The Community of European Shipyards Association (CESA) is investigating newbuilding agreements concluded[ds_preview] in the Far East after its members reported »irrational low-priced contracts«. Although it will be difficult to ascertain and prove any illegal dumping under international trade rules, the shipbuilding association announced that an investigation will involve experts in order to take concrete project specifications as well as the specific conditions of the respective builder into account. Only contracts for which European yards have tendered will be taken into consideration. Should the results indicate that the reported contract price is substantially below the estimated cost; CESA will contact both customer and builder for comments. In case of positive evidence the organisation warned Seoul it would lead to repercussions to the extent that South Korea’s free trade agreement with the EU could be jeopardized. Article 3 of the so-called »Agreed Minutes«, a binding bi-lateral agreement, the Korean Government agrees that the level of ship prices shall reflect all the factors of costs according to the definition of a normal value under the WTO Antidumping Agreement. CESA will seek clarification on the basis of this commitment through the consultation process established by the Agreed Minutes. »Should the consultations confirm serious shortcomings on the implementation of commitments by Korea, an impact on the ongoing ratification process of the Free Trade Agreement between the European Union and the Republic of Korea might be expected« CESA announced in a recent press release.
As far as shipbuilding in China is concerned, no such bilateral agreement with Europe exists. However, Mr. Lüken expressed his hopes that WTO trade rulings on shipbuilding might be more successful in the future, as WTO case law has moved on and Asian shipyards are being operated by reasonable managers. Korean shipbuilders Hanjin e.g. announced early this year it would not agree low-priced orders and simultaneously announced about 30 % lay-offs of their workforce.
The European shipbuilding industry has been seriously hit by the global economic downturn with an orderbook in 2009 that crashed by around 85 % year-on-year. A sharp decline in market prices, particularly if these are unsustainable in comparison to production costs, would be detrimental also to shipowners, as they undermine a market correction on the supply side. Unrealistic price levels also reduce the value of the existing fleet affecting the refinancing options for owners.
According to the CESA secretary-general Reinhard Lüken the first result of the investigations announced shall be released within a month’s time.
