E. COMMUNITY INTEREST
E.1 COMMUNITY INDUSTRY
The shipbuilding industry in the Community represents a very important sector of economic activity with a labour force directly employed in shipbuilding and ship repair of 82500 persons (all Community producers considered) in 1999 and a substantial number (more than 250000) of indirectly employed persons in subcontracting or supplying companies.
On the basis of the information available it seems reasonable to forecast that, should the Korean pricing policy continue, the Community industry may not be in position to regain at least parts of its 10st market Shares and improve its profitability.
It is to be recalled that a number of shipbuilding plants were closed down during the IP, representing a capacity of more than 300 000 cgt, entailing job losses of around 6000 employees. A number of other shipyards went bankrupt, but continued to operate due to a transfer in ownership, entailing nevertheless job losses for approximately another 2100 employees.
If no action is taken, a further deterioration of the situation of the Community industry is probable. It is likely that Community shipyards will then either try to further shift their production into market niches or decide to shut down other shipyards with a corresponding loss in direct and indirect employment.
A large number of companies are involved in shipbuilding either as subcontractors that execute their works (for instance, painting hulls or outfitting passenger ferries) on the premises of the shipyard or as suppliers of material. In the Community as a whole, for both subcontracting and outside supply the Community shipbuilding industry (all producers) employed indirectly 267 500 people in 1999.
Depending on the type of vessel produced, both subcontracting and external supply may represent up to 70% of the full cost of production.
While some subcontractors or suppliers may be able to switch to other activities outside the shipbuilding industry, others are highly specialised in their field of activity and would severely suffer from a reduction or disappearance of their part of the European shipbuilding activity.
The role of shipbrokers is basically to bring about shipbuilding contracts, i.e. by bringing together the buyer (shipowner) and the builder (shipyards), very often including formal tender procedures. The income of shipbrokers depends on the value of deals actually concluded (usually around 1% of the ship price), regardless to which shipyard the contract is attributed.
Nine shipbrokers addressed either a letter or a more detailed submission to the Commission, of which five are based in the Community. In addition, four hearings with shipbrokers were organised with two brokers based inside and two outside the Community.
All shipbrokers are opposed to action against Korean shipyards. However, no evidence was given as to how Community action would deteriorate their financial situation. On the contrary, as indicated by themselves during the hearings, they would probably benefit from any price increase since their income is related to turnover.
While no submissions were received from shipowners' associations, seven shipowners addressed a letter to the Commission, expressing their opposition to the proceeding on the same grounds as the shipbrokers. A hearing was held with one shipowner. The latter put forward that the type of ships it had recently ordered at Korean shipyards (bulk carriers and tankers) was not available from Community shipyards. This is, however, a confirmation of the price suppression described above. The investigation showed that, during the IP, shipowners have directly profited from low prices for new ships. On the basis of the information available, it does not seem that shipowners would be negatively affected should any action against the subsidised Korean shipyards be taken.
On the contrary, it seems that the existence of abnormally low prices for commercial vessels may lead to a strong competition in freight rates, which could eventually negatively influence the financial position of shipowners.
With respect to the effects on competition of a possible action, although it cannot be excluded that some of the Korean shipyards would suffer negative consequences, the remaining Korean shipyards are likely to keep a strong market position. Moreover, there will still be a significant number of major competitors of the Community industry, including shipyards in Eastern Europe . Japan and China, and shipowners will continue to have the choice of different suppliers of commercial vessels inside and outside the Community.
On the basis of the above, it can be concluded that the effect of any Community action, if appropriate, would be beneficial for the Community industry, without inflicting unduly adverse effects on other interested parties.