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SEA EUROPE SHIPBUILDING MARKET MONITORING REPORT 35 OF JUNE-2014

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SHIPBUILDING MARKET MONITORING

2014 1Q

Report N° 35 – June 2014

HEADLINES

Shipbuilding Market:

- The global orderbook continues the growth trend that began in 2013 after 5 years of

decline, standing at 108M CGT.

- In the 1Q 2014 global new orders increased 60% compared to the same period last

year, accounting for a total of 14.5M CGT.

- 9.7M CGT were delivered in the 1Q 2014.

- China tripled the new orders compared to the 1Q 2014, and Japan doubles the con-

tracts thanks to the enhancement of the Yen’s competitiveness through governmen-

tal intervention.

- European yards hold the 3rd position in terms of value of the orderbook ($31.5bn)

and new orders ($3.3bn). Japan follows with $29.5bn orderbook and $2.2bn new or-

ders.

News:

- Asian financing brings new orders to their shipyards. Far Eastern banks increase

their financing to European owners

- Chinese Government’s policy for restructuring Shipbuilding Industry positions China

as world leader in number of new contracts

- Major shipbuilding countries promote local content by governmental support (Brazil,

US, China, Korea, Japan), which is a threat to EU suppliers

- European Commission DG COMP adopts Innovation Aid for R&D&I, including a clar-

ification about Shipbuilding

- Europe working towards a Blue Growth Economy, more modern, safer and greener

maritime economy.

- The EU adopts stronger rules to better defend its rights under Trade Agreements


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Restriction of use and Copyright notice

This report is intended for internal circulation only within the member-

ship of SEA EUROPE.

Due to copyright restrictions from the data sources, please contact SEA EUROPE

and ask for prior permission for any use of the information contained in this publi-

cation.

Summary Statement

Global newbuilding activity increased in the first months of 2014 continuing the trend

that began last year. Despite that it is too early to speak of recovery, signs of stabiliza-

tion can be seen globally.

New orders for all type of vessels have increased compared to the same period last

year. Bulk carriers have tripled demand, followed by gas tankers and other cargo car-

riers. Demand for these vessels is driven by the easy access to credit facilitated by

China and other Far Eastern Countries which are financing the building of new more

efficient cargo carriers built in their own countries. Demand for non-cargo carriers has

also increased. More efficient designs for reducing fuel consumption and to comply

with new international and European regulations for safer and less pollutant maritime

operations are driving the demand for these vessels.

European shipyards are increasing their activity and maintain a good position in terms

of value thanks to the specialization of the industry on Passenger, Offshore and other

specialized non-cargo vessels. However, Far Eastern countries continue leading the

shipbuilding market thanks to the governmental policies, cheaper production costs and

availability of financing. On the other hand, European marine equipment providers are

market leaders with a 43% of global shares. With the aim of increasing their market

shares, some Asian shipyards are offering considerable price reductions for installing

national equipment on board. In addition, the existence of market barriers for Europe-

an companies and the need of outsourcing part of the production to access these mar-

kets are issues which are challenging the European industry.

In order to face these challenges, European maritime technology industry continues at

the forefront of innovation and developing new technologies of the highest quality and

reliability. In the line of the above mentioned circumstances, it is expected that the

new environmental and safety requirements will continue bringing demand for inno-

vative high technology vessels and equipment, benefiting the European maritime

technology industry.


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GENERAL OBSERVATIONS

SHIPBUILDING FINANCING

1. Asian Shipbuilding Industries

Rapid growth in steel production capacity in Japan, South Korea and China facilitated the growth

of shipbuilding. Shipbuilding also requires skilled labour. Labour costs are a significant compo-

nent of vessel costs, and low costs in China – estimated to be between a 10th and a 15th of

OCED countries’ – have helped its shipbuilding grow. In recent years, however, skilled labour

shortages have contributed to rising wage costs in China. A third requirement is technological

knowledge. Traditionally, Japan and South Korea have offered superior technology and reliability

compared to China. However, following investment, China now produces better ships in more

complex segments such as ultra-large container ships of 12,000-14,000 20-foot equivalent units

(TEU). China is also now making inroads into the fast-growing LNG segment. A fourth input that

drives shipbuilding is government support. Many governments champion shipbuilding because

it creates skilled employment, stimulates related industrial activity and has potential political and

military importance. However, while political support for shipbuilding is important, financial

support matters more. For example, in South Korea shipbuilding is concentrated among the

chaebol (industrial conglomerates), such as Samsung Heavy Industries and Hyundai Heavy Indus-

tries, which receive strong support from policy banks and a significant proportion of South Ko-

rea’s export credit agency (ECA) funding. Similarly, in Japan, ECAs make buyer financing available

and facilitate low cost working capital for shipyards (which is crucial given the three to four-year

shipbuilding timeframe). In China, government support includes access to capital from govern-

ment agencies and policy banks and programmes to support buyers. It is focused on larger ship-

building companies such as China Shipping Development Company and China State Shipbuild-

ing Corporation. One final factor that has driven Asia’s shipbuilding dominance is the growth of

the offshore segment, prompted by the deep-sea drilling boom. Demand for Arctic Class semi-

submersible ships, which can cost up to US$1bn each, has soared. While the sophisticated drill-

ing equipment on Arctic Class ships is manufactured in Norway, the hulls (which represent 70%-

80% of the total cost) are built in either China or South Korea. Similarly, the dramatic boom in

shale gas in the US and Australia has spurred an increase in spending on LNG vessels of

almost 40% between 2008 and 2012.

Japan’s revival

Following the introduction of the package of measures aimed at reviving the Japanese

economy (including bond purchases and increased government spending) the yen was

depreciated by over a third against the US dollar. Most shipbuilding is priced in US dol-

lars so local currency depreciation improves pricing for buyers. Moreover, the risk of FX

volatility is taken by the shipyard, despite only 20% to 30% of the purchase cost being

paid up front. Japanese costs are now comparable to South Korea and China while relia-


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bility and consistency are considered superior: consequently activity increased. The flexi-

bility of Japan’s ECAs, Japan Bank for International Cooperation (JBIC) and Nippon Export

and Investment Insurance (Nexi) has also supported its shipbuilding resurgence.

South Korea

The shipbuilding sector and buyers of ships from the country have traditionally had easy access

to funds from ECAs and development banks, such as Korea Trade Insurance Corporation (K-Sure)

and the Export-Import Bank of Korea (Kexim) and policy banks, including Korea Development

Bank (KDB), Korea Exchange Bank (KEB) and the Korea Finance Corporation (KFC). However, the

South Korean government is consolidating some of the agencies that support shipbuilding.

While government support overall is certain to remain strong in the long-term, the restructuring

of support is having some short-term impact on financing availability.

Consolidation in China

China´s shipbuilding capacity tripled to 63 million DWT from 2008-2013. This explosive growth is

now causing problems as it is geographically dispersed but concentrated in the bulker segment

(an estimated 60% in 2012), which is the worst performing sector in recent years. State-owned

and policy banks support only 10% of shipbuilding companies. Despite frantic cost cutting by

some shipyards in order to win business, ship buyers have been careful not to simply give busi-

ness to the lowest cost shipbuilders. Instead, there has been prudent scrutiny of shipyards’

strength and the likelihood of closure. At the same time as consolidation of capacity is taking

place, the industry is trying to capture more of the higher end value chain, such as LNG and off-

shore vessels. To help strengthen China’s reputation in these segments, orders have been placed

by state-owned enterprises. In addition, China has worked to secure technology support and

supervision for such projects from Japan.

GTReview.com – 2014

2. Chinese policy banks continue to woo Greek owners

Lenders give priority to offshore, eco-design and hi-tech orders

China’s major ship finance institutions are continuing to court the top echelon of Greek

shipowners as part of their expansion strategy but are still restricting themselves mostly to

transactions linked to building tonnage in Chinese shipyards. Although newbuilding orders in

China are overwhelmingly for dry bulk carriers, a sector that accounted for 86% of yards’ ship

orders in the first quarter of this year, the shipping portfolio of the Export-Import Bank of China

is skewed towards crude oil tankers and offshore units, followed by bulkers and containers.“We

will continue to finance conventional vessels, but eco, hi-tech and offshore will be the top priori-

ties,” said Chen Bin, deputy general manager of Cexim’s transport finance department. According

to Cexim, China’s builders scooped 46% of ship contracts in the first quarter and a 44% share of

offshore orders. In the offshore sector, first-quarter figures showed jack-up drilling rigs as the

main type of offshore asset contracted at the country’s yards, representing 29% of China’s off-

shore orders. They were followed by drillships and semi-submersible drilling rigs with 14% each.

An impressive 45% of Cexim’s shipping portfolio, which spans $14.5bn in commitments and

almost 400 vessels, has financed companies in Europe. Asia was the second-largest borrower,

with 32%. However, ship exports account for only about 10% of its total disbursements. Mr Chen

said Cexim is prepared to finance purchases of secondhand ships as well as newbuildings,

but the vessel would have to be Chinese-built. Although there can be some flexibility for lend-


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ing on secondhand acquisitions, this is mainly within the scope of a wider relationship with a

shipowner that includes building vessels in China. For approved projects, Cexim can provide fi-

nancing for up to 80% of the investment amount. China Development Bank, which has a ship-

ping loan book of more than $12bn, also pays “high attention” to the Greek market, said An Gu,

deputy general manager of CDB’s Ship Finance Centre. In 2010, CDB was exclusively mandated

to administer a new $5bn China-Greece ship-development fund. Lending under the fund has

been comparatively modest, however, with commitments so far “over $1bn”, financing more than

30 ships of various types. Faced with several years of shipping-market adjustment, CDB has

strengthened its risk management and diversified the ways it supports shipowners. Mr Gu’s out-

look for the industry is that “probably, the downside potential is limited but the time of revival

might still be uncertain”.

