- Industry-wide shipbuilding event commences – insights into current industry developments
Prior to the SMM maritime trade fair in Hamburg, Germany's shipbuilding industry association issues a warning about a potential turning point. Europe has been losing its share in shipbuilding for years and has already lost a significant portion of its industry, as stated by the Association of German Shipbuilders and Naval Engineers (VSM). The industry needs to stay competitive to maintain its expertise in Europe.
A long-term solution on a European level is needed, as suggested by the VSM. They refer to an unimplemented 1997 proposal by the EU Commission that suggested linking tax incentives and state guarantees with ships being built in Europe.
The SMM fair, which focuses on shipbuilding, machinery, and maritime technology, is the leading global event for the maritime industry, according to organizers. The event expects more than 2,000 exhibitors and 40,000 visitors in Hamburg from Tuesday to Friday.
How is the market trending?
Despite the warning from the VSM, utilization of most German companies is currently high. In 2021, the value of new orders in seafaring shipbuilding was approximately 2.6 billion euros, as reported in the association's annual report. This is a significant increase of around 172% compared to the previous year. Cruise ships, yachts, and merchant ships are included in seafaring shipbuilding. The inland shipbuilding sector also saw a considerable increase.
Additionally, world market prices for newbuilds, which were previously low, have increased again. The VSM anticipates this trend to continue because shipowners need to modernize their fleet to comply with environmental regulations. Low prices were a problem because high energy costs could not always be passed on to customers.
What is the mood in the companies?
The IG Metall Coast union conducts annual surveys of works councils from shipyards and suppliers. The current results show an improvement compared to last year: Over one-third of the companies expect their order situation to improve in the next two years. Only one in ten companies expects a deterioration.
What role does German shipbuilding play worldwide?
In the important area of building merchant ships such as container ships, Germany plays a minimal role. According to the UN Conference on Trade and Development, Germany's share of production was 0.45% last year. Other European countries are at a similar level.
Most ships are built in Asia. According to figures from the European shipbuilding association Sea Europe, more than 80% of all orders by value went to China and South Korea last year. Japan is also an important location. Prices primarily influence the decision for orders.
In 2006, the domestic industry still received many orders for freight ships in the civilian sector. Since then, shipyards have largely specialized in high-tech segments. In the construction of cruise ships, Germany was recently in second place worldwide - behind Italy. Between 2011 and 2021, Germany's share of cruise ship production was 29.1%, as shown by an OECD analysis. Yachts are also successfully built in Germany.
How important are shipyards for the domestic economy?
The VSM reports that around 60 shipyards employed approximately 16,700 people and generated a turnover of 6.7 billion euros last year. However, the privately-run industry is far more important than the figures suggest. A study commissioned by the Federal Ministry of Economics and Technology found that 100 jobs in shipbuilding secure 380 jobs in total. This is because shipyards work with suppliers who in turn commission further companies.
The supplier industry for shipbuilding and offshore employs around 63,000 people and achieved a turnover of around 11.3 billion euros last year, according to the German Engineering Federation. The most important location is Baden-Württemberg, where companies accounted for 27 percent of turnover. This is followed by Bavaria (20 percent) and North Rhine-Westphalia (11 percent). The figures show that shipbuilding is not just important in coastal federal states.
Who are the largest employers?
According to a survey by IG Metall, the majority of employees work for three shipyard groups. Meyer Neptun, which specializes in cruise ships, has around 4,170 employees. This group also includes the struggling Meyer Werft. In second place is Thyssenkrupp Marine Systems from Kiel with around 4,030 employees. The Thyssenkrupp subsidiary is active in naval shipbuilding and claims to be the world market leader in the construction of conventional submarines. Lürssen from Bremen, known for its megayachts and naval ships, has around 3,290 employees.
What trends are there?
A major market is converter platforms for offshore wind farms. Such a platform, which is intended to improve the transmission of electricity to land, can cost around 2.5 billion euros, according to the Federal Ministry of Economics. At least 33 new platforms are to be built in Germany by 2045. Several shipyards are preparing for the construction of these facilities. Meyer Werft is already working on one.
It is also known that some companies are dealing with ship recycling. A higher demand for steel scrap could be a driver, as a study has found. However, legal hurdles are still holding back the companies. In any case, military orders are more lucrative than old ships, which are likely to increase due to the Russian attack on Ukraine.
To adapt to the changing market trends and maintain their competitive edge, European shipbuilders should seriously consider the EU Commission's 1997 proposal regarding tax incentives and state guarantees for ships built within Europe. This strategic move could potentially help shift the shipping industry's landscape and contribute to Germany's overall shipping sector growth.
Shipping companies in Germany are actively investing in modernizing their fleets to comply with environmental regulations, which has led to a significant increase in new orders for seafaring shipbuilding. In 2021, the value of new orders stood at approximately 2.6 billion euros, a substantial increase compared to the previous year.
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In order to encourage greater investment in eco-friendly shipping technology and promote the competitiveness of European shipbuilders, it is crucial for policymakers to revisit and implement the 1997 proposal suggesting tax incentives and state guarantees for ships constructed within Europe. This initiative could serve as a long-term solution for the industry, empowering it to sustain its expertise in Europe while aligning with environmental regulations.
