technology Platforms. Work being under-taken within the Maritime Industries Forum should form the base for this approach.

Shipbuilding should, in substance, enjoy the same conditions as other industries that engagein similar RDI activities.

Support intensities need to reflect the actual technological risks taken in all phases of design,development and production.


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New definitions, notably regarding innovation support, need to be developed where

necessary. RDI investment support needs to aim at enhancing European technological leadershipand should reward risk taking.

Progress

The Technology Platform WATERBORNETP was successfully launched in January 2005 and isexpected to conclude a Strategic Research Agenda by the end of 2005.

In April 2005, supported within the EC Framework Programme 6 and co-ordinated byCESA, a new initiative was launched to systematically develop visionary concepts forvessels and floating structures. This project aims to establish itself as a permanentTechnology Think Tank for Europes maritime industry.

The new EC framework for state aid in shipbuilding, which entered into force at the

beginning of 2004, has taken the a.m. recommendation fully into account and now includesappropriate provisions related to support measures for innovation; through informalcooperation with DG Competition, CESA took a central role to advise Member States asto the national implementation of innovation aid.

Advanced Financing and Guarantee Schemes

Problems:

Shipbuilding projects are capital-intensive, but yards are not well suited to organise allnecessary financing elements.

A number of commercial banks are pulling out of ship financing.

Non-EU competitors can rely on advanced state-supported financing instruments. Export financing principles are not fully applicable to shipbuilding projects.

Recommendations:

Explore the possibility of establishing an EU-wide guarantee fund for pre- and post-deliveryfinancing. The alternative of harmonising standards in EU Member States, in line withcommon market and OECD rules, could also be considered, albeit difficult to fully achieve.Any such tools have to be easily applicable.

Export credit insurance companies, covered by appropriate re-insurance, should offerhedging instruments for currency risks.

Progress:

Priority has been given to establish a European wide instrument to enlarge the availablevolume for pre-delivery financing, which shipyards see as the most urgent need.

In January 2005, Commission Vice-President Verheugen announced the goal of creatingsuch an instrument before the end of the year.

Promoting Safer and More Environment-Friendly Ships

Problems:

Low freight rates and declining new building prices have a detrimental effect on maritimesafety and the protection of the marine environment.

Rogue operators can still participate in the market with impunity.


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3

LeaderSHIP2015

The system for surveying the quality of design, construction, and repair needs enhancing.

The full potential of Short Sea Shipping is not yet used.

Recommendations:

Existing and future EU legislation has to be strictly implemented and exported to theinternational level.

A more transparent, uniform, efficient and independent system of technical surveys ofvessels has to be promoted.

A quality assessment scheme for shipyards at world-wide level should be developed,covering newbuilding and repair.

Maintaining and strengthening shiprepair capabilities in Europe is important to ensure ahigh level of transport safety and environmental protection.

An expert committee is to be established to provide technical support to the European

Commission and to EMSA. The great potential of Short Sea Shipping needs to be exploited through appropriate political

and economic framework conditions.

Progress:

The European Commission is actively pursuing a strengthened coordination role related toIMO activities. CESA supports these endeavours and advocates, in this respect, a Europeanratification process of adopting IMO conventions instead of the 25 separate ratificationsby the EU Member States. However, in the decision-making process, there is no need forchange of the current IMO practices with EU Member States executing their voting right.

A first experts committee at EMSA was created in April 2004 addressing technical

concerns related to double-hull oil tankers. CESA has established a Technical Advisory Committee, which contributes its expertise tothe Commission and EMSA; the CESA representative to the IMO is also embedded in thisworking structure.

CESA actively contributed to the consultation related to the Motorways of the Seas,emphasising in particular that ships have to be regarded as a fundamental part of theinfrastructure for Short Sea Shipping.

A European Approach to Naval Shipbuilding Needs

Problems:

Further co-operation between navalyards is hampered by diverging opera-tional requirements of national navies.

Non-harmonised export rules, andtheir application and interpretation,potentially distort competition.

The absence of a truly commonmarket for defence equipment makes industrial consolidation difficult.

Recommendations:

Joint requirements should be established to shape a numberof major projects, enabling co-operation between yards and leading

to inter-operability of systems, vessels and fleets.

A keydefencecapability


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Member States should address the issue of harmonisation of export rules.

Common rules to create a European market for defence equipment have to be de-veloped, based on the Councils request to create an intergovernmental agency in thefield of defence capabilities development, research, acquisition and armaments.

Progress:

In July 2004, the European Defence Agency was established by a Joint Action of the EUCouncil. Its scope is to support the Member States in their effort to improve Europeandefence capabilities and to further develop the European Security and Defence Policy(ESDP).

CESA has established a new working group dedicated to naval shipyards, which bringstogether all major European players in this field.

Complementing the CESA activities, the European Aerospace and Defence Industry

Association (ASD), has formed a group with a wider coverage including also system,equipment and service providers.

Protection of European Intellectual Property Rights

Problems:

European shipbuilders and suppliers are more dependent on technological leadership thanFar East competitors.

The complex and comprehensive interaction in shipbuilding projects between yards,suppliers, owners, classification societies, universities and other service providers opensnumerous opportunities for the leakage of knowledge.

The industry has no sufficiently established culture for the protection of intellectualproperty rights (IPR).

Recommendations:

The existing instruments for IPR protection (copyrights, registered designs, trademarks,patents, non-disclosure and specific collaboration agreements) need to be fully exploited.

Knowledge data bases for shipbuilding, containing information about the state of the art,existing patents, the specific competitive situation for certain products and solutions, andkey knowledge holders, should be built and run by dedicated IPR entities.

International patent rules applicable to shipbuilding need to be examined and possiblystrengthened.

Progress:

Several cases related to IPR in shipbuilding have been closely followed and discussions havetaken place related to some of the key loop-holes.

A systematic approach to the issue is intended to be launched mid 2005.

Securing the Access to a Skilled Workforce

Problems:

The nature of the industry is changing, posing new skills challenges. Exchange of staff and know-how across Europe is still limited.

The industry has not sufficiently communicated a positive and attractive image.


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LeaderSHIP2015

Recommendations:

Programmes for shipbuilding-specific management training need to be developed andestablished.