Lloyd´s List - 10 June 2014

3. Greece - China Multi-Billion Shipbuilding Trade Deals

Greece and China have signed multiple trade and investment agreements in areas including

shipping and energy worth approximately $4.6 billion, according to the Greek Development Min-

istry. The signings took place within the framework of Chinese Prime Minister Li Keqiang’s official

three-day visit to Greece. The deals, among others, include multi-billion-dollar Chinese bank

loans to build at least ten Greek-owned ships in Chinese shipyards.During a joint press con-

ference at the Maximos Mansion in Athens, Greek Prime Minister Antonis Samaras said: “We seek

to bring China closer to Europe. Greece can become China’s gateway in Europe, and the start of

a European trade corridor.”These investments might herald a new era for the Greek slumping

economy, and blaze the path for future investors. China is said to have already set sights on a

few potential investment opportunities, namely a 67% stake in the Piraeus Port Authority, which

is to be privatized as part of Greek government’s shipping revitalization plan. A number of other

Greek ports, including the second largest Port of Thessaloniki, await privatization under a state

asset programme mandated under the country’s EU-IMF debt rescue.

World Maritime News Staff, June 20, 2014

4. Greek ship lending slumps as caution rules European banks

Petrofin says private equity has filled the gap but banks should bounce back soon. One of the

largest annual drops in the amount of bank financing for the Greek-owned fleet has been re-

ported in a new survey that identifies lingering doubts in the European banking industry and an

influx of private equity financing among factors contributing to the reduction in conventional

loan finance. Petrofin Bank Research’s snapshot of the industry showed that Greek ship finance

fell by 6.5% last year. Although the fall was not as dramatic as in 2009, when the aggregate

portfolio plummeted by 8.5%, total lending to the industry at end-2013 stood at $61.5bn, back

to estimated levels of mid-2007. According to Petrofin managing director Ted Petropoulos, more

time was needed before a revival of confidence in the industry could translate to a wider pick-up

in lending activity. Many shipping banks also needed time to reduce their shipping exposure to a

more desirable level or had implemented criteria for lending that was “too strict”, ruling out most

potential loan transactions. However, said Mr Petropoulos, more significant reasons for banks’

lack of ship lending appetite stemmed from weakness in the liquidity and capital ratios of Euro-

pean banks in the light of Basel III and the new European Central Bank regulatory overview.


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“Banks simply lacked the resources and the risk appetite to step on the gas pedal,” he said. “Eu-

ropean banks especially found themselves bracing for the ECB loan review and proving their fi-

nancial robustness. In a world of doubt, to banks profitability came second to financial strength.”

According to Petrofin’s statistics, European banks provided 72% of global ship finance in De-

cember 2013, and 90% of finance for Greek owners.

European banks’ difficulties had a “profound” effect on financing of Greek companies and last

year’s reduction in portfolios came at the same time as a surge in the size of the Greek-owned

fleet to a record capacity of 291m dwt. However, owners have been able to turn increasingly

to US private equity funding. “As the finance gap widened, private equity funds were for many

Greek owners often the only way to take advantage of what promised to be a healthy shipping

recovery,” said Mr Petropoulos. Funds were “not only active but often scoured Greece for oppor-

tunities to co-invest and lend to Greek owners”. A trend for the share of mortgage financing for

the world fleet to fall was “even more pronounced in Greece”, Mr Petropoulos said. “We believe

that there are over 40 joint ventures in place today,” he said. Most individual banks saw some


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reduction in Greek shipping exposure during last year although there were quite a few notable

exceptions. Amid the ranks of top 10 lenders to Greek owners, international banks that increased

their activity last year included Credit Suisse, which is estimated to have boosted its portfolio by

more than 9%. With a Greek portfolio of about $5.7bn, including $900m committed but undrawn

for newbuildings, the Swiss lender now stands clear second in terms of exposure. Although it fell

one place in the rankings to fifth, DVB increased its lending to the Greek market by 25%, to

$3.7bn. HSH Nordbank, now ranked ninth, also increased its loan book, while the survey also

confirmed the market reputation of banks such as ABN Amro and ING as among the more active

recent lenders. The overall leader in Greek ship finance remains Royal Bank of Scotland, with

a portfolio at year’s end of $8.8bn, or a market share of 14.4%. However, it was one of the fast-

est-shrinking portfolios, marking a 16.5% decrease from 12 months earlier. Its total includes

about $213m in committed but undrawn loans, but another 10 banks — led by Credit Suisse —

have committed more in future newbuilding support. Other sharp reductions were at Com-

merzbank, which last December was still the third-largest bank in Greek shipping, but it is exiting

ship finance, and at Calyon, which is estimated to have shed about 21% of its exposure. The

leading Greek domestic banks also emerged as growing in the field, with fourth-placed Piraeus

Bank, sixth-placed National Bank of Greece and eighth-placed Alpha Bank all registering hefty

portfolio gains, but these were the result of absorbing other banks’ portfolios, in most cases due

to taking over smaller Greek banks. The number of Greek banks left in ship finance has fallen to

five, from 15 a decade ago, while the overall number of banks involved in Greek shipping last

year fell from 51 to 46. A number of Far Eastern banks, including Cexim, China Development

Bank and Kexim, also increased their financing of Greek owners last year. Petrofin said that

provided the shipping recovery continued, which it said was “a big ‘if’”, it expected private equity

interest in the industry to wane over the next two years. But this, and a recent slowdown in Chi-

nese ship lending to western owners, would be offset by the increasing confidence and financial

ability of European and North American banks. Western banks would again be “attracted by the

high loan yields of Greek shipping based on modern eco design vessels,” said Mr Petropoulos.

Lloyd´s List – 23 April, 2014

5. UK - Chinese Firms Close Multi-Billion Trade Deals

The UK and Chinese firms have signed £14 billion (circa USD 23.7 billion) of trade and investment

deals. The annual UK-China summit takes place just 6 months after the UK Prime Minister’s visit

to China and with bilateral trade at record levels – up by 8% overall in 2013. UK exports to China

have more than doubled since 2009, and are growing faster than the country’s French and Ger-

man competitors. Last year UK exports to China averaged more than £1 billion each month. The

UK benefited from Chinese investments worth over £8 billion in 2013/14 alone, creating or safe-

guarding over 6,000 jobs in the UK.

World Maritime News, June 17, 2014

6. China Eximbank lends $1.2 billion to German firms for Chinese ships

Export-Import Bank of China (EximBank) will lend $1.2 billion to German shipping firms Peter

Dohle Shiffahrts-KG and Bernhard Schulte for the purchase of Chinese ships, the official Xinhua

news agency reported. The deal will increase chances that German shipping firms will purchase


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more China-made ships, Xinhua reported the EximBank as saying. A prolonged slump in shipping

and pressure to shrink bloated loan books have forced many European banks to abandon or

scale down lending to the sector. The EximBank loan deal was signed during Chinese President

Xi Jinping's state visit to Germany.

Reuters - 31 March, 2014

7. Korean Kexim enhanced relationships with European players since 2013

The Export-Import Bank of Korea signed in December 2013 memorandums of understanding

with European firms and lenders to enhance financial co-operation, as it seeks western partners

and clients to support South Korea’s export-oriented economy. The deals were signed during the

state visit to France and the UK this week by South Korean president Park Geun-Hye. According

to Kexim, the counterparties include European Bank for Reconstruction and Development, UK

Export Finance, Barclays, Société Générale, Proparco and Seadrill. Kexim pledged to provide $1bn

financing to John Fredriksen’s oil-drilling business Seadrill, which has ordered 17 offshore units

at South Korean yards for $8.9bn. It will also jointly provide $1bn with EBRD for developing logis-

tics and infrastructure projects across Europe and Asia, such as the Eurasia Tunnel beneath Tur-

key’s Bosphorus Strait. The agreement states that the two lenders will “promote projects that

support sustainable economic and social development from central Europe to central Asia and

southern and eastern Mediterranean”. Meanwhile, Kexim and UK Export Finance have agreed to

provide $1bn in financing to firms from the two countries that are developing export projects.

UK Export Finance and Korea Trade Insurance signed a separate MoU that has a similar purpose

but with no headline figure.

Lloyd´s List – December 2013

8. European banks lend $830m on Star Cruises vessel. Rare case of Asian owner look-

ing west for finance

KFW Ipex-Bank, Crédit Agricole and the Singapore branch of DNB Bank are to provide just under

€600m ($829.4m) of the €700m financing required for a new cruiseship ordered by Star Cruises

from the Meyer Werft shipyard in Papenburg last October. The move is a rare example of Euro-

pean banks lending to an Asian owner as most purely German commercial banks are pulling

back from shipping exposure as their counterparts in the Far East are opening their coffers to

keep domestic shipyards in business. However, Europe retains a lead in the cruiseship market

and KfW’s remit expressly includes lending to assist the German and wider European economies.

The loan will be paid in US dollars and has a term of 12 years from delivery. The deal was struc-

tured by KfW and is backed by export credit insurance issued by the German government. “With

this high-volume financing, we are underlining both our expertise in structuring within the

cruiseship industry and our role as one of the world’s leading players in ship financing,” said

Christian Murach, the responsible management board member at KfW Ipex-Bank. “We are also

helping to support German exporters [and] especially north Germany as a shipbuilding location.”

The new vessel has a gross tonnage of about 150,000 gt, more than 1,600 passenger cabins on

18 decks and a length of approximately 330 m. This makes it the largest ship in Star Cruises’ fleet

and one of the biggest cruiseships based out of Asia.

Lloyds List – 15 April 2014


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9. Norway says yes to new shipping bank

M&M prepares a capital issue having secured its private trading licence.

Maritime and Merchant, the new Norwegian financial institution that launched last year, has se-

cured a licence to trade as a private bank from the country’s financial supervisory authority.

M&M is preparing a capital issue with a target of $300m-$350m in equity to build up its opera-

tions, create its banking system and to form its organisation. Pareto Securities and DNB Markets

will be joint lead managers and bookrunners, and the bank intends to start operations in April.

M&M managing director Halvor Sveen said stricter requirements on lenders at a time of growing

opportunity as the markets recover made for good timing for the new bank to launch. M&M has

described itself as a small operation that will conduct business on a personal level and keep

overheads as low as possible. With funding from shipowners Henning Oldendorff and Arne

Blystad, M&M was unveiled last October with the brief to provide standard financing to shipping

and offshore companies as many of the industry’s traditional lenders move away from what they

see as a high risk industry. Apart from Mr Oldendorff and Mr Blystad, each with 30% stakes, the

backers and shareholders include Pål Utvik and David Wu, through Shanghai-based Landmark

Holdings’ 18.75% stake. Nergaard Investment Partners, based in Singapore and controlled by

Alex and Birger Nergaard, will have an 11.25% share.

