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Tuesday, October 16, 2018

Shipbuilding overcapacity - OECD

Current levels of over-capacity, estimated at around 15%, are largely the result of subsidies and other forms of government support that have allowed shipyards that would otherwise have gone bankrupt to continue to operate.

According to INTERTANKO, compared to December 1992, the VLCC price has declined by 37% and the price of a clean 40,000 dwt product tanker has declined by 21%. The result has been to push new ship prices to artificially low levels, as many shipyards reduce their prices to below economic levels in order to attract the business needed to keep their workforces employed. Looking at the productivity measured in Compensated Grosse Tonnes per employee of the various shipbuilding areas, both Japanese and South Korean yards have demonstrated strong improvements in productivity in the 1990s, whereas European yards (AWES Members) have virtually stagnated.

Productivity in Japanese yards was 126 CGT per employee in 1990, when they had 35,400 employees and produced 4.5 million CGT. Productivity peaked in 2000 with 178 CGT per employee, when Japanese yards had 36,000 employees and produced 6.4 million CGT.

Productivity in Korean yards was 40 CGT per employee in 1990, when they had 38,860 employees and produced 1.6 million CGT. Productivity peaked in 2000 with 111 CGT per employee, when Korean yards had 54,573 employees and produced 6.1 million CGT.

Productivity in European AWES yards was 24 CGT per employee in 1990, when European AWES yards had 144,800 employees and produced 3.5 million CGT. Productivity peaked in 2001 with 38 CGT per employee, when AWES yards had 114,800 employees and produced 4.4 million CGT.

We do not have any figures for employees in Chinese yards, but production increased from some 0.3 million CGT in 1990 to 1.1 million CGT in 2000.

World shipyard production has increased from 11.7 million CGT in 1990 to 20.3 million CGT in 2000, and fell to 18.0 million CGT in 2001.

The productivity improvements may be seen in relation to the hourly compensation, i.e. productivity increases mainly offset increasing wages. However, there have also been technological developments contributing to better productivity, that are independent of wage levels. Shipyards have also become much larger and obtain economy of scale when building ships in series.

The OECD members are joined by Brazil, China, Croatia, Romania, the Russian Federation, Chinese Taipei and Ukraine, all with important shipbuilding capacities. Together, the OECD and these non-OECD economies account for more than 95% of total world shipbuilding production.