New skill requirements need to be analysed and addressed, ideally through a sectoral socialdialogue.

Exchange of staff and know-how needs to be organised on all levels, from shop floor toacademia.

A publicity campaign, showing the vitality and sustainability of the shipbuilding industry, hasto be implemented.

Regional centres of excellence could provide crucial input for the realisation of the aboverecommendations.

Progress:

A formal Social Dialogue Committee for the shipbuilding and shiprepair sectors has beenestablished in September 2003. It is the first of its kind in the metal trades in Europe.

An Experts workshop to exchange best practice related to training & skill retention will beheld in October 2005.

As part of strengthened efforts to improve the public perception of shipyards as high-techproduction sites and to attract young people to the industry as well as highly skilledengineers, a Europe-wide Shipyards Week is planned for March 2006.

Building a Sustainable Industry Structure

Problems:

While shipbuilding and shiprepair are for many reasons a strategic industry for Europe, theindustrial structure is not optimal to achieve the desired results.

International trade distortions, problematic investment decisions, in particular in Asia, andchanging business patterns need to be met with a comprehensive European response.

EU enlargement will create additional needs for industrial consolidation, but it will alsooffer opportunities.

Past restructuring efforts have not always produced sustainable results.

Recommendations:

Non-action is not an option, neither is protectionism: The EU of the 25 must furtherdevelop its policy approach to the sector, in line with its principles on industrial policies.

A consolidation process among European producers should be facilitated, providingincentives to remove less efficient production capacity and thereby freeing resources fornew investments.

The current closure aid rules in the EU should be scrutinised with the view to facilitate amore pro-active approach, based on the idea of aid to consolidation.

Progress:

The consolidation process in European shipbuilding is continuously developing. In particu-lar Aker Yards have shown that strengthened corporate structures can be the basis for asuccessful IPO.

Systematic analysis of parts of the European industry have identified an insufficient levelof net equity, often leading to investment congestion; further discussions on this issue,

developing possible means to address it, are on-going.


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World Trade Organisation (WTO)

In 2005, the World Trade Organisa-tion has concluded its work relatedto a complaint by the European Unionagainst the Republic of Korea as wellas counter complaints filed later. Themarket distortions concerned wereinitially addressed in June 2000, whenthe European Commission and Koreasigned a bilateral agreement (AgreedMinutes) to promote fair and com-petitive market conditions in shipbuild-

ing. The parties agreed to a number ofobligations including the issue of subsi-disation as well as other aspects suchas financial transparency or preven-tion of dumping. However, it appearedvery soon that the Korean governmentcould not implement the Agreed Minutes. Consequently after several fur-ther bi-lateral talks, the EC decided in June 2002 to request WTO disputesettlement proceedings and as well asto implement a Temporary DefenseMechanism(TDM) operating aid of

up to 6% of the contract value forcontainerships, product and chemicaltankers and LNG carriers. The Koreangovernment filed a counter-complaintin September 2003 targeting mainlythe TDM.

The WTO adopted the ruling on the case brought forward by the EC on 11 April 2005. It found thatKorea had indeed granted prohibited export subsidies. However, the EC claim that Korea was also grantingactionable subsidies which caused injury and serious prejudice to the EC was rejected. The WTO Paneldid confirm that substantial amounts of debt held by three of Koreas most important shipyards wereactually forgiven or otherwise restructured by state-owned and state-controlled banks. However, these

measures were not found to breach WTO rules, because the EC could not establish sufficientevidence to show that the banks acted on government order, aiming to bail out the shipyards.

The ruling on the counter-complaint brought forward by Korea was published by the WTO on 22April 2005. Korea challenged the TDM on the grounds of four different articles. It claimed that theTDM caused distortion of competition in breach of two GATT articles and was a specific actionthat does not take one of the forms authorised by the SCM Agreement. The WTO Panel rejectedall these claims, while supporting Koreas in one respect, namely the purpose of the TDM. Whilethe EU saw the TDM as help to yards which suffered an injury, the WTO saw it as an instrument topress Korea to stop subsidising its shipyards. The latter, however, is the exclusive right of the WTOand, therefore, has been seen as contstituting a violation of the ECs obligations. In any case, theTDM had already expired on 31 March 2005 and a prolongation was not intended.

4. International relations

Internationally bindingrules are essential tostabilise the marketand facilitate sus-tainable development


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Internationalrelations

Organisation for Economic Co-operation and

Development (OECD)

The business environment of European shipyards is determined to a large extent by global fac-tors. For centuries, seagoing vessels have traded worldwide and their owners have purchasedtheir equipment globally. Although the shipbuilding market has been a global one earlier thanmost other markets for manufactured goods, it does not enjoy globally applicable trade rules tothe same extent. Tackling this problem, the OECD Council decided on 12 September 2002 tolaunch new negotiations on a new Shipbuilding Agreement to bring about normal competitiveconditions in the world shipbuilding and repair industries. The Council mandated a so-called Spe-cial Negotiating Group (SNG), to review and address market distorting factors, in particulargovernment support measures, pricing and other practices which distort normal competitiveconditions in the world shipbuilding industry, as well as mechanisms to deal with these.

CESA strongly appreciates and supports these efforts; in particular as the circumstances in theshipbuilding sector establish a particularly challenging trade policy case. The need for an inter-national agreement on normal competitive conditions in world shipbuilding remains of utmostimportance. The fact that the market currently experiences a better supply/demand balance thanat any time during the last two decades does not alter the necessity for internationally applicablerules. On the contrary, it cannot be expected that the current high level of ordering will continue,and the accelerated increase of world wide production capacity, sparked by the recent order boom,will undoubtedly have lasting impact. Consequently, the structural imbalance of supply and demandremains a persistent problem.

On this background, CESA has advocated an effective agreement to include:

a subsidy discipline, a pricing discipline, and a workable procedure including effective remedies.

The WTO case brought by the EC against Korea was intended to clarify important issues related tosubsidies. However, the WTO only condemned illegal export subsidies granted to Korean shipyards.Even though it confirmed that substantial amounts of debt held by three of Koreas most importantshipyards were actually forgiven or otherwise restructured by state-owned and state-controlledbanks, the Panel did not, on the basis of the evidence available, conclude that these measures wereactionable subsidies.

