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December 9, 2008

European yards to banks: Asia's problems not ours

Cancellations of bulk carriers and containership orders at Korean and Chinese shipyards are having a negative effect on European shipbuilders.

According to CESA (Community of European Shipbuilders' Associations), European yards are being hurt as banks withdraw from financing shipyards because of the negative news from Asia.

CESA and its national member associations are calling on European institutions and national governments to urge banks not to initiate "industry policies" based on over-simplistic market assessment. European shipyards serve healthy growth markets and are largely engaged in solid and profitable projects, says CESA, which declares that policy makers should not accept shipyard jobs being jeopardized by irresponsible behavior on the part of banks.

European yards are mostly concentrating on specialized market niches, such as cruise ships, OSV's, ferries, yachts, dredges, small and medium sized cargo ships and naval and coast guard ships. These markets have been very profitable in recent years and are still solid. Shiprepair and conversion activities at European yards also offer good prospects for the years ahead.

CESA says the long-term perspectives in shipping are robust and that the current deep crisis in dry bulk and container shipping results from tremendous ordering activity in recent years on speculative basis. Worldwide, more than 50% of all ships on order are either bulk carriers or containerships and many Asian yards have planned capacity expansions to cater for these ship types. In contrast, only 22% of the orderbook at European yards is exposed to these two segments. The yards involved have already adapted their product portfolio towards other market segments and are now in the process of completing this shift.

CESA considers that the current global orderbook shrinkage is a necessary correction from a status of unrealistic and unhealthy over-ordering. It says the correction comes at a timely moment as it will avoid more excessive shipyard capacity being created in Asia.


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