The Covid-19 pandemic has accelerated structural changes in the German shipping sector, but a lack of orders suggests the industry’s slow demise may yet continue
German shipbuilding has long been decoupled from the ‘mass market’ of China, South Korea and Japan. Like its auto industry, it has built a strong reputation for quality products, especially in the specialist sectors, but the industry is not immune from the general slowdown in orders.
According to the German Shipbuilding Association (VSM), in the past four years, newbuild orders fell short of total production by more than 40%. This is against a background of considerable under-utilisation of available shipbuilding capacity. Even those orders that have been placed are not secure; VSM warns of a rise in cancellations and lays the blame on the overt and covert subsidies and blatant dumping of cheap ships onto the market by China and other Far East shipbuilding nations.
“So far, German and European shipbuilding has been able to decouple from the weak global economy in shipbuilding, due to the successful concentration on high-tech segments,” said VSM in a press release. VSM basis this statement on the superior forward cover (future work in the yard) of German shipyards versus those in the Far East. VSM estimates that the average forward cover of German shipyards is four years, compared to a VSM estimate of two years for Far East yards.
“There is now a window of only two or three years before the lack of orders means that shipbuilding work will dry up”
One of the reasons for the longer forward cover, argues VSM, is the greater complexity of the projects booked in German shipyards. According to VSM, these require longer lead times of, on average, 3.5 years. The danger, as VSM sees it, is that the Covid-19 pandemic has cut off the supply of orders for more sophisticated tonnage and this could seriously impact German shipbuilding. “There are around 2,800 (shipyard-related) companies in Germany and there are approximately 200,000 employees active in shipbuilding and marine technology,” reports VSM. “Together, they deliver about 85% domestic value-added to deliveries from German shipyards,” it claims.
The downside of the longer forward cover and the longer average construction time for vessels built in German shipyards is that there is now a window of only two or three years before the lack of orders means that shipbuilding work will dry up. “If, as is currently to be expected, orders will not be received across the board in the next two to three years, many companies will run out of work,” said VSM.
In response, VSM is calling on the German government and other European shipbuilding associations and their governments to provide incentives for the renewal of the current fleet, with more environment alternatives. VSM has also called on European institutions to tackle, in a practical and realistic manner, the overt and covert subsidies enjoyed by shipbuilders in the Far East.
But this may be too late for the construction of 10,000 dwt-plus tankers in Germany. It has been nearly 10 years since a large tanker was constructed in Germany. In 2011, the 18,900 dwt Enisey was built as an ARC7 ice-class fully coated tanker at Nordic Yards. The penultimate tanker appears to be the 2009-built Citrus Vita Brazil, an MR1 stainless steel tank fruit juice carrier.