Boom in German shipbuilding defies global industry slump

The German ship industry is defying a global trend of decline in the shipbuilding industry with a growing number of orders.

An analysis by the German Shipbuilding and Ocean Industries Association (VSM) in Hamburg, cited by “SPIEGEL” on Monday, shows that large shipbuilders in Europe and Germany, in particular, were experiencing a backlog in orders due to high demand.

The value of European orders has grown continuously to reach 48 billion euros (57 billion U.S. dollars) in June 2017, a third of which was accounted for by German shipyards. More than 40 percent of all global shipbuilding orders are currently placed in Europe.

While demand for new freight vessels has plummeted, German and European shipbuilders are hereby benefiting from their close links to the resilient tourism sector by specialising in the construction of cruise ships.

“The cruise ship industry remains a magnet for customers with ever-new attractions and passenger records” a statement by the VSM read. Twenty-six new cruise ships are due to be delivered in 2017 alone.

German shipbuilders also remain highly popular among defence sector customers. Last week, the Bremen-based Luerssen shipbuilder was able to secure an order worth 2.6 billion euros from the Australian navy for twelve military patrol boats.

The fortunes of German and European shipbuilders stand in stark contrast to worsening conditions across the wider industry. According to VSM, nearly two-thirds of all wharfs across the world have closed since 2009. Only 358 shipbuilding companies remain, of which 30 percent are working on their last vessel.

“It is to be expected that several of these wharfs will have to close down as well in the coming months.” the VSM warned. Aside from cruise ships, the industry has experienced a dramatic dearth of orders since the 2007/08 financial and economic crisis.

Wharfs are suffering from an oversupply of vessels which has seen freight and charter rates plummet along with the prices for used ships. Furthermore, shipping companies are going through a phase of industrial consolidation of their own which further stifles demand.

As a consequence, the relative strength of German shipbuilding has also attracted attention from competitors. China has announced its desire to achieve a market share of 40 percent for high-tech shipbuilding and recently formed a joint venture with the major Italian wharf Fincantieri to build cruise ships.
This development has caused anxiety in German ports that domestic shipbuilders could soon lose their advantage over commercial rivals.

“There is no reason for us to rest on our laurels” VSM Director Reinhard Lueken told “SPIEGEL”. Lueken added that the pressure of competition experienced by the German industry was “constantly rising.”

As a consequence, German policymakers would have to take steps to improve the prospects of the country’s maritime industry. The VSM voiced concern, however, that such reforms could be hampered by the lack of a stable government in Berlin.

Source: Xinhua, Der Spiegel