The legal difficulties encountered during this pure anti-subsidy procedure have confirmed CESA inits opinion that an international agreement for the sector can only be effective if a subsidy disci-pline is complemented by a workable pricing discipline. A predatory pricing policy by an individualyard - i.e. offering prices below its costs - can be maintained for a considerable time-span, evenseveral years. Sufficient cash-flow to continue operation may artificially be generated through fastgrowing orderbooks and the use of long lead times combined with high down-payments. Until theultimate failure, which such a business model would inevitably produce under normal market condi-tions, numerous competitors will have suffered considerable injury.

Experience has shown that political dynamics may make it very difficult for governments to refrainfrom supporting an important company in difficulties. This is often referred to as too big to fail.However, enforcing an effective pricing discipline, which prevents prices below the real productioncost of the respective company, actually prevents the accumulation of debts in the first place.


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JECKU

Going back to an initiative launched in 1990, JECKU has established itself as a fixture in theagenda of CEOs from the leading shipyards around the world. The abbreviation reflects theparticipating countries, i.e. Japan, Europe, China, Korea and USA. The Top Executive meeting JECKU2004 took place in Maastricht on 13-15 October 2004, hosted by the European Delegation. ForEurope, the event is traditionally organised by EUROYARDS EEIG, this time supported by the CESASecretariat. While in past years focus was mainly given to the different views on the developmentsin the world shipbuilding market, new items have been introduced to the agenda such as shipyardsincluding material cost development.

The JECKU 2005 meeting will be hosted by China.

Tripartite

The so-called Tripartite meeting is an international gathering of representatives from shipyards,shipowners and classification societies. In November 2004, the fourth of its kind was held inYokohama (Japan), attended for the first time by CESA as an observer. The largest part of the meet-ing dealt with an initiative by the International Association of Classification Societies (IACS) toestablish common rules, initially for tankers (Joint Tanker Project) and Bulk Carriers (Joint BulkerProject). While these two shiptypes constitute important markets only for a limited number ofEuropean yards, the discussions were followed with great interest also and in particular as further

common rules projects for other shiptypes are expected.

Other issues addressed by the gathering were of immediate relevance to European yards, includingquality standards, ship recycling or the triangular relationship between the yard, the client and theclassification society.


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Research,development&innovation

Shipbuilding has changed its fundamental character from a mainly labour-intensive industry sec-tor to capital and know-how dominated high-tech production sites. Many European shipyards areconcentrating on a very select product portfolio, often comprising custom-made highly optimisedone-off products. Consequently, there are a number of elements in the production process forwhich automation is not a cost-efficient option, leading to particularly high requirements regardingthe qualification of the workforce.Competing with producers in low labour-cost countries means the success of European shipyardsis crucially linked to innovative products and smarter ways of production. The permanent challengeis to innovate faster than the competitor can imitate. Therefore all efforts to further strengthen theresearch, development and innovation capabilities are strongly emphasised.

Framework Programme activities

Framework programmes

The European Union is supporting scientific research and technological development by funding,to contribute to the realisation of the Lisbon agenda for growth and competition. The main instru-ments for this funding are the consecutive EU R&D Framework Programmes (FP).

5. Research, development and innovation

The permanentchallenge is toinnovate fasterthan the competitorcan imitate.


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CESA, in particular its standing R&D working group COREDES, is actively defining and communica-

ting its R&D needs. Together with the other maritime stakeholders (e.g. ship owners, classificationsocieties, outfitters, port operators, infrastructure builders, research institutes, etc.) and in the con-text of the Maritime Industry Forum, a strategic planning group compiled and updated a MaritimeIndustry R&D Master Plan, which contributed to the EU research policy and to the allocation ofsufficient EU funds during the previous (FP5) and the ongoing (FP6) Framework Programme. Theseactivities have been partly supported by the European Union through the instrument of ThematicNetworks, of which CESA co-ordinates ERASTAR.

Including the second call, which was the last one finished during the report period, the maritimesector has launched EU research and development projects with a total value of almost 180 M,of which approximately 107 M will be funded by the EU. Nearly 45% of the project partners areenterprises of the maritime industry (to a large extent shipbuilding and shiprepair yards).

A new instrument under FP6 is the Integrated Projects (IP). The largest IP accepted in the entireprogramme so far is INTERSHIP, in which 7 major European shipyards teamed up with numeroussuppliers, universities and research institutes, to develop ambitious integrated design and manufac-turing processes for complex one-off type ships, e.g. for cruise and RoPax ships. Further IPs andNetworks address main engines for ultra low emissions, maritime structures, application of newsafety regulation philosophies, fluid computation and, coordinated by CESA, a scenario-based thinktank of shipbuilding industry and maritime universities for medium term product ideas.

Since spring 2004, the preparations for the FP7 are ongoing. COREDES has contributed to thesepreparations in the first line. An important result of these activities is the Technology PlatformWATERBORNE, on which in the future all stakeholders in the maritime (transport) sectors as wellas those of the inland waterways shall reach consensus and formulate their medium to long term

vision and strategic research agenda, according to the European Commissions new R&D policy.WATERBORNEwas launched in Bremen on 25 January 2005, in the presence of the Vice-President ofthe European Commission, Gnter Verheugen. COREDES acts as the secretariat of the TechnologyPlatform, which was a major prerequisite to maintain a high attention level in the commission.

Innovation aid

Public support for the development of prototype products is available to various industry sectorsunder horizontally applicable framework. Such incentives aim to increase the competitiveness byenabling the producer to better cope with the high risk related to the commercial exploitation

of new developments. Prototypes in shipbuilding are regularly developed on the basis of a salescontract with a client that wishes to operate the innovative ship. However, the risk of the un-tested technology constitutes a substantial hurdle to the conclusion of such contracts. The 1998shipbuilding regulation (EC 1540/98) was intended to provide a specific incentive to stimulate moreinnovation in shipbuilding. However, due to administrative difficulties, these provisions were neverable to be applied. Therefore, the new Commission Framework on support measures for shipbuil-ding, which entered into force in the beginning of 2004, needed to improve and strengthen sup-port for innovation. A new definition of the concept of innovation tailored to the special needsof the shipbuilding industry was introduced and the percentage of State support for expenditureon investments needed to fund the innovative aspects of the project doubled from 10% to 20%.The important work carried out by the LeaderSHIP 2015 initiative was a key driver behind the newprovisions. CESA also took a central role through informal cooperation with DG Competition, inadvising Member States as to the national implementation of innovation aid.


