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Graphic element Research > Growth > Research projects > Land & marine transport projects > Europe fights Korean shipyard threat
Graphic element Europe fights Korean shipyard threat
    22-10-2001
last update: 26-09-02
 

The European Commission is threatening to appeal to the World Trade Organisation (WTO) over alleged subsidies given by the South Korean government to support its shipyards. Although Korea has achieved, in recent years, a leading position in the world shipbuilding industry, Europe is still strong in building specialised ships such as ferries, cruise ships and gas tankers. A number of EU thematic networks and research programmes are aimed at speeding up ship design and production to help support these important market segments.

The world market for shipping continues to be in crisis. Supply outstrips demand and even with the recent rise in demand, prices continue to fall. As South Korean yards can offer ships at prices that do not fully cover production costs, it is almost impossible for European shipyards to win orders. These are some of the conclusions of five Commission reports on the situation in the world shipbuilding market (COM(2000) 474 final; COM(2000) 263 final; COM(2000) 730 final; COM(2001) 219 final; COM(2002) 205 final). These reports to the European Council, presented by Commissioner Liikanen, analyse the market situation in detail and provide evidence that over-investment in Korean shipyards has triggered business practices that are not in line with the generally accepted rules.

Are the South Koreans playing fair?
 

EU countries are no longer able to subsidise their shipyards but the Commission's reports show that several of the six major Korean yards have received substantial state support. The Daewoo and Halla yards both had to be declared insolvent after the 1997 Asian crisis before being given debt relief by state-owned banks. These companies now operate under the new names of DSME and Samho Shipyard, respectively. The Commission and European industry organisations have held several rounds of talks with the Koreans, which produced so-called 'Agreed Minutes' laying down principles on financial transparency, non-subsidisation, commercial pricing and effective consultation and monitoring. It is Korea's apparent unwillingness to adhere to these agreed measures that has led to the latest dispute. EU trade commissioner Pascal Lamy is considering an application to the World Trade Organisation to protest against the debt-for-equity swaps and loan restructuring that have enabled the faltering Korean yards to carry on operating.

Korea builds mainly large bulk carriers, container ships, and oil and liquefied natural gas (LNG) tankers, and its tenders are on average 20% below what has been calculated as the full cost-covering price in Korea. The Koreans deny any price dumping, claiming that their lower prices are the result of increased efficiency, lower labour costs and private as well as state financing. However, the Commission's analyses have shown that Korean yards, while typically accounting for their direct costs such as labour and materials, systematically fail to make provisions for their significant financial costs. Moreover, Korean yards operate in an inflationary environment and labour costs are not much different from those of other OECD countries.

 
To subsidise or not
 

There is wide agreement among EU Member States and in the EU shipbuilding industry that subsidies do not help to improve competitiveness. However, in the absence of a level playing field, defensive measures may be required. With this in mind, the Commission has proposed to the Council that direct aid of up to 6% be allowed for certain market segments where unfair Korean trading practices have caused injury to EU shipbuilders. This defensive mechanism will be limited in scope and duration and is designed to support EU shipbuilders while a WTO dispute settlement is pending. Currently, the mechanism, which was approved by the Council in June 2002, covers container ships and product and chemical tankers. Liquefied gas carriers may be added if further investigations show that Korean yards are using subsidies here as well, allowing them to offer ships at prices below production costs. This defensive subsidy regime will enter into force when the Commission officially requests a dispute settlement at the WTO.

Europe on Sea - some key facts about Maritime Europe:
  • Europe's coastline is enormously long in relation to its land area;
  • From the dawn of civilisation, Europeans have used the sea for travel, trade, migration and war;
  • Today, 90% of European exports are still carried by sea;
  • 2 million EU citizens work in the maritime industries, of which about 300 000 are employed in shipbuilding;
  • Many European shipyards are having a difficult time, losing orders and jobs to yards in the Far East due to unfair trading practices;
  • Europe is the world leader in building ferries, cruise ships and specialist tonnage like dredgers and supply ships.
 
