EU Shipbuilders Predict Cruise Ship Order Cancellations

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Published Apr 2, 2020 8:00 PM by The Maritime Executive

European shipbuilding and ship equipment association SEA Europe is calling for government aid to help the industry weather the COVID-19 downturn, citing temporary shutdowns, order cancellations - particularly for new cruise ships - and project delays. 

"European shipyards and maritime equipment manufacturers are key for the European Green Deal, for Europe’s Blue Economy and mobility, for Europe’s defence, security and autonomy and for Europe’s access to seas and trade of goods and passengers," said Kjersti Kleven, SEA Europe’s chairwoman. "If the EU fails to adopt tailor-made sectoral policies and financial support . . . Europe risks to lose its strategic maritime technology sector to Asia."

With most of Europe in lockdown, the EU maritime equipment, ship repair and shipbuilding sectors have been hit hard, SEA Europe said. At many firms, production has been reduced or stopped and workers are furloughed. Top shipbuilding conglomerates Navantia, Naval Group and Fincantieri have all halted or scaled back activity at their yards. With revenue down, many smaller companies face liquidity problems or lack of access to credit.

To make matters worse, many yards' shipowner customers are facing financial difficulty themselves, and many are postponing or cancelling orders. SEA Europe expressed particular concern about cruise ship orders: these billion-dollar vessels were in high demand until January, but the cruise industry now faces its most severe downturn in history.  "The sector expects that many orders for newbuilt cruise ships will be cancelled since cruise operators are heavily suffering from the financial consequences of travel restrictions and health issues onboard such ships. Hence, production of and demand for cruise ships and related maritime equipment will not restore before shipowners will be confident about better market conditions and passengers about better financial and sanitary circumstances," cautioned SEA Europe. 

While many sectors are experiencing similar problems, the shipbuilding sector will likely be affected for longer due to the dynamics of the global economy. "Shipbuilding and maritime equipment manufacturing are export-oriented businesses and very much depend on global macro-economic trends, trade volumes, and market sentiments," the association said. "SEA Europe expects that COVID-19 will particularly negatively impact those markets in which Europe’s shipyards currently are global leaders, notably the markets of complex ship types, such as ferries and cruise vessels, dredgers, advanced fishing vessels and vessels for offshore operations."

European shipbuilders already faced stiff competition from Asia, particularly China, where Beijing's "Made in China 2025" initiative directly targets shipbuilding competitiveness. SEA Europe warned that the added pressure of the COVID-19 crisis could lead to the loss of EU knowledge, capacity and technological competency in shipbuilding. 

To address these structural challenges, SEA Europe is calling for sectoral assistance tailored specifically to the ship technology and shipbuilding sector - above and beyond the aid that the European Commission is providing to all EU industries. The association also pointed to its previous policy guidance, which calls for recognition for European shipbuilding as a strategic sector and for a comprehensive EU-wide maritime technology sectoral strategy.