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Research,development&innovation

Preparatory Action Security Research (PASR)

The Preparatory Action on 'Enhancement of the European industrial potential in the field of Secu-rity Research 2004-2006' constitutes the Commission's contribution to the wider EU agenda foraddressing key security challenges facing Europe today. It focuses in particular on the development

of a security research agenda to bridge the gap between civil research, as supported by EC Frame-work Programmes, and national and intergovernmental security research initiatives and defenceprogrammes.

The PASR will also address how best to serve the various end user communities, from public ser-vice organisations to government departments to industry and the wider public.The budget available for security research amounts to 15 M per year. This budget is managedby DG Enterprise and complements DG Researchs FP6. PASR will ultimately form the basis for aEuropean Security Research Programme from 2007.

The first call for proposals, opened 31 March 2004 and closed 23 June 2004, allocated funds to 7projects (equivalent to STREP in FP6) and 4 supporting actions (equivalent to CA in FP6). These

projects and supporting actions can be funded up to 75%. PASR-2004 aims to develop, demonstrateand validate technology solutions for security problems in the following five priority areas:

Improving situation awareness Optimising security and protection of networked systems Protecting against terrorism

(including bio-terrorism and incidents with biological, chemical and other substances) Enhancing crisis management Achieving interoperability and integrated systems for information and communication

The second call for proposals, opened on 5 February 2005 and closed on 3 May 2005, is expectedto fund six to eight projects and supporting activities. Selected projects will be 'mission oriented', i.e.capable of delivering tangible results that address the 'immediate security challenges' facing Europe.

The priority areas, on which PASR-2005 concentrates, are the same as in 2004.

Shipyardsactivelyengage in

SecurityResearch


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Technical issues regarding ship safety, marine environment pro-tection and maritime security are of increasing significance for

the European shipbuilding and its industrial associations. Within the LeaderSHIP 2015 initiative, thisperception has been materialised in the key area Promoting Safer and More Environment-friendlyships recommending a more transparent, uniform, efficient and independent system of technicalsurveys of vessels and promoting a quality assessment scheme for shipyards at world-wide level.A high level of transport safety and environmental protection is an important responsibility of allindustry players and a strict implementation and export of EU legislation to the international levelit will contribute to maintain and strengthen the newbuilding and shiprepair capabilities in Europe.

To further underline CESAs commitment in this field, it decided to incorporate the promotion ofsafe and environmentally friendly shipping, including an active contribution to the work of the IMO

into its statutes. Furthermore, CESA reorganised its working structure in order to efficiently co-ordinate all regulatory activities which are - regardless of the institutions involved - based on a com-mon set of technical topics, in a Technical Advisory Committee (TAC).

The activities of the new TAC comprise the monitoring of technical/regulatory developments andthe dissemination of information to other CESA bodies and National Associations. It serves as adiscussion forum in order to support the formation of opinion on CESAs technical line of policyand provides the CESA Board with recommendations and proposals facilitating the decision pro-cess. TAC may delegate specific technical issues to dedicated subgroups for in-depth analysis andposition elaboration.

International Maritime Organisation (IMO)

In 2004, CESAs commitment to these topics has again been demonstrated through active con-tribution to technical and regulatory institutions. CESA has consultative status with the Interna-tional Maritime Organisation (IMO) and the Central Commission for the Navigation of the Rhine(CCNR). Although the European institutions, in particular the European Commission (DG Energy& Transport) and the European Maritime Safety Agency (EMSA), are becoming increasingly impor-tant as regional regulators of ship safety and marine environment related topics, IMO is - due toits international mandatory character - the institution of central significance. In 2005, CESA enjoys25 years of IMO membership as a non-governmental organisation and is still the only voice of theshipbuilding industry with consultative status.

6. Safety and environment

Promoting safer and moreenvironment-friendly shipsreflects good industrialresponsibility andsecures future markets


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Safetyandenvironment

The following paragraphs give an overview on significant regulatory projects which are under con-

sideration or have been finalised at IMO in the time period covered by this annual report.

Marine Environment Protection at IMO

Protection of fuel tanks - In 2004, the Sub-Committee Ship Design and Equipment (DE) ad-dressed the risk associated with the carriage of large amounts of unprotected fuel oil in all ship-types, which in case of container vessels have bunker capacities in excess of the cargo tank volumesof small tankers requiring double-hull protection.

In order to prevent or reduce spillage of oil carried as fuel in case of collision or stranding, DE 48developed a new draft MARPOL Annex 1 regulation Oil Fuel Tank Protection that is intended to ap-ply to all new ships (and major conversions) with an aggregate oil fuel capacity of 600 m3 and above.The draft regulation gives requirements for the protective location of the fuel tanks (double-hullrequirements based on aggregate fuel tank capacity) and includes a maximum capacity limitation of2 500 m3 per oil fuel tank. Based on a CESA submission, the Sub-Committee decided on the use ofthe probabilistic approach (simplified oil outflow analysis) as an alternative method to prescriptivedouble-hull requirements.

Ballast water management - According to the International Convention for the Control and Man-agement of Ships Ballast Water and Sediments which has been adopted at the Diplomatic Conferencein February last year, all ships will have to implement a Ballast Water and Sediments ManagementPlan, to carry a Ballast Water Record Book and they will be required to carry out ballast watermanagement procedures to a given standard. Existing ships will be required to do the same, butafter a phase-in period.

The Diplomatic Conference also agreed on an action plan for the development of guidelines toprepare the implementation of the Convention which has subsequently been pursued by the IMOMarine Protection Committee (MEPC). However, only two (out of 12) guidelines could be finalisedat MEPC 52 with a view to their adoption at MEPC 53, i.e. Guidelines for Approval of Ballast WaterManagement Systems and Procedures for Approval of Ballast Water Management Systems. Work on theGuidelines on Procedure for Approval of Prototype Ballast Water Treatment Technologies is advanced to alarge extent. The remaining guidelines will be further developed intersessionally and at BLG 9.