Lloyd´s List - 03 February 2014

10. China´s 3 year plan for upgrading and restructuring Shipbuilding Industry:

China's State Council has issued a three-year plan to upgrade and restructure its shipbuilding

industry. China has become one of the most influential shipbuilding countries in the world. But

China's shipbuilding industry is now facing unprecedented challenges, due to the plunge in de-

mand worldwide. The plan states that many important measures need to be taken as part of the

industry's three years development. In the coming three years, the restructuring and upgrading

of China's shipbuilding industry will focus on accelerating innovation, strictly controlling new

capacity, promoting high-end products and stabilizing the industry's international market

share with greater funding support. "The three-year plan has three measures. One is to expand

domestic demand and promote export. To expand domestic demand, the plan is to encourage

the scrapping of older ships and more military-civilian cooperation in vessel design and

development. To maintain a more stabilized international environment, the plan encourages

financial institutions to increase credit support for foreign buyers of vessels and equip-

ment, and study securitization of shipbuilders' loans. Besides restricting new shipbuilding ca-

pacity, the government is encouraging mergers and acquisitions and the pooling of resources

in the industry. The plan also encourages the development of offshore engineering equipment

such as drilling platforms and large LNG ships. "The new three-year plan is focusing on long term

sustainable development. It aims at changing from big to strong. It no longer eye at maintain or

expand the development scale of the industry." Cao Yousheng said. The statement says that local

authorities and agencies should formulate supporting policies and ensure the timely completion

of targets.

China Daily – Augost 2013

http://www.lloydslist.com/ll/sector/finance/article430468.ece


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11. Japan: Abe Revives Dying Shipyards as JBIC Loans Jump 30%

For a sign of success for Prime Minister Shinzo Abe’s economic stimulus policies look no further

than Japan’s once-stricken shipbuilding industry. Japan Marine United Corp. has work scheduled

for more than two years and is building two types of large bulk carriers at its Ariake shipyard that

are about 20 percent more fuel efficient, spokeswoman Shoko Aoyama said. Japanese shipbuild-

ers’ orders reached the highest level since 2007 last fiscal year, industry data show. Japan Bank

for International Cooperation boosted ship loans to foreign customers by 30 percent in the

period, Katsuya Mogaki, director at the bank’s marine and aerospace finance division, said in an

April 16 interview. “Overseas shippers and ship owners are coming to Japan, betting now’s the

chance to buy Japanese vessels,” Mogaki said. The yen has weakened 15 percent against the

dollar since the end of 2012 after Abe took steps to end deflation, making ships manufac-

tured in Japan more cost competitive. Japanese shipbuilders are also winning orders with fuel-

saving technology, even as vessel makers worldwide struggle to recover after the global finan-

cial crisis.

Better Yields

Japan’s commercial banks are eager to lend to shippers to get better yields than domestic loans,

which are at record lows because corporate demand for funds remains weak, according to

Standard & Poor’s. Oslo-based DNB ASA said its margins on new ship loans range from 200 to

300 basis points over the Norway interbank offered rate. Mogaki declined to give an estimate for

margins in Japan. The average commercial loan rate in Japan is an unprecedented 0.808 percent,

Bank of Japan data show. “Compared with ordinary loans to large companies in Japan, ship

financing gives banks better returns that reflect risks” such as moves in exchange rates and

the shipping market, Ryoji Yoshizawa, a Tokyo-based director of financial institution ratings at

S&P, said by phone yesterday. “It’s pretty difficult though for the banks to accurately measure

the credit risk” of overseas shippers, he said. Mogaki expects overseas appetite for funds to pur-

chase ships to remain high in 2014 after such JBIC loans increased to about 30 billion yen ($293

million) last fiscal year.

JBIC and overseas customers may sign contracts to finance purchases of at least 14 or 15 Japa-

nese ships in the year started April 1 and the number could exceed 20 if buyers place bulk orders,

Mogaki said. They used funds from the bank for 17 vessels last financial year including two Japa-

nese ships built at an overseas site, up from 13 the previous year.

‘2014 Problem’

Before Abe became prime minister, the companies were concerned that orders to build ships

would run out by 2014, as the global supply glut caused vessel prices to plummet and the yen’s

strength pushed up the price of made-in-Japan products. That was dubbed the “Year 2014 prob-

lem,” according to Mogaki. The state lender stepped up support for the Japanese shipyards’ ex-

ports after their biggest customers Nippon Yusen (9101) K.K., Mitsui O.S.K. Lines Ltd. and Kawa-

saki Kisen Kaisha (9107) Ltd. all refrained from buying new ships during the global financial crisis.

The market turmoil triggered by the collapse of Lehman Brother Holdings Inc. in 2008 caused

shipping demand to plunge. JBIC and local commercial banks increased loans to overseas

companies to enable them to pay for Japanese vessels as European banks stopped financ-


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ing after the crisis, Mogaki said. The exposure of Germany’s top seven shipping lenders stood

at 86 billion euros ($119 billion) in the middle of 2013, down from 97 billion euros in mid-2012,

according to the Bundesbank’s Financial Stability Review. Commerzbank AG announced its exit

from ship financing in 2012. In Japan, new ship orders at domestic yards climbed 76 percent to

16.5 million gross tons last fiscal year, an April 11 statement by the Japan Ship Exporters’ Associ-

ation shows. “European banks are gradually returning to the market, but they won’t dominate

like in the past,” Mogaki said. Japan’s market share “may rise a little bit. Some are buying Japa-

nese ships because they like them and others are because they are cheap now.”

Bloomberg 24 April 2014

EU POLICY

12. The European Parliament backs down on extended plans for a greenhouse gas

emissions monitoring scheme for shipping.

The European Parliament has, in its environment committee, debated proposals for what is seen

as a potential regional precursor to a global monitoring reporting and verification system for

ships’ carbon dioxide emissions. The committee had however decided to propose the scope of

shipping falling under the scheme to include vessels larger than 400 gt, rather than 5,000 gt, as

originally proposed, and to include NOx emissions along with CO2 emissions. The plenary has

now rejected these proposals. The Parliament, probably following the May European elections,

will debate the proposals in camera with the Council and the Commission ahead of a formal ac-

ceptance of what will then be a new European regulation, probably before the end of this year.

Under the remaining proposals all ships calling at European ports will be expected to record and

report their CO2 emissions, having previously prepared a reporting plan. The current expectation

is for reporting to start from January 2018. The decision to reject proposals to include smaller

ships and NOx emissions has been welcomed by the European Community Shipowners Associa-

tion. Ecsa secretary-general Patrick Verhoeven notes that Brussels’ timeline will buy some time

for the International Maritime Organization to work on a more suitable global solution for ship-

ping. Debate at the International Maritime Organization over the way shipping’s CO2 emissions

will be curbed with the use of a market-based measure has been progressing slowly due to polit-

ical stalling at other UN bodies. The decision to work on a means of understanding the levels of

CO2 emitted from global shipping is seen as a less controversial step in finding a final acceptable

future market-based measure such as a levy or emissions trading scheme.

Lloyd´s List -18 April 2014

13. European Parliament votes for more modern inland waterway transport

The European Parliament voted on April 15th in first reading on two proposals by the Commis-

sion regarding inland waterway transport: a proposal to facilitate the use of the Reserve fund and

another relating to technical requirements for inland waterway vessels. Commission Vice-

President Siim Kallas, responsible for Transport said “I welcome the vote of the Parliament on

these two proposals. The inland waterway sector needs to be a real alternative for transport and

our package of proposals is needed to use Europe's rivers and canals to their full potential to the

benefit of the transport network." The NAIADES II "Towards quality inland waterway

transport", adopted in September 2013, sets out an action programme for the period 2014 –


PAGE 12 OF 41

2020 aiming at creating favourable conditions for inland navigation in the field of infrastructure,

innovation, functioning of the market, environmental standards, and jobs and skills. The Reserve

fund in the inland waterway transport sector includes currently around € 35 million and has nev-

er been used. With the vote, Parliament agrees to broaden the scope of the measures towards

training schemes, not only for workers in the sector, but for all crew members. Additionally, it

will be possible to use the funds for innovation of vessels and their adaption to technical

progress with regards to the environment. With the approval of the European Parliament, and

since the Council of Ministers has already given its agreement, the amended Regulation can en-

ter into force in this legislature. The proposal for a Directive laying down technical require-

ments for inland waterway vessels aims at facilitating and improving the adoption procedures

when adapting and updating the technical standards for inland waterway vessels. After the vote

in the Parliament, the Council of Ministers is expected to take its position on the proposed Di-

rective.

Rapid EC news – 15 April 2014

14. The European Parliament adopts the Marine Equipment Directive. Modern marine

equipment rules for safer EU ships.

The European Parliament adopted on 15th April the Commission's proposed new Directive on

marine equipment. Better rules on marine equipment in the EU will result in safer journeys for

the ships and their crew, less red tape for Member States, reduced costs for business, and in-

creased competitiveness of the EU industry. European Commission Vice-President Siim Kallas,

responsible for transport, said "These new rules are an important development in this sector as

marine equipment represents a significant fraction of the value of a ship, and its quality and safe

operation are critical for the safety of the ship and its crew. It is equally important for the preven-

tion of maritime accidents and pollution of the marine environment". The law that has been

adopted today contains three main innovations. The possibility to introduce an electronic tag

or electronic wheel mark: This is an electronic version of the wheel mark proof of conformity

for compliant marine equipment traded within the European Economic Area. The electronic tag

should be cheaper for users and administrations to deal with than the physical mark, which can

be hard to affix on products. The electronic version can be read at a distance and will help with

stock control, market surveillance and the fight against counterfeit equipment.

Administrative simplification: a simpler system for the transposition of IMO requirements into

EU law will decrease the administrative burden on Member States. Furthermore, clear and har-

monised rules across the EU will strengthen the competitiveness of Europe's industry. Law revi-

sion: the new directive addresses the problems encountered in the current Directive, which dates

from 1996, such as weak market surveillance, as well as obligations for manufacturers, importers

and distributors (with certain adjustments specific for the marine equipment sector).