Europe leads in specialised shipping
 

One European shipyard that has successfully exploited niche markets is Flensburger Schiffsbau-Gesellschaft (FSG), founded in 1872.

It currently has a full order book with options until 2004, for ro-ro ferries and other specialised vessels. "Our design for a naval supply vessel has been ordered by the UK MoD," says Stefan Krüger, FSG research director. "Six ships of this design will be built at the UK shipyard, Harland and Wolff, while we will produce the other four ships. Our first principle is that basic numerical research underlies every design we produce, and we never use empirical methods. For every ship that we build, 10% of our direct costs go into research, and this is what turns our designs into successful ships. In addition we received funding through EU programmes and directly from the German government. In this way even a prototype can be profitable, and with the advanced ships that we design, every one is a prototype." FSG joins in several of the thematic networks described below.

 
Maritime research in the EU
 

The Committee of European Shipbuilders' Associations (CESA) has its own research body, the Committee for Research and Development in the European
shipbuilding (COREDES), which aims to promote understanding of its industry's R&D needs and priorities, and coordinates efforts to achieve them. It has formulated maritime R&D strategy along four main axes, aiming to make new ships:

  • more competitive
  • safer
  • more friendly to the environment
  • adapted to short sea routes in Europe

"There are four main topics within these themes," explains Patrick Person, vice-chairman of COREDES. "In manufacturing, we need to reduce the cost of making and assembling hull sections for large carriers. We need better design tools to produce new types of ships more quickly and cheaply. We need to improve the handling of freight containers, so that a much larger volume of goods are carried by water. Finally we need new technology to survey and explore beneath the sea and support offshore oil and gas platforms, and automatic monitoring." To help to define research needs within these themes, the EU increasingly uses thematic networks.

 
European thematic networks
 

Maritime research projects are defined for the EU through a number of thematic networks. A thematic network (TN) unites the expertise of industry and research organisations to examine the state of the art in a given area, look for research needs and help to formulate joint projects that can apply to FP5 for funding. The EU helps with the cost of travel and meetings. The generic thematic networks in the marine area are CEPS, PRODIS, Safer Euroro and TRESHIP . Within these generic TNs are a number of more specific ones, described under each heading. The structure of the thematic networks is outlined in the marine information website.

 
Competitive Engineering and Production in Shipbuilding
 

CEPS has successfully submitted research proposals under the Fourth and Fifth Framework Programmes.

One of its achievements has been to improve laser cutting techniques, first introduced by two relatively small UK shipyards but since adopted by bigger yards, which use it to streamline production and save costs. There are two thematic networks within CEPS: MARNET-CFD and ROBMAR.

The MARNET-CFD TN aims to encourage the spread of knowledge about, and use of, computational fluid dynamics as a design tool in the marine industry. The network was set up in 1999 with 37 organisations - shipyards, classification societies, naval architects, design consultancies, specialist manufacturers, research institutes and tank testers - with many more joining as the activity advanced. It was founded by W.S. Atkins, UK design consultants, and Sirehna of France.

CFD is a mathematical tool successfully used to model aerodynamic flow in designing aeroplanes and motorcars. Designers of ships and offshore platforms have been slower to take up the method, and MARNET is planned to bring the benefits of CFD to this sector. "Europe leads in this technology," explains MARNET coordinator, Paul Gallagher of W.S. Atkins. "It was EU support for CFD in aeronautical design that helped to make a success of the European airbus, with its laminar wing flow and low-drag area profiles. The average bulk carrier is just a series of boxes welded together and CFD does not have much to offer there. It comes into its own in supporting the design of efficient or novel ships like fast ferries and cruise liners, where European yards have a leading position in an expanding market. These vessels need good sea-keeping ability and low noise and vibration, so hydrodynamic design is very important. MARNET enables advanced hydrodynamic methods to filter down from the universities to the shipyards."
MARNET, too, has four thematic areas, marine vehicle performance, hydrodynamic loads and responses, propulsors and offshore engineering. So far it has helped to set up eight research projects to develop tools for design optimisation and others are progressing. Sirehna are creating a database of the experimental and computational data gathered in these areas so that it can be accessed and used by all participants. The database has two parts, problem definition, set-up and references, and data files in simple formats. Proposals for the second phase of MARNET are being developed.