Recycling of ships - In December 2003, the Guidelines on Ship Recycling had been adopted bythe IMO General Assembly. The guidelines give advice to all stakeholders involved in the life cycle ofa ship, i.e. administrations, flag, port and recycling states, as well as shipbuilders, repairers and recy-

cling yards. Amongst others, they introduce a Green Passport to accompany the ship through itslifetime and an inventory of potentially hazardous materials. The guidelines also address a numberof issues with direct relevance for shipbuilders and repairers:

- Ship designers and shipbuilders are encouraged to use preferably materials which can besafely recycled and to minimise the use of materials known to be potentially hazardous tohealth and the environment;

- If possible, ship/equipment designers are encouraged to recommend designs to shipoperators that minimise/prevent waste at the source/end of the operating life of the ship;

- Substances prohibited or restricted by International Conventions should not be used in theconstruction, refit and repair of ships;

- Ship designers and shipbuilders, without compromising safety or operational efficiency, areencouraged to facilitate recycling and removal of hazardous materials.

Although the guidelines were originally designed as a non-mandatory instrument, MEPC is now in


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the process of identifying the elements for which a mandatory scheme may be regarded as best

option for their implementation. The other important task is the development of a single list ofpotentially hazardous materials instead of the existing three annexes.

As regards the identification of possible elements for mandatory application, a table of the initialelements was drafted at MEPC 52. This contains the prohibition/restriction/minimisation of theuse of potentially hazardous materials in new ships (a similar proposal was made regarding exis-ting ships). Upon intervention by CESA, supported by some Member States, that this could havenegative effects to the technical evolution in shipbuilding, the word minimisation was added. Thiscould also be the case regarding the meaning of potentially hazardous materials, for which noclear definition was yet provided. The provisions related to the Green Passport were also amongthe issues for whom a mandatory application would be considered appropriate. As a consequence,shipbuilders would be obliged to provide all new ships with a Green Passport.

Regarding the development of a single list of potentially hazardous materials, only a layout for sucha list has been prepared so far. Further work will be done by the Correspondence Group and du-ring a three-day intersessional meeting to be held the week before MEPC 53. The CorrespondenceGroup will be chaired by Norway, and Greece volunteered for the further work on the single listwithin this group. Since the issue of ship recycling is an important one for the shipbuilding industry,CESA will continue to participate actively in the future work of the Group.

Air pollution from ships MARPOL Annex VI onAir Pollution from Ships has entered into force on 19May 2005 after the ratification thresholds for entryinto force have been met.

Draft amendments to MARPOL Annex VI whichwere approved at previous sessions of theCommittee, have been reviewed at MEPC 52 witha view to their adoption at MEPC 53. They relateto the designation of the North Sea area as a SOxEmission Control Area and the introduction of theHarmonised System of Survey and Certification intoMARPOL Annex VI.

Progress was made on the draft Guidelines on the CO2Indexing Scheme. IMO Member States were urgedto carry out trials using the scheme and to report tothe next MEPC. MEPC agreed that a CO2 indexingscheme should be simple and easy to apply and takeinto consideration matters related to constructionand operation of the ship, and market based incen-tives.

MARPOL Annex I and Annex II revision - The revised MARPOL Annex I Regulations for thePrevention of Pollution by Oilwas adopted by MEPC 52 and is expected to enter into force on 1 Janu-ary 2007. It incorporates the various amendments adopted since MARPOL entered into force in1983, including the amended regulation 13G (regulation 20 in revised Annex I) and regulation 13H(new regulation 21) on the phasing-in of double hull requirements for oil tankers. It also separates,in different chapters, the construction and equipment provisions from the operational requirementsand makes clear the distinctions between the requirements for new ships and those for existing

ships. The revision intends to provide a more user-friendly, simplified Annex I.

Clean shipsfor

clean seas


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New requirements in the revised Annex I include new regulation 22 regarding Pump-Room Bottom

Protection: on oil tankers of 5 000 tonnes deadweight and above constructed on or after 1 January2007, the pump-room shall be provided with a double bottom; regulation 23Accidental Oil OutflowPerformance - applicable to oil tankers delivered on or after 1 January 2010; construction require-ments to provide adequate protection against oil pollution in the event of stranding or collision.MEPC also adopted a resolution giving explanatory notes on matters related to the accidental oiloutflow performance required under regulation 23.

MEPC 52 also approved the revised Unified Interpretations to the revised MARPOL Annex I and a Cir-cular on cross-reference lists between the oldand newregulations ofMARPOL Annex I to facilitatefamiliarisation with the new numbering system of the revised Annex I.

The revised Annex II Regulations for the Control of Pollution by Noxious Liquid Substances in Bulk wasalso adopted and is expected to enter into force on 1 January 2007. The new Annex contains a

new four-category pollution categorisation system for noxious liquid substances (X, Y, Z and OtherSubstances). The revised annex includes a number of other significant changes, such as significantlylower permitted discharge levels of certain products which have been incorporated into Annex II.

Consequential amendments to the International Bulk Chemical Code (IBC Code) were also adoptedat MEPC 52, reflecting the changes to MARPOL Annex II. The amendments incorporate revisionsto the categorisation of certain products relating to their properties as potential marine pollutantsas well as revisions to ship type and carriage requirements following their evaluation by the Evalu-ation of Hazardous Substances Working Group. Ships constructed after 1986 carrying substancesidentified in chapter 17 of the IBC Code must follow the requirements for design, construction,equipment and operation of ships contained in the Code.

Maritime Safety and Security in IMODamage Stability - In 2004, IMO finalised a substantial revision of SOLAS Ch. II-1 aiming at har-monised damage stability requirements for all shiptypes except tankers. With the draft approved atthe 79th session of the Maritime Safety Committee (MSC), the subdivision of passenger vessels,RoRo and cargo ships will be performed by means of a common probabilistic method, which hasbeen successfully used for cargo ships since 1990. Although the European shipbuilders welcome aperformance based approach to ship stability in principle, CESA - in close co-operation with ship-yards - raised concern with regard to the current status of the draft proposal due for adoption inMay 2005.