Following the vote in the European Parliament, the Council is expected to endorse the text as

adopted by the Parliament, in accordance with the informal agreement reached between the two

institutions in February 2014. The new Directive is expected to be adopted towards the end

of 2014 and become applicable two years later.



PAGE 13 OF 41

15. Commission welcomes European Parliament's vote for renewed resources for com-

bating pollution at sea

The European Parliament adopted in April a financial package of €160.5 million for a period

of 7 years (2014-2020) for the EMSA to allow continued action to combat marine pollution.

This vote follows an informal agreement reached with the Council in March and shows the sup-

port and confidence in the European system to combat pollution at sea established in EMSA.

This system which has proven its added-value and cost-efficiency relies on satellite services to

detect pollution and a network of specialised anti-pollution vessels available to Member States

to recover pollutants. The funds from the Union's transport budget will allow continued detec-

tion, monitoring and cleaning up of spills from ships and for phase-in activities to fight spills

from oil and gas installations given the extended mandate of the Agency1 following the Deep-

water Horizon oil spill. The Council is expected to endorse the Regulation as adopted by Parlia-

ment, in accordance with the agreement reached between the two institutions in March 2014. By

having those funds for this specific activity over a seven-year period, EMSA can conclude multi-

annual contracts for the required equipment and services which is kept on stand-by in order

to address incidents in the waters of individual Member States or in sea basins with neighbour-

ing countries which cannot combat large pollution on their own. Since 2007, EMSA pollution

response services have been used during 25 incidents including four mobilisations of "response

vessels" in Europe as well as one equipment assistance package to the USA during the Deep-

water Horizon incident in the Gulf of Mexico. Emergency support to affected coastal states has

included "response vessels", satellite imagery, MAR-ICE activation (Marine Intervention in Chemi-

cal Emergencies Network) in relation to chemicals, and onsite expertise.


16. European Commission adopts new rules for RDI including a clarification on Ship-

building

Commission adopts new rules facilitating public support for research, development and innova-

tion that will facilitate the granting of aid measures by Member States in support of R&D&I ac-

tivities. The new R&D&I state aid Framework sets out the conditions under which Member States

can grant state aid to companies to carry out R&D&I activities. Moreover, the scope of measures

that no longer need to be notified to the Commission for prior approval has been widened un-

der the new General Block Exemption Regulation (GBER). These new rules will help Member

States reach the targets of the Europe 2020 Strategy for smart, sustainable and inclusive growth,

while at the same time limiting distortions in the Single Market. Under a Questions and Answers

section Shipbuilding is specifically mentioned:

Q: The rules for innovation aid to the shipbuilding industry will expire soon, so innovation aid for

this sector is now subject to regular R&D&I rules. Will this put the European shipbuilding industry

at a disadvantage compared to its global competitors?

A: No. First of all, those activities that could be supported with innovation aid under the ship-

building framework can clearly continue to be supported as experimental development under

the R&D&I Framework. Moreover, the conditions for such aid will be more favourable than under

the previous shipbuilding framework: for example, the allowed aid intensity for prototype devel-

opment is higher under the new rules, and commercial profits from prototypes – even if there


PAGE 14 OF 41

will be a whole series of ships based on that same prototype – do not have to be offset with the

aid.

EC – DG Competition – June 2014

17. EU adopts stronger rules to better defend its rights under trade agreements

The European Commission welcomes a new legal framework approved by the European Parlia-

ment on April 2 and by the EU Council in May to better enforce EU rights under international

trade agreements. The new rules will allow for a more effective EU response to illegal measures

taken by our trading partners. The new regulation gives the EU a single horizontal framework to

react swiftly and effectively to make sure that trade agreements translate into real benefits for EU

businesses and workers. “These new enforcement rules will help us ensure that trade agree-

ments are respected and deliver benefits for the EU economy. The EU is now better equipped to

take action when other countries don't play by the rules," said EU Trade Commissioner Karel De

Gucht. If an international trade panel – a WTO panel or a dispute settlement panel created un-

der a free trade agreement – finds an EU partner country does not abide by international trade

rules, the Commission will now be able to adopt trade sanctions under a streamlined procedure.

Recourse to lengthy legislative procedures, which are ill-suited for the swift adoption of effective

enforcement measures, will no longer be necessary. The Commission can now increase customs

duties, set an import quota or impose limitations on access to public contracts in the EU by

means of an executive decision to prompt the offending country to remove their illegal

measures. The Commission will now also have legal powers to compensate for import re-

strictions imposed on EU products in exceptional situations (so-called safeguard measures), or to

react to cases where a WTO member raises its import tariffs without adequate compensation for

the EU.

EC – DG Trade – May 2013

PRICES, FUEL, FREIGHT & EXCHANGE RATES MARKETS

18. Suezmax crude tankers saw zero fleet growth in first quarter. Positive sign for most

pressured tanker segment

Two vessels were delivered into the global fleet during the quarter, according to Clarksons’ data:

the 157,055 dwt Dragoa Do Mar and the 158,000 dwt Almi Voyager . However, two vessels were

sold for scrap, hence zero net fleet growth. The suezmax crude tankers sold to the breakers dur-

ing the quarter were the 1994-built, 158,670 dwt Ruby and the 1992-built, 149,544 dwt Vinashin

Atlantic. The global suezmax fleet on the water stands at almost 500 vessels, with only around 40

on order, according to Clarksons. This relatively small orderbook, coupled with zero fleet growth,

is positive for the segment. Diminishing trading opportunities for these vessels means the seg-

ment would certainly not benefit from fleet growth. Fixtures dropped from 226 in January to 200

in March. The main reason for the drop is the weakening of the West Africa to US Atlantic coast

trade, traditionally the main suezmax crude trade. Since the increase in US domestic shale oil

production, this route has “essentially become non-existent”. West Africa to Asia crude trades are

growing, but very large crude carriers are generally being employed for this rather than su-

ezmaxes. The only hope for suezmaxes on this route is if it becomes more cost effective to em-

ploy two suezmaxes over one VLCC —a development that happened on occasion in the first


PAGE 15 OF 41

quarter. For suezmaxes to see any type of significant, sustained improvements in freight rates, it

is clear that the segment would benefit from continued zero fleet growth in the coming quarters.


19. The maritime industry will see a "big growth in scrubbing" for the long term.

Marine and Energy Consulting's managing director Robin Meech said at the 35th International

Bunker Conference in Copenhagen, that the cost of resorting to scrubbers would be a big moti-

vating factor for growth. Subject to some economies of scale and the age of vessels, scrubbing is

"the cheapest method to comply for existing ships less than 15 years old," he added, comparing

scrubbers to low sulfur bunker fuel and LNG. The approximate cost of a scrubber is around $4

million, varying on ship size, industry sources said previously. Scrubber systems are air pollution

control devices that can be used to remove some particulates and/or gases. On board a ship,

scrubbers are installed on ships' engines to remove sulfur from bunker fuel. If a ship spends a lot

of time in ECA areas, it would make sense for it to use scrubbers or LNG, said Meech. By 2025,

the projected figure for heavy fuel oil being scrubbed annually is set at 28 million mt, and the

industry would have a cumulative investment of $15 billion, he said. By 2025, he projects around

6,000 scrubbers will be in operation. In the current market, scrubber supplier Wartsila said that

"as of March 2014, Wartsila has 45 vessels contracted for a total of 94 exhaust gas cleaning sys-

tems for both new building and retrofit projects." By 2035, Meech projects that these numbers

will "more than" double.

OTHER FACTORS

How shipowners choose to comply with upcoming regulations will not only depend on the ves-

sel's age but also on the availability of compliant fuels, access to financing, flexibility to move

ships to non-ECA trade areas, technological developments and their level of confidence in pre-

dicting fuel and technology prices, said Meech. The developing situation of global LNG infra-

structure will also be another key factor, as will the question of when the IMO will introduce the

global sulfur cap of 0.5%, he said. The IMO is due to review the global sulfur cap of 0.5% in 2015

and will make recommendations by 2017, just three years ahead of the proposed implementa-

tion in 2020. This will be a drastic drop from the current 3.5%.

FUTURE OF LNG

In considering LNG as a bunker fuel in non-LNG tankers, there are several pros and cons to con-

sider, and shipowners will have to weigh the advantages of lower emissions against disad-

vantages such as retrofit costs, which might end up being more expensive than scrubbers,

Meech said. The cost to outfit a newbuild with LNG fuel tanks and engines can be 20-40% more,

he said. And with LNG in unchartered territory as a bun-ker fuel, there is uncertainty about price,

he added. In projected figures, if LNG does take off, the market should see some 8 million

mt/year of LNG used as bunkers, and this volume will be used mainly by around 1,700 smaller

vessels, Meech said. This volume will account for around "11% of bun-kers consumed," he said.

Hellenic Shipping News - 04 April 2014


PAGE 16 OF 41

NEWBUILDING MARKET

20. South Korean shipbuilders’ new orders plunge 70% in March

South Korean shipbuilders saw their new orders tumble more than 70% in March from a year

earlier due to increased ship prices, industry data showed. South Korean shipyards clinched new

orders totalling 434,774 compensated gross tons (CGTs) in March, down 70.1 percent from 1.45

million CGTs a year ago, according to the data by global market researcher Clarkson Research

Services. The number accounted for 22.8 percent of the total global ship orders, with South Ko-

rean shipyards outpaced by Chinese rivals. Chinese shipbuilders won orders totalling 1.05 million

CGTs in March, equaling 54.9 percent of the global total, the data showed. CGT, an indicator of

the amount of work needed to build a given ship, is used as a tool to compare inter-country

shipbuilding output. It is the generally used measure for the volume of orders received. The

plunge in March orders left South Korean shipbuilding companies trailing their Chinese rivals in

the January-March period. In the first quarter, South Korean shipbuilders won 4.03 million CGTs,

or 37.4 percent of the global total, while Chinese companies garnered 4.29 million CGTs, or 39.8

percent. In the first two months, cumulative orders of local shipbuilders reached 3.13 million

CGTs, 34.7 percent more than the 2.32 million CGTs of Chi-nese shipbuilders. According to in-

dustry watchers, the March plunge resulted from global shipping companies' unwillingness to

place new orders amid rising ship prices.