 
PRODIS for marine transport
 

The PRODIS TN reflects the importance of the shipbuilding industry in integrating different European technologies. It was set up under the policy to make ships more environmentally friendly, with an important aim being to shift cargo traffic from land to water, reducing congestion and air pollution. This has to be achieved while meeting the demand for efficiency, flexibility and fast turnaround that modern freight transport demands.

The network aims to make better use of the funding available by linking different national programmes and projects. The analytical thematic areas of PRODIS are hydrodynamics, hull structures, power plants and cargo handling and mooring. There is also an integrating area, new ship concepts. The main contractor is the French shipyard Chantiers de l'Atlantique.

The TN divides its technologies into two distinct groups, one related to transport in deep seas, suitable for intercontinental or polar shipping, and one related to coastal, inland or short sea shipping. A supporting thematic network is MARPOWER, which deals with marine machinery that has low pollution and high efficiency.

These are just some of the TNs that impact on the transport sector and shipping in particular. The different TNs are collaborating more and more to make their work more effective. They holding regular joint workshops to this end, the latest being in Crete on 18?19 October 2001. "Thematic networks are now looking at where they want to be in 10 years time when thinking about new research," comments Jim Grant of Plymouth University's Centre of Expertise, Marine Science and Technology.

 
Automation in production
 

To compete with Korean shipyards, European yards need more efficient ways to assemble large hull structures. Automation offers a tool to replace expensive manual labour and keep up production as shipyard capacity is cut back. The expertise for many 'tele-operations' already exists within the nuclear, military and aerospace industries but it needs to be transferred to the maritime industries in a systematic and useful way. The ROBMAR TN was set up to help exchange information between the industry sectors and bring high technology to ship construction.

One example of a project within this structure is ROWER 2, the second phase of research into a robotic welder. The aim is develop an effective welding machine to use inside the confined space of hull sections, as the present ones cannot work in dry-docks or slipways where ships are fitted out for going to sea. The result will be a prototype robotic welding system, with the welding torch held by a manipulator on a platform that will fit inside the ship cell. It will also have a viewing system to survey and measure the join to be welded and an external control console.

The system should improve welding productivity more than threefold, with better welds that need less reworking. It will also reduce assembly time, which is one of the main bottlenecks in ship construction, improving throughput and hence profitability and market share.

 
Automation in maintenance
 

Many marine maintenance procedures are rough, risky and repetitive, making them prime targets for automation. One difficult maintenance task is cleaning the underwater parts of ships to remove marine fouling. It has to be done in a dry dock, which is expensive, and the marine growth is contaminating and its disposal is strictly controlled by environmental regulations. The AURORA project, managed by Spain's Instituto de Automatica Industrial, is developing a low cost auxiliary hull climbing robot that will be able to clean adhering marine growth from a ship's hull underwater. It will also act as an inspection tool through sensors for evaluating the condition of the hull steel.

The project goes right through from defining the specifications such a system would need to building a prototype and testing it in two shipyards in Greece and Spain. The system will be divided into sub-systems that can be built and assessed separately, and safe disposal of the cleaned material will also be studied. AURORA has the potential to save Europe €185 million per year of costs arising from labour, dry-docking and ship stops.

The insides of ballast tanks and cargo spaces must also be regularly inspected to make sure that the hull is still seaworthy. A free-floating underwater vehicle equipped to make visual inspections and gauge the thickness of the steel hull could save having to drain tanks and keep human operators out of a potentially dangerous environment. The ROTIS project aims to develop a prototype system with a self-powered vehicle, on-board navigation and tether control, an arm to hold inspection tools and a docking device, and a surface control unit.