In particular, the late decision to terminate maintaining an equivalent level of safety compared to the

existing requirements for passenger ships raised criticism, since no compelling need for the require-ment to meet a higher standard than that currently provided in SOLAS had been demonstrated inthe preceding decade of this legislative project. The proposed Required subdivision index R, increasingsignificantly with ship size and number of persons on board, will induce substantial design modifica-tions, which require the evaluation of the impact on other safety aspects defined by existing regula-tions in order to ensure consistency and compatibility with other SOLAS Chapters.

In addition, the proposed amendments necessitate appropriate phase-in periods for the new regu-lations. The extreme high value of large cruise ships and long time range of such projects leave noroom for experimental rule development that might lead to interim regulations requiring furthermodifications after a short period of time. Therefore, the European shipbuilding industry needs IMOregulations that achieve the highest possible level of both maturity and continuity.


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Some of the concerns have been successfully addressed in an intersessional meeting of the Working

Group on Subdivision and Damage Stability in January 2005. However, some topics of consistency(Life saving appliances) still have to be considered in the drafting process at the upcoming MSC80 session. In order to arrive at a user-friendly formulation and homogenous interpretation of therevised damage stability requirements, the European shipbuilders will have to closely follow andinfluence the development and adoption of the Explanatory notes in time before the entry intoforce of the revised SOLAS Ch. II-1.

Passenger Ship Safety - The proactive initiativefor the development of new requirements concern-ing the safety of future large passenger ships finallyreturned to a normal SOLAS development. In con-sidering a proposal offering three parameters forthe purpose of characterising a large passenger

ship in order to enable to facilitate the work on thisagenda item, the majority concurred with the recom-mendation to develop requirements for all passengerships regardless of size. Therefore, the Committeeagreed to rename the work programme item Pas-senger Ship Safety and instructed subsidiary to de-velop relevant parameters, as necessary, for application purposes of any proposed require-ments and recommendations, bearing in mind that a one size fits all approach should beavoided since each area of safety (i.e. fire, machinery, stability, lifesaving, search and rescue, etc.) hasdifferent concerns.The revised approach is based on the premise that the regulatory framework should place moreemphasis on the prevention of a casualty from occurring and that future passenger ships should

be designed for improved survivability so that, in the event of a casualty, persons can stay safely onboard as the ship proceeds to port.

Bulk Carrier Safety - In response to an alarming number of bulk carrier losses, IMO hasfinalised a comprehensive set of measures comprising requirements addressing operational issuesas well as structural and equipment related standards, focussing on the hull envelope, closing appli-ances and evacuation. The MSC adopted amendments to SOLAS Ch. XII (Additional safety measuresfor bulk carriers) incorporating a new Reg. 14 on restrictions from sailing with any hold empty andnon-mandatory requirements for double-side skin construction as an optional alternative. The op-tion of double-side skin construction applies to new bulk carriers of 150 m in length and over, car-rying solid bulk cargoes having a density of 1 000 kg/m3 and above. An amendment to SOLAS Reg.31 in Ch. III (Life-saving appliances and arrangements) makes the carriage of free-fall lifeboats on allbulk carriers mandatory.

With regard to draft new requirements relating to double-side skin bulk carriers the Committeeconsidered contradictory Formal Safety Assessments without reaching consensus. The Committeesdecision not to make double-side skins mandatory was taken by a simple majority of the flag statespresent and voting. This procedure clearly demonstrates that the number of flag states at IMO is,besides tonnage represented, a major factor for success, which should be taken into account whenconsidering the EU approach to IMO.

Safety of Navigation - In 2004, IMO continued to introduce carriage requirements for VoyageData Recorder (VDR) for existing ships to assist in accident investigations. Under SOLAS Reg. V/20,passenger ships and ships other than passenger ships constructed on or after 1 July 2002 must carryVDR. The new Reg. 20 defines a simplified voyage data recorder (S-VDR) that does not store so

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detailed data as a standard VDR, but should maintain information concerning the position, move-

ment, physical status, command and control of a vessel over the period leading up to and followingan incident. The phased-in carriage requirement for S-VDR will apply to existing cargo ships of3 000 GT and upwards.

Goal-based new ship construction standards (GBS) - IMO continues its approach to be-come involved with the structural standards to which new ships are built. The new work pro-gramme item gained momentum through ageneral plenary discussion and a subsequentworking group (WG) at MSC 79. The Com-mittee decided that goal-based new ship con-struction standards should be broad, over-arching goals against which ship safety should beverified at design and construction stages and

during ship operation. They are not intendedto set prescriptive requirements or to givespecific solutions.

Consensus was reached on a five-tier approachto the further development of the basic prin-ciples: Tier I (Goals), Tier II (Functional require-ments) and Tier III (Verification of compliancecriteria). It was agreed that Tiers IV (Technicalprocedures and guidelines, classification rulesand industry standards) and V (Codes of prac-tice and safety and quality systems for shipbuild-

ing, ship operation, maintenance, etc.) wouldbe developed by classification societies and in-dustry organisations. Tier I goals and workingdescriptions address safety and environmentalfriendliness with respect to structural inte-grity and strength, dismantling and recycling, accessibility, inspection and proper maintenance. Theyinclude provisions regarding operating and environmental conditions and specified design life.The group also developed basic Tier II functional requirements, for the time being relating to bulkcarriers and tankers only.

The deliberations so far exposed a wide range of divergent views held by different administrationsand observers. CESA supported a risk-based approach to goal-based standards and emphasisedthe importance of a holistic view of newbuilding and life cycle aspects including competenciesrequired at shiprepair yards. With regard to the design accessibility for verification, CESA stressed theimportance of the protection of the intellectual property rights of shipyards.

The GBS initiative is another example of the IMO tending to go ashore, which means that theOrganisation is more and more deviating from its traditional method of setting technical require-ments for the design and operation of ships in international service. The development of GBS couldsoon incorporate minimum requirements concerning a harmonised international ship productionstandard addressing in detail the building methodologies within shipyards, as it is already under waywith the work programme item Development of performance standards for protective coating.The results obtained from a class and shipowners initiative in the field of protective coating clearlydemonstrate that such an approach is only acceptable, when it draws from the competence ofshipyards.