Yonhap-07 April 2014

21. Japan's shipbuilding orders up

Japan’s shipbuilding industry receives number of substantial contracts this year. Total new export

orders of ships undertook by shipbuilding enterprises in Japan amounted to 27.72 million tonnes

or 658 vessels this year ended March. The amount of export orders was 16.49 million tonnes in

the previous fiscal year. According to Shipbuilders Association of Japan the demand for ship

plate will reach 2.71 million tons this year.

Hellenic Shipping News / Yieh – 29 April 2014

22. Japan: Shipbuilders face uncertain future despite weak yen

The nation’s shipbuilding industry faces uncertain waters. As shipbuilders scramble to secure

construction orders for large passenger ships and special-purpose vessels that require advanced

technology, profits continue to disappoint. Shipbuilders have been able to survive thanks to the

yen’s depreciation, but the prospect of having to fight an uphill price war against Chinese and

South Korean shipbuilders has left them deeply concerned.

While Japanese shipbuilders saw their shares in the global shipbuilding market halve—from 27

percent in 2005 to 13 percent over a period of eight years—the combined shares of Chinese and

South Korean shipbuilders increased from 53 percent to 77 percent in the same period. Chinese

and South Korean shipbuilders have the advantage of lower production costs, which trans-

lates to lower prices and increased orders, particularly in the case of cargo ships and tank-

ers because of their comparatively simple structures. Complex structures can cause complex

problems, as the experience of Mitsubishi Heavy Industries, Ltd. shows. The firm lost ¥13 billion

building two large passenger ships from an order it accepted in 2000. Nonetheless, MHI contin-

ued accepting orders for large-scale passenger ships as a survival strategy. But the strategy


PAGE 17 OF 41

seems to have backfired. In March, MHI took extraordinary losses of ¥60 billion for the con-

struction of two other large passenger ships. Though the initial construction order was valued

at approximately ¥100 billion, additional costs were incurred when the ships had to be rede-

signed at the insistence of the clients, who were dissatisfied with the liners’ interior design. The

company will therefore revise its focus on large-scale passenger ships, including the possibility of

withdrawing from their construction altogether. A senior official of the firm said, “They incur too

many losses compared to their scale.” In other developments in the industry, Mitsui Engineering

& Shipbuilding Co. said it will seek more orders for underwater probe vehicles after it failed to

merge with Kawasaki Heavy Industries, Ltd. last spring. Mitsui Engineering & Shipbuilding Presi-

dent Takao Tanaka is still seeking a merger partner. He said his company needs a partner to se-

cure funding for research and development and to win orders for big projects. The total number

of shipbuilding orders for exports accepted by domestic shipbuilders in fiscal 2013 in-

creased dramatically by 222 compared to the previous fiscal year. Japanese shipbuilders

are regaining their competitive edge thanks to the yen’s depreciation, although shipbuild-

ing in Japan had been projected to disappear by 2014. But Takahiro Mori, an analyst at Merrill

Lynch Japan Securities Co., said: “Sooner or later, Chinese and South Korean manufacturers will

technologically catch up with Japan. Domestic manufacturers have to reduce their production

costs as they expand their scale through a restructuring of the industry.”

The Japan News- 29 April 2014

23. China shipbuilding sector in recovery mode

China’s shipbuilding sector has embarked on a path to recovery, aided by the overall global

economic rebound and policies from Beijing to help the shipyards, after more than five years

of downturn, according to China Association of the National Shipbuilding Industry (Cansi). The

shipbuilding sector has been bogged down by excessive shipyard capacity amid the ongoing

vessel tonnage glut, leading to low newbuilding prices and reduced orders, not to mention the

widespread bankruptcy of many bottom-rung yards. Tan Naifen, deputy director of Cansi, said

that the number of vessels to be delivered from Chinese yards would decrease significantly in

2014 and 2015 as the sector consolidates, an outcome that would alleviate the global vessel ton-

nage glut that has been stripping away profit for shipowners. And as China’s shipbuilding sector

consolidates, Tan noted that the yards have been raking in profits in the first two months of 2014,

with 87 of the country’s stronger yards generating revenue of RMB30.8bn ($4.9bn), up 10.8%

year-on-year and profit of RMB480m, skyrocketing 123.3%. While Tan believed that the recovery

process has started, she did not give a forecast on when the shipbuilding sector will witness a

boom again. The resolve by Beijing to revive the shipbuilding sector has been the driving force

for an optimistic outlook, as China’s State Council has banned shipbuilders adding new yard

capacity and is incentivising owners to scrap old vessels. Meanwhile, deputy minister of Chi-

na’s ministry of industry and information technology Su Bo believed that China will become the

world’s strongest shipbuilding nation within the next 20 years. “In the next 10 to 20 years, China

will become the world’s most important and leading shipbuilding nation as the country contin-

ues to transform and enlarge its maritime sector,” Su was reported saying. “China is already the

world’s second largest economy, and its shipbuilding sector is expected to raise its standards to


PAGE 18 OF 41

meet international demands. The shipbuilding industry is also expected to spearhead the growth

of China’s maritime sector,” he added.

Seatrade Global – 29 April 2014

24. Newbuild Crude Tankers Rise in Popularity

Low shipbuilding prices and the North American energy boom are leading ship operators and

investors to finance billions of dollars into building crude tankers, according to IMDO’s Weekly

Market review. New drilling and extraction technology enabling the shale oil and gas boom has

triggered plans for LNG projects, led Canada to boost crude exports and historically, led the US

to consider lifting their long-standing crude oil export ban. Removing the ban would be contro-

versial and far off, however the willingness of the US government to debate such an idea has led

shipping executives to try and position themselves to take advantage. Used tanker prices have

risen by about 15% since November, after four years of falling prices, and many operators are

considering newbuilds. Indeed prices of newbuild VLCCs have risen 10% since mid-2013 and are

now in excess of $100m. Despite this, orders for new VLCCs, jumped from just three in 2011 to

47 last year, with 18 ordered during the first quarter this year. One Greek owner who asked not

to be named commented, “We are looking into buying three new VLCCs on the assumption that

the US will reverse its crude oil ban…It is a huge gamble, but I’ve been in the tanker business for

30 years and never seen so much movement on this issue.”

IMDO, June 19, 2014

25. Helsinki shipyard benefits from renewed interest in icebreakers. Finnish and Russian

orders for icebreakers offer promise for once struggling yard

Helsinki’s shipyard, Arctech, is about to hand over the world’s first oblique icebreaker to its Rus-

sian owners. In another world first, it is also starting work on the first dual-fuelled icebreaker,

which must be handed over to the Finnish government in two years’ time. Arctech also has a

third vessel on its orderbook, a coastal icebreaker for Russia. There is a positive feeling again in

Helsinki over the city’s shipyard as its new focus on vessels dedicated for work in ice conditions,

particularly for Russia, is paying off, but the era of change for the yard is far from over. Arctech

has been using Russian facilities to build most of the blocks for the orderbook before the vessels

are assembled, painted and fitted out in Helsinki. Arctech has had the new oblique icebreaker

and oil spill response vessel Baltika out for two sea trials, with the vessel back in Helsinki for final

adjustments and fitting out of the accommodation areas. Its eventual owner is the Russian Fed-

eral Agency of Sea and River Transport. While it is an icebreaker, it is more a rescue and oil com-

bat vessel for work in the Gulf of Finland. The most notable aspect of this vessel is its lack of

symmetry. One side of the vessel will act as an oblique icebreaker, creating 50 m wide channels

in ice by using the vessel’s length. The other side of Baltika has oil recovery equipment for open

waters.



PAGE 19 OF 41

I. SHIPBUILDING STATISTICS

Figure 1.1 – Summary of activity in World Shipyards (CGT)

Data source: IHS Fairplay

Global orderbook continues the increasing trend began in 2013 after 5 years of drop. Demand

for new vessels stands at 14.5M CGT, 60% increase compared to the 1Q 2013 (8.8M CGT). Deliv-

eries have slowed down compared to precedent years.

Figure 1.2 – Summary of activity in Chinese shipyards (CGT)


Chinese yards have contracted 41% of the global orders with 347 vessels accounting 6M CGT;

just 2M CGT less than the average contracts in previous year. The orderbook continue growing.


PAGE 20 OF 41

Figure 1.3 – Summary of activity in South Korean shipyards (CGT)


South Korean orderbook is recovering after 5 years of downturn. In the 1Q 2014 have contracted

124 new vessels accounting 4.2M CGT, 1M CGT more than in the same period of 2013. Even af-

fected by overcapacity in the cargo markets, owners are placing new orders for more efficient

tankers, bulkers and containerships.

Figure 1.4 – Summary of activity of Japanese shipyards (CGT)


Thanks to the Japanese government’s decision for devaluating the Yen, Japanese yards have po-

sitioned themselves as more competitive at the export market. Continuing the growth trend of

2013 the orderbook stands at 15M CGT. In the 1Q 2014 Japanese yards contracted 3M CGT, tri-

pling the levels of the same period last year. Completions remain at 2013 levels.


PAGE 21 OF 41

Figure 1.5 – Summary of activity of EU28+ Norway shipyards


The European orderbook continue the growing trend initiated last year. Compared to the 1Q

2013 new orders have increased 30%, despite is still at low levels. Completions stand at the

same levels of last years.

Figure 1.7 – Evolution of the Orderbook in Number of Vessels by Country


Global orderbook stands at 6354 vessels, increasing a 6% since the end of 2013. Chinese order-

book contains 2402 vessels, half of them bulk carriers, but also containerships, tankers and off-

shore supply and support vessels. Korean orderbook contains 945 vessels, mainly tankers but

also some containerships and bulkers; Korean yards have also on order 40 drilling ships, few

FPSOs and Gas Processing vessels of high value. Japanese have 906 vessels in the orderbook,

mainly bulkers and tankers. Europe 28+Norway orderbook contains 474 vessels, mainly high

technology and value vessels such as Offshore supply, passenger vessels, workboats and other

special purpose vessels.

Number

of vessels


PAGE 22 OF 41

Figure 1.7 – Evolution of the Production in Number of Vessels by Country


Global production slowed down a 16% in 2013 compared to previous years. Around 740 vessels

were delivered in the 1Q of 2014. China leads the production with 230 vessels delivered, 30 ves-

sels less than in the same period last year. Japan delivered 157 vessels, 6 less than in the 1Q 2013.