OCTOPUS is another robotic cleaning system, this time operating in the dry. While it can also clean hulls in dry dock, it is the only system being developed that can crawl over a ship's superstructure, cleaning as it goes. It will provide an economical solution for vertical and overhanging areas that are difficult for a person to clean in safety.

 
Ship construction tools
 

Development in the cruise ship industry has been very fast and new concepts need to be realised rapidly if Europe is to retain its lead in this market. DISCO is a new programme that will derive new structural solutions for cruise ship requirements and evaluate them. Guidelines for cruise ship design and construction will be drawn up to complement the analysis in DISCO.

A new four-year project called VRSHIPS-ROPAX seeks to unite the various existing simulation packages into a life-cycle virtual ship system. It will create an independent platform to support simulation tools and test it by modelling a new ship type, ROPAX.

Ship stability and smooth operation should be enhanced by an investigation of pod propulsion systems OPTIPOD, which will optimise the design of such systems for any shape of hull and ultimately generate guidelines. A cruiser, a ro-ro passenger ship, a cargo ship and a supply vessel will be taken as the examples in the study, which will cover operational and environmental aspects of podded ships compared with conventionally powered vessels.

However successful a ship design, it has to be reproduced industrially to build the ship. Current fabrication methods require a good deal of remedial work, common in heavy industry, before a new ship can be classified as acceptable. Currently around 28% of labour costs are wasted in correcting unsatisfactory work. The QUALIGLOBE project seeks to apply systematic quality control, integrated with process planning, at each stage of the production process. It will develop a range of software, for pre-adjusting process parameters, real time process control and monitoring overall quality assessment. It will use sensors to acquire data for a database on quality at all levels from individual components to entire assemblies. The result should be a tool for manufacturing improved steel structures at lower cost.

 
Why EU research matters
  The purpose of these thematic research actions and projects is to provide Europe's maritime transport sector with the assistance it needs to maintain and improve its competitiveness. Ensuring that ship builders and related industries are developing the latest technology - in terms of design, engineering and production - will allow them to match key players such as Japan and Korea. However, industrial competitiveness is not the only aim: key benefits from EU-funded research must also offer reductions in energy consumption and increases in safety, reliability and availability. To obtain these deliverables, research efforts are arranged around the evolution of critical technologies and their use in advanced industrial concepts.

There is a broad remit for research in this field because of the special nature of the maritime sector. Projects cover the complete supply chain because 50-80% of shipbuilding's added value is generated outside the yard. More information on the goals of maritime research can be found in the Growth Work Programme 2001-2002.

 
Are the South Koreans playing fair?
To subsidise or not
Europe leads in specialised shipping
Maritime research in the EU
European thematic networks
Competitive Engineering and Production in Shipbuilding
PRODIS for marine transport
Automation in production
Automation in maintenance
Ship construction tools
Why EU research matters
   

Key data

Work aimed at enhancing European maritime competitiveness is supported under the Growth Programme's Land transport and marine technologies key action.

Projects

CEPS - Competitive engineering and production in shipbuilding;
PRODIS - Product development and innovation in shipbuilding;
SAFER/EURORO - Non-linear dynamics of ship capsize in extreme seas;
TRESHIP - Technologies for reduced environmental impact from ships;
MARNET-CFD - A thematic network in computational fluid dynamics for the marine Industry;
ROBMAR - Robotics for the maritime industries;
MARPOWER - Concepts of advanced marine machinery with low pollution and high efficiency;
ROWER 2 - On-board automatic welding for ship erection - phase 2;
AURORA - Auxiliary climbing robot for underwear ship hull cleaning of the sea adherence and surveying;
ROTIS - Remotely operated tanker inspection system;
DISCO - Development of innovative structural concepts for advanced passenger vessels;
VRSHIPS-ROPAX - Life-cycle virtual reality ship system(s);
OPTIPOD - Optimal design and implementation of azimything pods for a safe and efficient propulsion ships;
QUALIGLOBE - Product quality state based fabrication in global production environment.

     

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