CESA supportsgoal-based stan-dards emphasising

a holistic view andIPR protection


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Maritime Security - In the field of this philosophy has already materialised in a new Code specifi-

cally addressing security issues at port facilities including shipyards. In 2004, the MSC consideredissues relating to the implementation of the maritime security measures which have entered intoforce on 1 July 2004. The MSC, recognising that the consistent, uniform and harmonised imple-mentation of the control and compliance measures will contribute towards the enhancement ofmaritime security, adopted a resolution on Interim Guidance on Control and Compliance Measures toEnhance Maritime Security.

CESA provided the Committee with the shipbuilding industries legal position concerning the ap-plication of the provisions of SOLAS Ch. XI-2 and the ISPS Code with regard to shipyards. CESAdoubted in particular the applicability to newbuilding yards since a ship under construction is not aSOLAS ship on international voyage and since contractual agreements could not be applied by wayof analogy in public international law.

The Committee approved Guidelines for the Implementation of SOLAS Ch. XI-2 and the ISPS Codewhich provides guidance on security measures and procedures to be applied at the ship/port inter-face dealing with either a non-compliant ship or port facility. It contains also specific interpretationsregarding ships interfacing with an FPSO or an FSU and concerning the implementation of the ISPSCode in relation to shipyards.

Although MSC/Circ. 1111 acknowledges to some extent CESAs position and distinguishes inprinciple between newbuilding and shiprepair yards, IMO refers the designation of shipyards asport facilities to national administrations which should base their decisions on local circumstances.Therefore, CESA raised concerns as to the wide variety of views expressed by national delegationsconcerning the application of the ISPS Code to shipyard. In application, this lack of unanimity couldlead to the inequitable implementation of the provisions world-wide, resulting in market distortions

in shipbuilding, repair and conversion.

Technical Cooperation with the European Institutions

In view of the increasing role of the EC on safety matters, including in particular in the context ofIMO activities, CESA aims to ensure that the interests of European yards are better taken into ac-count. To fulfil this purpose CESA is establishing itself as a constructive and competent partner toall the European Institutions.

In April 2004, EMSA, while still in the process of establishing full operation, initiated a High Level

Panel on Double Hull Tankers in order to stimulate an informed debate between the Industry1

andregulators2 and to identify pro-active measures that would lead to further improvements in tankersafety and protection of the marine environment. The Panel agreed to collect and analyse feedbackfrom experience in the design, construction, operation, maintenance and survey of double hulltankers of all types and sizes and identify factors that may have an adverse impact on the structuralintegrity of the vessels. It met six times and concluded on eight targeted recommendations whichare listed below.Large oil tankers cannot be considered as core business of most European shipyards. Nevertheless,selected European shipyards for repair as well as newbuilding hold outstanding expertise so that, bycontributing to the discussion, CESA underlined its dedication to play a role as a constructive andcompetent partner for EMSA. It is expected that similar initiatives covering other areas and shiptypes might follow in due course.

1 Represented by BIMCO, CESA, IACS, ICS, INTERTANKO, OCIMF.2 Represented by officials from EMSA, the European Commission (DG TREN) and IMO


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The Panel identified the following areas of concern:

corrosion in ballast tanks due to coating break-down; corrosion on uncoated deckhead and tank topstructures in cargo tanks; corrosion and fatigue inballast and cargo tanks, cracks due to fatigue, variations

in workmanship and construction standards during new building and during repairs, cargo seepageinto ballast tanks (double hull spaces). To tackle with these issues, the Panel agreed to recommendrespectively

to improve the coatings performance by introducing mandatory requirements for coatingperformance standards within SOLAS 74 (Reg II-I/3-2);

to introduce requirements for coatings on cargo tank deckhead and tank top structures

within SOLAS 74 (Reg II-I/3);

to establish a performance standard for cargo tank coatings by introducing mandatoryrequirements within SOLAS 74 (Reg II-I/3);

to establish harmonised maintenance procedures by making hull maintenance mandatoryfor vessel owners (in line with the ISM and TSCF Maintenance manual);

to develop an appropriate response to fatigue failures that includes fatigue analysis whenappropriate and pro-active repairs or modifications as may be necessary by modifying IMOResolution A.744(18) and demanding IACS to develop guidance for field surveyors;

to establish hull construction standards and to harmonise the content, standards and

procedures of the initial hull Classification survey;

to harmonise the content and standards of initial statutory surveys by making IACS hullconstruction standards for new and existing vessels a mandatory minimum (and includeTSCF recommendations for repairs), by requesting IACS to develop unified require-ment for initial hull classification surveys and by considering modifications to IMOResolution A.948(23) to improve initial statutory surveys;

to install a fixed hydrocarbon gas detection system to allow constant monitoring ofdouble hull tank atmospheres by amending SOLAS 74 Reg. II-I/5.7 to require provision offixed gas detection systems in new tankers along industry best practice.

Premium safety -double hull tankersproduced in Europe


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Erika III package

In preparation of the so-called Erika III safety package, The European Commission (DG TREN)consulted the Maritime Industry3 on several issues in May 2004 and in February 2005. DG TRENsconsultation procedure included questionnaires and a general forum for an open debate.

The discussion topics of the first consultation (May 2004) were: Flag State Compliance; PortState Control; amendment of the Directive on a Vessel Traffic Monitoring and Information System;Approach to Marine Casualty Investigations in the EU; Liability and Compensation, Maritime LabourStandards. The next discussion topics of the second consultation (February 2005) were : Passengers- Proposal for a Regulation on the liability of carriers of passengers by sea in the event of acci-dents; Freight Proposal for a Regulation on financial guaranty for ships; Modification of the TrafficMonitoring Directive; Classification societies questionnaire for consultation; Modification of thePort State Control Directive (95/21/EC).

In both consultations, CESA participated actively and provided appreciated contributions.

Central Commission for Navigation on the Rhine (CCNR)

In December 2003, CESA has been formally recognised by the Central Commission for Navigationon the Rhine (CCNR) as a non-governmental organisation in the CCNR. This enables CESA to par-ticipate in certain CCNR activities, including

Further development of technical rules for inland shipping; Participation in working groups, e.g. Ships of the future;

Promotion of the environmentally-friendly character of inland shipping, in particular bystimulation of environment saving technical precautions.