S. Korea with 89 completions has slowed down in 40 ships and European yards with 46 stay in

the same level of the 1Q 2013.

Figure 1.8 – Evolution of New Orders in Number of Vessels by Country


794 vessels have been ordered in the 1Q 2014. Chinese yards, with 347 new orders, have se-

cured 55% more contracts than the same period last year. Japanese, thanks to the Yen devalua-

tion have increased 60% the new orders compared to 1Q 2013, standing at 192 vessels. S. Korea

has contracted 124 new ships, 20 more than 1Q 2013 and Europeans 61 vessels, increasing the

contracting activity in 1Q 2013 by 25%.

Number

of vessels

Number

of vessels


PAGE 23 OF 41

Figure 1.9 – New Orders by Area


In CGT terms, China leads the new contracts market in the 1Q 2014. Compared to the same peri-

od last year Japanese and Chinsese are the countries with a higher gowth (Japan, with 3M CGT,

tripled their new orders and Chinese doubled their shares in 1Q 2013 with 6M CGT). European

yards have also increased their new contracts a 30% compared to 1Q 2013, despite standing in

4th place with 0.7M CGT. S. Korea contracted 4.2M CGT, 1M more than 1Q 2013.

Figure 1.10 – New Orders by Main Ship Types


Demand for cargo carriers picked up in 2013 and the trend continues. Driven by efficient design

demand for bulkers has almost tripled the new orders in the same period last year. Also demand

for tankers and LPG vessels has considerably increased. Non cargo vessels demand grew as well,

for passenger/ro-ro, ferries and offshore vessels.


PAGE 24 OF 41

Figure 1.11 – Completions by Main Shipbuilding Areas


10M CGT have been delivered at world shipyards, slightly smaller figure than in the same period

last year when 11.3M CGT were delivered. No significant changes can be seen regarding the

vessel types or the shipbuilding areas. Bulk carriers and containerships still lead the deliveries.

Figure 1.12 – Completions by Main Ship Types



PAGE 25 OF 41

Figure 1.13 – World Orderbook by Area


The world orderbook has grown compared to the end of 2012. China leads the orderbook with

40M CGT followed by Korea with 33M CGT, Japan 15M CGT and EU 28+Norway 6.2M CGT. The

orderbook has increased thanks to owners’ choose for more fuel efficient vessels, and an in-

crease can be seen in both cargo carriers and non-cargo and offshore vessels.

Figure 1.14 – World Orderbook by Ship Types



PAGE 26 OF 41

Figure 1.15 – Value of the Orderbook by main Shipbuilding Areas and Ship Types

Data Source: Clarkson

Clarkson estimates that global commercial orderbook stands at aprox. $298bn. South Korean

orderbook is the most valuable with $106bn, 50% of its value corresponding to offshore. Euro-

pean orderbook, composed by passenger ships, offshore vessels and non-cargo carriers is esti-

mated in $31.5bn, and Japanese orderbook in $29.5bn.

Figure 1.16 – Value of the New Orders by main Shipbuilding Areas


Besides in number of vessels and CGT European yards have contracted less than Japan, in terms

of value seems that have higher value new orders, given the type of advanced technology vessels

built in Europe. EU28+Norway have 13% of the global market shares in value terms.


PAGE 27 OF 41

Figure Types 1.17 –Value of Completions by main Shipbuilding Areas


In the first 3 months of the year world shipyards delivered vessels accounting $22.8bn. Asian

yards lead the production in terms of value, followed by European yards.

Figure 2.1 – Monthly Newbuilding Price Index


Clarkson’s ship prices index shows an improvement of US $, Korean Won and Japanese Yen. Euro

and Yuan are still at lower levels, despite fluctuations in the last year. Yards are still facing a com-

plicate situation of low pricing to compete for low incomes.


PAGE 28 OF 41

Figure 2.2 – Evolution of Cargo Carriers Time Charter Rates

Data Source: Platou

Cargo carriers’ charter rates are still at very low levels hardly covering operating costs, despite a

slight recovery for bulk carriers and tankers.

Figure 2.3 – Bunker Fuel and crude Oil prices

Data source: BunkerWorld.com and World Bank

Crude oil and bunkering fuel continue at historical high levels. Bunker fuel stands at $ 581.75 per

tonne making hard for shipowners’ efforts to cover shipping costs and influencing the choice of

owners for more efficient design vessels and other bunker fuels.


PAGE 29 OF 41

Figure 2.4 – Ship Scrapping

Data source: Clarksons


Low earnings from shipping and overcapacity have favoured an increase in scrapping over the

last years. In total 205 vessels of 6M GT were sold for demolition in the 1Q 2014. Slightly lower

figure than in the same period 2013. Scrapping of Containership tonnage was the largest, fol-

lowed by bulkers and tankers.

Figure 2.5 – Materials Price

Data source: MEPS.co.uk

Despite slight fluctuations over the last 2 year prices of the hot rolled plate have decreased.

Asian average steel price stands at $634/ton while European stands at $703/ton.


PAGE 30 OF 41

Figure 2.6 - Exchange Rates evolution

Data source: X-Rates.com

Exchange rates against the dollar continue to fluctuate making financial planning difficult in a

period already challenging. Japanese Yen was devaluated by the government to help the indus-

try and is now more competitive in the export markets. Korean Wan continues approaching more

competitive rates. The Euro is still at the least competitive rate.

Figure 2.7 Evolution of Global Investment in Newbuilding Activity:

Dat

Data source: Clarkson

Current financial crisis has lead to a cut of investment in the global newbuilding market. $ 24.8bn

were invested in newbuilding in the 1Q 2014, out of which $ 6.6bn were invested in Offshore.

87.1 103.6

24.8


PAGE 31 OF 41

Figure 2.8 New Orders of Specialized Vessels per Country (CGT)

In the 1Q 2014 European yards received new orders for Cable layers, cutter suction dredgers,

diving support vessels, cruise, well stimulation and work ships, amongst other offshore and spe-

cialized vessels.

Figure 2.9 New Orders of Specialized Vessels per Country (Number of Vessels)


