Europe View: Shipowners leave builders in dust

Europe View: Shipowners leave builders in dust

LONDON - The recent news that EU regulators will investigate the legality of a whopping $1.8 billion government handout to Izar, Spain's state-controlled shipbuilder, seemed yet another sign that Europe is a spent maritime force.

The announcement in Brussels came hard on the heels of the EU's latest annual report on the shipbuilding industry showing Europe's world market share has crashed to just 7 percent in 2002 from 13 percent in 2001 and 19 percent in 2000. The fact the EU heaped most of the blame for the slide on "unfair" competition from South Korea yards only served to flesh out the image of a former maritime superpower incapable of adjusting to the reality of changed market circumstances.

Fact is, Europe is strengthening its position as a maritime power with dominant market positions in almost every sector from tankers and bulk carriers, to cruise liners, containerships and liquefied gas carriers.

This success isn't visible because many European-owned vessels fly flags of convenience that hide their identity and their owners, unlike shipyard executives, are rarely seen in Brussels lobbying for special treatment to fend off Asian competition. Bankruptcies among shipowners are just that; failures of shipyards are politically charged events.

Gap widens

The gap between the two industries has widened dramatically in the past year with shipowners, buoyed by booming tanker and bulk markets and a sudden spectacular rally in container charter and liner rates, scrambling to order new tonnage - often at "enemy" yards in South Korea, while Europe's shipbuilders are bracing for a new wave of closures as "their" orders drift to the Far East.

Keeping it in the family

Some of the biggest plays in container shipping today are European family concerns that have confounded doubts about their staying power in a cutthroat, capital-intensive business. Mediterranean Shipping Co., CMA CGM and Maersk Sealand parent A.P. Moller all rank at or near the top of global shipping, and are privately-controlled.

Equally impressive are Europe's "unseen" shipowners, the German finance houses which have built up a massive fleet of container vessels for charter thanks to investors seeking a tax-efficient home for their savings. This is a big business with charter tonnage now accounting for nearly 50 percent of the fleet of the world's top 30 liner shipping companies, a trend that is likely to continue as the finance houses trade up from their traditional market of small- and medium-size ships between 1,750 TEUs and 3,500 TEUs into the panamax and post-panamax sectors. Fears that Europe's shipping families can't hold out against a riding tide of Asian competition were fuelled by the recent $1.4 billion takeover of Bergesen, the Norwegian bulk shipping giant, by WorldWide Shipping, the Hong Kong group controlled by the Sohmen family. It wasn't WorldWide's first foray into the highly independent Scandinavian shipping business: in 1999 it acquired Sweden N&T Agronaut and transferred it to Hong Kong. The sense of vulnerability was heightened as Norway's fleet in 2002 fell to 1,670 ships of 45.9 million deadweight tons, down from 48.7 million dwt in 2001, its biggest decline since 1993.

Norway holds onto niche markets

But those fears are overdone. Norway, nation of only 4.5 million people, still boasts the world's third-largest fleet , including 18 percent of the tanker and dry cargo sector. Well-run Scandinavian carriers have a disproportionate share of niche markets, like WWL, a joint venture between Norway's Wilh. Wilhelmsen and Sweden's Wallenius, which has a 16 percent share of the world auto-shipping market, just behind Japan's NYK, with 18 percent. On top of this the two partners have a combined 80 percent stake in Eukor Car Carriers, the former car division of Korea's Hyundai Merchant Marine, which has a 16 percent slice of the world market.

Greek owners, meanwhile, have rebounded from a period of depression when they became the main target of the EU's planned ban on single-hull tankers, and are ordering new tonnage at a sizzling pace driven by buoyant tanker and bulk freight rates. At the end of May they controlled 3,355 ships of 171.6 million dwt, or 18.3 percent of world capacity in service or on order, an increase of 7 million dwt, or 4.2 percent in the past 14 months.

But these successes won't generate much media attention, certainly not as much as the hand-wringing that will go on when the EU rules on the Izar handout.

Bruce Barnard is the European correspondent for The Journal of Commerce Online.