During 2004, the CESA-CCNR activities concentrated on the actual revision of Chapter 15 of theRhine Vessel Inspection Regulations regarding rules for passenger vessels (both vessels for day tripsand cabin vessels).In February and April 2004, CESA position papers were submitted in conjunction with the shipow-ners association European Barge Union, another CCNR recognised NGO. The CESA objections tothe proposed new rules concentrate in particular on stability and freeboard requirements, as wellas on the extremely long validity period of transitional provisions which would have a very negativeinfluence on the realisation of the envisaged safety improvements.The executive secretariat of the CESA-CCNR activities is performed by the Netherlands

Shipbuilding Industry Association (VNSI).

Modern vesselsensure top-competitiveness ininland navigation

3 Represented by CESA; ECSA; EMPA; ESC; ESPO; ETA; ETF; IACS; ICS; INTERCARGO; INTERTANKO; P&I CLUBS; OCIMF


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Socialdialogue

The key factor to success is the people who carry out the

business. European yards benefit from the excellent skilllevels and the dedication of their workforce. Securingcontinued access to a skilled workforce is of vital impor-tance for the long-term competitiveness of the industry.Thus, CESA has committed itself to a policy of fosteringSocial Innovations. This is also one of the key areas thatLeaderSHIP 2015 has identified.

The evolution of shipyards towards a structure assystem integrators, cooperating with numeroussubcontractors has posted new challenges regard-ing skills and adaptability. Moreover, the industry hasnot sufficiently communicated a positive and attractive

image to the general public.

During years of trustful, constructive and pragmaticcooperation between CESA and the European Metal-workers Federation (EMF), a European dimension in theindustrial relations in the shipbuilding sector developed.Both employers and trade unions share a commonview on the perspectives and challenges that Europeanshipyards are facing. Aiming to further strengthen thedialogue and implement Leadership 2015 recommen-dations, CESA and EMF established in 2003 a formalEuropean Shipbuilding Social Dialogue Committee

under the auspice of the European Commission, thefirst of its kind in the metal trades.

At present, the following concrete steps have beentaken by the Social Dialogue Committee in response toLeadership 2015 recommendations:

Conduct a quantitative survey to improvethe knowledge of the social, geographical andeconomic reality of the European shipbuildingsector;

Organise a workshop to exchange bestpractices in the field of qualification and training(to be held in October 2005);

Plan a Europe-wide shipbuilding week to publi-cise the attractiveness of the shipbuilding sectorand safeguard the right image of the industry thereby assisting in attracting the right peopleto the industry - skilled and young people all together (to be held in March 2006);

Consider a tool box which could contain legal instruments and information about bestpractices across the European Union as a point of reference to deal with cyclical andstructural change in the European shipbuilding sector.

7. Social Dialogue

Europeanyards benefitfrom theexcellent

skill levelsand thededicationof theirworkforce


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Global shipbuilding requirement and capacity

The global economy and international seaborne trade continued to grow in 2004 and at a veryhigh level compared to former years. Measured in tonne-miles, preliminary figures from Fearnleyssuggest that the growth in seaborne trade could be as high as 6.9%, after a 5.4% growth in 2003. Intonnes, the growth is estimated at 6.7%, whereas the growth in tonnes in 2003 was 7.0%. Both tradein oil and dry bulk increased in 2004 oil with 7.2% and dry bulk with 6.3%. Preliminary figures in-dicate that the dead-weight tonnage of the global seagoing merchant fleet increased by 5.0% during2004, or by less than the trade. The tonnage balance i.e. the balance between the transport capa-city of the fleet and the need for tonnage has thus improved. The development in world seabornetrade in past years is illustrated in the accompanying graph.

0

The CESA Working Group on Market and Forecast has observed the developments in the marketand prepared a new forecast on the requirement for new merchant ships to be built. The new studycovers the period from 2004 up to 2020.

This forecast, as with earlier similar evaluations, aims at indicating a likely future development basedon historical data and a number of assumptions as to the future development in factors of impor-tance to the future need for new ships. The forecasts focus on the long-term trends, not on fluctua-tions year-by-year. The table hereunder shows the key figures for the latest forecast.

8. Global shipbuilding requirement & capacity


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Globalshipbuildingrequirement&capacity

Key figures of the CESA shipbuilding forecast

Unit 1.1.2004 1.7.2010 1.7.2015 1.7.2020

Fleet mill. dwt. 898.5 1027.4 1139.2 1242.2

Unit 2004-10 2010-15 2015-20 2004-20

Economic growthGDP p.a. based onconstant prices

3.0 2.8 2.7 2.8

GDP in PPP p.a. 3.6 3.5 3.4 3.5

Tonnage to be deleted(seagoing ships of 100 gt or more)

mill. dwt. 198.3 139.2 121.9 459.4

mill. dwt p.a. 30.5 27.8 24.4 27.8

Tonnage to be completed(seagoing ships of 100 gt or more)

mill. dwt 318.3 236.6 207.4 762.3

mill. gt 217.5 166.5 155.0 538.8

mill. cgt 156.2 119.5 114.0 389.8

mill. dwt p.a. 49.0 47.3 41.5 46.2

mill. gt p.a. 33.5 33.3 31.0 32.7

Source: CESA mill. cgt p.a. 24.0 23.9 22.8 23.6

The global merchant fleet today is relatively young compared to the recent past. The need forreplacement of ships in the fleet due to age will, therefore, contribute relatively less to the newbuil-ding requirement in the coming years compared to earlier periods. Continued growth in interna-tional seaborne trade is, however, expected to call for a relatively high level of newbuilding activityin the forecast period.

In recent years, global shipbuilding has been characterised by a high level of new orders, a high

and still increasing level of production and by continued growth in the shipbuilding capacity. Thedemand for new ships was historically high during both 2003 and 2004, and after the price level fornew ships was at its lowest in many years in 2002, it has grown to the highest level ever at the begin-ning of 2005 (measured in US $ without taking the

Documents

CESA Annual Report 2004- 2005