PAGE 32 OF 41

Annex Tables - Summary of Ship building Activity*

Source: IHS Fairplay

Table 1.1 –Orderbook by Ship Types 1Q 2014

ORDERBOOK AS PER END OF MARCH 2014 BY SHIPTYPES

TYPES NO. 1.000 GT % 1.000 CGT % 1.000 DWT %

Crude Oil Tanker 235 23,471 11.8 7,716 7.2 44,138 15.9

Oil Products Tanker 190 2,338 1.2 1,594 1.5 3,809 1.4

Chemical Tanker 532 11,334 5.7 7,541 7.0 18,552 6.7

Other Liquids 8 19 0.0 24 0.0 27 0.0

A Tankers 965 37,162 18.7 16,875 15.7 66,526 24.0

Bulk Dry 1,755 78,980 39.8 33,813 31.4 143,346 51.8

Bulk Dry / Oil 2 84 0.0 49 0.0 161 0.1

Self-Discharging Bulk Dry 4 171 0.1 77 0.1 260 0.1

Other Bulk Dry 36 579 0.3 316 0.3 765 0.3

B Bulk Carriers 1,797 79,814 40.2 34,255 31.8 144,532 52.2

General Cargo 378 3,615 1.8 3,245 3.0 5,266 1.9

Container 491 39,312 19.8 18,916 17.6 42,450 15.3

Refrigerated Cargo 3 7 0.0 16 0.0 12 0.0

Ro-Ro Cargo 140 5,588 2.8 3,184 3.0 2,137 0.8

Other Dry Cargo 14 331 0.2 228 0.2 376 0.1

C Dry Cargoes 1,026 48,853 24.6 25,589 23.8 50,241 18.2

LNG Tanker 112 11,741 5.9 9,186 8.5 9,081 3.3

LPG Tanker 207 5,336 2.7 3,866 3.6 6,010 2.2

D Gastankers 319 17,077 8.6 13,052 12.1 15,091 5.5

Passenger/Ro-Ro Cargo 72 478 0.2 653 0.6 114 0.0

Passenger (Cruise) 31 2,884 1.5 2,990 2.8 221 0.1

Other Passenger Vessels/Ferries 51 78 0.0 132 0.1 16 0.0

E Ferries / Passenger Ships 154 3,440 1.7 3,775 3.5 351 0.1

Fish Catching 98 164 0.1 421 0.4 0 0.0

Other Fishing 19 31 0.0 80 0.1 0 0.0

Offshore Supply 746 1,934 1.0 4,244 3.9 0 0.0

Other Offshore 325 8,863 4.5 6,794 6.3 0 0.0

Research 53 252 0.1 386 0.4 0 0.0

Towing / Pushing 593 233 0.1 1,032 1.0 0 0.0

Dredging 25 186 0.1 263 0.2 0 0.0

Other Activities 234 544 0.3 906 0.8 0 0.0

F Other Non Cargo Vessels 2,093 12,207 6.1 14,126 13.1 0 0.0

TOTAL 6,354 198,554 100.0 107,673 100.0 276,743 100.0


PAGE 33 OF 41

Table 2 – Orderbook by Country 1Q 2014

ORDERBOOK AS PER END OF MARCH 2014 BY COUNTRIES

COUNTRY NO. 1.000 GT % 1.000 CGT %

BELGIUM 1 1 0.0 2 0.0

BULGARIA2) 2 6 0.0 12 0.0

CROATIA2) 23 288 0.1 264 0.2

CZECH REPUBLIC 1 3 0.0 5 0.0

DENMARK2) 3 1 0.0 5 0.0

FINLAND2) 8 226 0.1 260 0.2

FRANCE2) 6 277 0.1 241 0.2

GERMANY2) 35 1,447 0.7 1,408 1.3

GREECE2) 2 2 0.0 6 0.0

HUNGARY 2 3 0.0 8 0.0

ITALY2) 26 1,175 0.6 1,329 1.2

LATVIA 3 2 0.0 7 0.0

LITHUANIA2) 5 13 0.0 26 0.0

NETHERLANDS2) 70 287 0.1 410 0.4

POLAND2) 79 185 0.1 348 0.3

PORTUGAL2) 2 8 0.0 14 0.0

ROMANIA2) 100 2,157 1.1 1,252 1.2

SPAIN2) 59 180 0.1 345 0.3

UNITED KINGDOM2) 9 9 0.0 25 0.0

A EU-28 436 6,270 3.2 5,967 5.5

ALBANIA 1 0 0.0 1 0.0

NORWAY2) 38 156 0.1 263 0.2

RUSSIA 38 175 0.1 236 0.2

SERBIA/MONTENEGRO 3 2 0.0 6 0.0

TURKEY2) 141 434 0.2 686 0.6

UKRAINE 12 43 0.0 75 0.1

B OTHER EUROPEAN 233 810 0.4 1,267 1.2

EU-28 + NORWAY 474 6,426 3.2 6,230 5.8

SEA EUROPE2) MEMBERS 608 6,851 3.5 6,894 6.4

C JAPAN 906 29,114 14.7 15,266 14.2

D KOREA (SOUTH) 945 65,842 33.2 32,964 30.6

E CHINA 2,402 79,685 40.1 40,146 37.3

BRAZIL 162 4,059 2.0 2,667 2.5

INDIA 153 952 0.5 903 0.8

INDONESIA 118 215 0.1 400 0.4

MALAYSIA 212 177 0.1 488 0.5

PHILIPPINES 95 5,255 2.6 2,623 2.4

SINGAPORE 55 199 0.1 286 0.3

TAIWAN 41 1,943 1.0 1,043 1.0

USA 143 1,245 0.6 1,217 1.1

VIETNAM 220 1,906 1.0 1,477 1.4

OTHERS 233 883 0.4 958 0.9

F REST OF WORLD 1,432 16,834 8.5 12,062 11.2

WORLD TOTAL1) 6,354 198,554 100.0 107,673 100.0


PAGE 34 OF 41

Table 3 – New Orders by Shiptypes 2013

NEW ORDERS JANUARY - MARCH 2014 BY SHIPTYPES


Crude Oil Tanker 39 4,750 15.8 1,456 10.0 9,171 19.6

Oil Products Tanker 19 493 1.6 264 1.8 834 1.8

Chemical Tanker 71 1,272 4.2 1,019 7.0 2,065 4.4

Other Liquids 0 0 0.0 0 0.0 0 0.0

A Tankers 129 6,515 21.7 2,739 18.8 12,070 25.7

Bulk Dry 299 14,546 48.5 6,045 41.5 26,709 57.0

Bulk Dry / Oil 2 84 0.3 49 0.3 161 0.3


Other Bulk Dry 7 23 0.1 26 0.2 35 0.1

B Bulk Carriers 308 14,653 48.8 6,120 42.0 26,905 57.4

General Cargo 49 514 1.7 447 3.1 734 1.6

Container 55 4,767 15.9 2,248 15.4 5,036 10.7


Ro-Ro Cargo 13 451 1.5 265 1.8 155 0.3

Other Dry Cargo 3 44 0.1 37 0.3 28 0.1

C Dry Cargoes 120 5,776 19.2 2,997 20.6 5,953 12.7

LNG Tanker 5 454 1.5 364 2.5 356 0.8

LPG Tanker 37 1,415 4.7 910 6.2 1,575 3.4

D Gastankers 42 1,869 6.2 1,274 8.7 1,931 4.1


Passenger (Cruise) 2 190 0.6 204 1.4 17 0.0


E Ferries / Passenger Ships 21 277 0.9 317 2.2 39 0.1

Fish Catching 15 23 0.1 61 0.4 0 0.0

Other Fishing 0 0 0.0 0 0.0 0 0.0

Offshore Supply 55 148 0.5 325 2.2 0 0.0

Other Offshore 24 613 2.0 466 3.2 0 0.0

Research 5 43 0.1 53 0.4 0 0.0

Towing / Pushing 56 43 0.1 130 0.9 0 0.0

Dredging 2 11 0.0 18 0.1 0 0.0


F Other Non Cargo Vessels 174 932 3.1 1,121 7.7 0 0.0

TOTAL 794 30,021 100.0 14,565 100.0 46,897 100.0


PAGE 35 OF 41

Table 4- New Orders by Country 2013

NEW ORDERS JANUARY - MARCH 2014 BY COUNTRIES


BELGIUM 0 0 0.0 0 0.0

BULGARIA2) 0 0 0.0 0 0.0

CROATIA2) 3 56 0.2 43 0.3


DENMARK2) 0 0 0.0 0 0.0

FINLAND2) 0 0 0.0 0 0.0

FRANCE2) 1 49 0.2 43 0.3

GERMANY2) 6 209 0.7 208 1.4

GREECE2) 0 0 0.0 0 0.0

HUNGARY 0 0 0.0 0 0.0

ITALY2) 1 40 0.1 60 0.4

LATVIA 0 0 0.0 0 0.0

LITHUANIA2) 0 0 0.0 0 0.0

NETHERLANDS2) 11 8 0.0 25 0.2

POLAND2) 9 16 0.1 37 0.3

PORTUGAL2) 0 0 0.0 0 0.0

ROMANIA2) 12 474 1.6 222 1.5

SPAIN2) 10 17 0.1 46 0.3


A EU-28 54 869 2.9 685 4.7

ALBANIA 0 0 0.0 0 0.0

NORWAY2) 7 14 0.0 31 0.2

RUSSIA 0 0 0.0 0 0.0


TURKEY2) 2 4 0.0 9 0.1

UKRAINE 0 0 0.0 0 0.0

B OTHER EUROPEAN 9 18 0.1 40 0.3

EU-28 + NORWAY 61 883 2.9 716 4.9

SEA EUROPE2) MEMBERS 63 887 3.0 725 5.0

C JAPAN 192 5,743 19.1 3,018 20.7

D KOREA (SOUTH) 124 10,193 34.0 4,241 29.1

E CHINA 347 12,073 40.2 5,964 40.9

BRAZIL 0 0 0.0 0 0.0

INDIA 1 1 0.0 3 0.0

INDONESIA 9 7 0.0 23 0.2

MALAYSIA 16 4 0.0 20 0.1

PHILIPPINES 13 918 3.1 362 2.5

SINGAPORE 7 74 0.2 78 0.5

TAIWAN 4 91 0.3 62 0.4

USA 1 8 0.0 12 0.1

VIETNAM 6 18 0.1 36 0.2

OTHERS 11 6 0.0 22 0.2

F REST OF WORLD 68 1,127 3.8 618 4.2

WORLD TOTAL1) 794 30,021 100.0 14,565 100.0


PAGE 36 OF 41

Table 5 – Completions by Shiptypes 2013

COMPLETIONS JANUARY - MARCH 2014 BY SHIPTYPES


Crude Oil Tanker 8 1,157 6.4 333 3.4 2,229 8.7

Oil Products Tanker 37 290 1.6 223 2.3 461 1.8

Chemical Tanker 38 731 4.1 481 4.9 1,189 4.6

Other Liquids 1 14 0.1 11 0.1 24 0.1

A Tankers 84 2,192 12.2 1,048 10.7 3,903 15.2

Bulk Dry 192 8,602 47.8 3,679 37.7 15,650 60.9

Bulk Dry / Oil 0 0 0.0 0 0.0 0 0.0


Other Bulk Dry 8 193 1.1 96 1.0 253 1.0

B Bulk Carriers 200 8,795 48.8 3,775 38.7 15,903 61.9

General Cargo 46 393 2.2 348 3.6 577 2.2

Container 48 4,243 23.6 2,020 20.7 4,506 17.5


Ro-Ro Cargo 20 402 2.2 249 2.6 156 0.6

Other Dry Cargo 4 99 0.5 65 0.7 114 0.4

C Dry Cargoes 119 5,142 28.6 2,690 27.6 5,359 20.9

LNG Tanker 4 426 2.4 335 3.4 356 1.4

LPG Tanker 13 111 0.6 118 1.2 122 0.5

D Gastankers 17 537 3.0 453 4.6 478 1.9


Passenger (Cruise) 1 146 0.8 141 1.4 11 0.0


E Ferries / Passenger Ships 33 270 1.5 318 3.3 34 0.1

Fish Catching 29 38 0.2 109 1.1 0 0.0

Other Fishing 4 6 0.0 16 0.2 0 0.0

Offshore Supply 89 199 1.1 444 4.6 0 0.0

Other Offshore 26 706 3.9 577 5.9 0 0.0

Research 5 37 0.2 52 0.5 0 0.0

Towing / Pushing 106 36 0.2 169 1.7 0 0.0

Dredging 2 8 0.0 15 0.2 0 0.0


F Other Non Cargo Vessels 286 1,069 5.9 1,466 15.0 0 0.0

TOTAL 739 18,005 100.0 9,750 100.0 25,677 100.0


PAGE 37 OF 41

Table 6 – Completions by Countries 2013

COMPLETIONS JANUARY - MARCH 2014 BY COUNTRIES


BELGIUM 0 0 0.0 0 0.0

BULGARIA2) 0 0 0.0 0 0.0

CROATIA2) 1 4 0.0 6 0.1


DENMARK2) 0 0 0.0 0 0.0

FINLAND2) 0 0 0.0 0 0.0

FRANCE2) 1 1 0.0 2 0.0

GERMANY2) 2 160 0.9 153 1.6

GREECE2) 0 0 0.0 0 0.0

HUNGARY 0 0 0.0 0 0.0

ITALY2) 2 6 0.0 13 0.1

LATVIA 0 0 0.0 0 0.0

LITHUANIA2) 0 0 0.0 0 0.0

NETHERLANDS2) 9 40 0.2 59 0.6

POLAND2) 11 59 0.3 80 0.8

PORTUGAL2) 0 0 0.0 0 0.0

ROMANIA2) 7 19 0.1 39 0.4

SPAIN2) 5 15 0.1 33 0.3


A EU-28 39 304 1.7 386 4.0

ALBANIA 0 0 0.0 0 0.0

NORWAY2) 7 15 0.1 30 0.3

RUSSIA 5 19 0.1 26 0.3


TURKEY2) 23 45 0.2 83 0.9

UKRAINE 3 17 0.1 24 0.2

B OTHER EUROPEAN 39 96 0.5 164 1.7

EU-28 + NORWAY 46 319 1.8 416 4.3

SEA EUROPE2) MEMBERS 69 364 2.0 440 4.5

C JAPAN 157 4,436 24.6 2,135 21.9

D KOREA (SOUTH) 89 5,341 29.7 2,793 28.6

E CHINA 230 6,615 36.7 3,305 33.9

BRAZIL 4 86 0.5 40 0.4

INDIA 9 22 0.1 44 0.5

INDONESIA 55 34 0.2 101 1.0

MALAYSIA 31 19 0.1 64 0.7

PHILIPPINES 13 567 3.1 266 2.7

SINGAPORE 14 56 0.3 85 0.9

TAIWAN 8 247 1.4 134 1.4

USA 14 92 0.5 104 1.1

VIETNAM 19 75 0.4 87 0.9

OTHERS 18 14 0.1 42 0.4

F REST OF WORLD 185 1,212 6.7 967 9.9

WORLD TOTAL1) 739 18,005 100.0 9,750 100.0 *All tables’ data source: IHS Fairplay at the end of reporting period

1) Difference due to rounding

2) SEA Europe members


PAGE 38 OF 41

Glossary and Abbreviations: BDI – the Baltic Dry Index, it tracks changes in freight rates for dry bulk cargoes and is published daily by the Baltic

Exchange in London.

Bunker Fuel – type of fuel used aboard ships.

Cabotage - coastal trade, the movement of goods by ship between ports on the same coast or between ports within

the same country. Many nations, including the United States, have cabotage laws which require national flag vessels

only to provide shipments between domestic ports.

Capesize – a dry bulk vessel around 180,000 dwt or with a beam that prevents passage via the Panama Canal, forcing

the ship to pass around Cape Horn.

Cargo (also freight) – in maritime context, goods loaded into a ship and transported over a certain distance usually for

commercial gain.

SEA EUROPE members - Croatia (from 2002), Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway,

Poland, Portugal, Romania (from 2000), Spain, United Kingdom, Lithuania, Bulgaria (from 2009) and Turkey (from 2012)

Charter - hiring out of a ship by a shipowner.

Charterer - the person who has chartered the ship for a specified voyage or period of time.

Charter rate - the tariff applied for chartering tonnage in a particular trade. It depends on the charter type:

Spot charter – contract for the carriage of a single cargo from one specified port to another in the immediate

future (abt. 2 months). Spot charters can be spot voyage charters or spot time charters.

Voyage Charter - the charterer pays for the use of the vessel's cargo spaces for one or more voyages. Pay-

ment is calculated per ton of goods carried. The owner pays voyage expenses.

Time charter - contract to charter a vessel over a fixed period of time at a set daily rate. Under time charters,

the charterer pays voyage expenses.

Pool charter - a time charter with a floating charter rate. The actual charter hire the pool vessel receives is its

corresponding share of all the income generated by all vessels in the pool.

Bareboat Charter - contract to hire an empty ship, with all operating costs covered by the charterer.

CGT - Compensated Gross Tonnes - International unit of measure that facilitates the comparison of different shipyards’

production regardless of the types of vessel produced. The CGT of a ship is calculated using a table of conversion

factors published by OECD. The conversion factors vary with ship type.

Classification Society - any organization that certifies seagoing vessels and their equipment for compliance with

standardized rules regarding construction and maintenance and carries out surveys at regular intervals of time and

acts on behalf of the flag state's maritime authorities.

Clarkson’s newbuilding price - The data reported represents the selection of ships covered by the Broker Clarksons.

The Ship Price Index of Clarkson’s historical data covers various sizes of the standard shiptypes. The Index only pre-

sents anticipated prices (ex ante) not effective prices (ex post). The methodology used by the brokers is based on

confirmed contracts where they exist and brokers estimations for ship types where no transactions were registered. It

should be also noted that the sizes per ship category have increased over time and that this creates as an “inbred

inflation”. Therefore only the trends should be considered as meaningful.

Deliveries - volume of completed ships.

Demolition – See ship breaking.

Dry dock - a facility for taking a ship out of water, an operation also know as “stemming” a ship. A drydock is normal-

ly either a graving dock (a permanent civil engineering structure) or a floating dock.

DWT – deadweight tonnes, roughly equivalent to a ships carrying capacity measured in metric tonnes.

Freight rate - the charge made for the transportation of freight.

Flag of convenience (FOC) - term used about countries allowing unlimited registration of foreign-owned ships in

order to achieve low wage levels and low or no taxation payable to the flag state.

GT – Gross Ton; unit of 100 cubic feet or 2.831 cubic meters, used in arriving at the calculation of gross tonnage.

Hot rolled plate – steel plates of the type purchased for building the hull of the ships and other heavy constructions.

Hull - the body of a vessel, a steel structure not including any equipment and machinery.

IHS Fairplay (former Lloyd’s Register-Fairplay) – supplier of maritime data, including shipbuilding statistics. The defini-

tion of the ships taken into account in the statistics of IHS Fairplay is commercial, seagoing vessels, self propelled and of

more than 100 GT. The coverage of the mega-yachts in the database is not homogenous due to the fact that registra-

tion/classification is not mandatory for a non commercial (private) use. Finally this definition excludes naval ships.

IMO – International Maritime Organization, the maritime authority of UN tasked with the coordination of international

maritime safety and related practices.

Keel - the backbone of a ship formed from a series of connected plates running fore and aft on the bottom of the

centre line of the ship.

Knot - unit for measuring speed, equal to one nautical mile per hour or 1.852 km/h.


PAGE 39 OF 41

Lay-Up - temporary cessation of trading of a ship by its owner i.e. during a period when there is a surplus of ships (or

over-tonnage) in relation to the level of available cargoes.

Liner - A vessel, usually containership advertising sailings on a specified trade route on a regular basis

Merchant shipbuilding – building of commercial vessels

New Order – announcement and confirmation of a firm newbuilding contract

Orderbook – the vessels on the shipyards’ books between the new order and delivery stages.

Owner – in the maritime context, the owner of a ship, or shipowner.

Ship delivery – handover of a vessel by the yard to the owner after the completing the construction

Ship Types – by segments or main shiptypes used in CESA Market Monitoring Report:

1. Mass segments - refers to standard vessels characterized by large market volumes, series production, standardiza-

tion, limited engineering content and a more limited number of subcontractors. Typical vessels:

Bulk carriers – all vessels constructed and equipped to transport dry, homogeneous, unpacked cargo in its holds,

for example Iron ore, limestone, grain, coal, fertilizers.

Containerships - ships equipped with container cells for the purpose of transporting cargo.

Oil Tankers - ships fitted with tanks to carry carrying either crude oil or oil derivatives.

2. Niche segments – refers to complex vessels characterized by smaller market volumes, small series with less repeti-

tion and more prototypes and sister ships, tailor-made production, substantial engineering content, knowledge-based

production and a relatively large number of subcontractors. Typical vessels:

Chemical tankers – ships designed to carry relatively small parcels of higher value chemicals, such as acids or

polymers or cargos such as wine, molasses and similar products. Some chemical tankers are equipped with stain-

less steel tanks and may carry different cargoes simultaneously, with each tank having its own pump and pipeline

system for loading and unloading.

Gas Carriers or Gas Tankers – vessels specially constructed to carry gasses in tanks:

LNG tankers - carry liquid methane in refrigerated tanks at normal atmospheric pressure

LPG tankers - carry butane, propane etc in pressurised tanks at ambient temperature.

General Cargo ships – include a large number of specialized vessels designed to carry special, heterogeneous

cargoes, including but not limited to:

Feeder Vessels - short–sea vessels which transfers cargo between a hub port and smaller ports.

Multipurpose ships – vessels that carry containers together with other cargo.

Reefers - vessels designed to carry goods requiring refrigeration.

Timber carriers, Pallet carriers, Car carriers, Cattle carriers etc

Other Non Cargo Carrying Vessels include but are not limited to:

AHT –Anchor Handling Tug, vessels employed in the offshore activities moving anchors and performing tow-

ing operations. AHT with combined characteristics of supply vessels is an AHTS.

OSV - Offshore service vessels or offshore support vessel - terms for specialized vessels used in activities

connected to the exploration, development and production of oil and gas at sea.

Special-purpose vessels – vessels not used for transport but designed to perform specific tasks (e.g. dredgers,

tugs, pilot boats, pollution control boats, rescue boats, cable or pipe layers, research or seismic vessels, survey

vessels, ice breakers, fishing vessels etc)

Tugs - a small vessel equipped with powerful diesel engines to tow or push large ships or barges

Passenger Ships:

Cruise ship - passenger vessel carrying passengers on trips between various ports, normally with the same

starting and ending port with high standards of accommodation and recreation.

Ferry – vessel used to transport passengers or/and goods across a body of water in short periods of time. The

market divides into three main groups: Roll-on-roll-off (roro) ferries - tend to be large ships, often operating

on relatively short routes such as across the English Channel or the between Greek islands; Cruise-ferries - of-

fer a higher standard of passenger accommodation for longer routes and some of the facilities offered by

cruise ships; Fast ferries that tend to be smaller, may have multiple hulls (catamarans) and are often built from

aluminium rather than steel.

Shipbuilding Area – geographical area with a high concentration of shipbuilding activities

Shipbuilding - the construction of a vessel including the installation of machinery and equipment.

Ship Maintenance, Repairing and Conversion - any repair of a vessel including, but not restricted to, alterations,

conversions, installations, cleaning, painting, and maintenance work.

Ship breaking - breaking down of a vessel's structure for the purpose of scrapping the vessel, including the removal

of gear, equipment or any component part of a vessel. Also referred to as demolition or recycling.

TEU – Twenty Foot Equivalent Unit, a measurement of cargo-carrying capacity of a containership.

Ton–Mile - measure used in the economics of transportation to designate one ton being moved one

CESA SHIPBUILDING MARKET MONITORING REPORT 17 OF 15-12-2009

PAGE 40 OF 41

Notes:

tel.: +32 2 230 2791

fax.: +32 2 230 4332

[email protected]

www.seaeurope.eu

Ships and Maritime

Equipment Association

Rue Marie de Bourgogne 52-54

1000 Brussels, Belgium

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