Recovery is just around the corner, but we must not let our guard down
The Annual General Meeting of ASSONAVE, the association that represents the Italian shipbuilding industry, was held in Rome, chaired by Ambassador Vincenzo Petrone. The Financial Statement for 2020 and the Budget for 2021 were approved during the meeting.
With regards to the global cruise sector, the General Meeting showed that after a disappointing 2019, with orders dropping by 20% in volume compared to the previous year, 2020 saw orders fall by an additional 20%, as a result of the global crisis generated by Covid-19. A sharp rise in orders during the fourth quarter barely made it possible to surpass the 20-year low of 2016. In this context, the shipbuilding sector in Europe is unfortunately seeing a reversal in trends compared to the past, when the booming cruise sector led to more orders and jobs.
In 2020 orders in Europe fell by 64%, much more than in other geographical areas, and Europe saw its share cut in half, down to 6% at the end of 2020 and as low as 2% in the first quarter of 2021. This is due to the fact that both in Europe and in Italy over 80% of new orders concern cruise ships, a sector that has experienced an unprecedented crisis due to the pandemic. During almost all of 2020 and early 2021 most of the cruise fleet was grounded, and there was no expectation of new orders from shipowners.
The only segment that saw meaningful growth in orders between late 2020 and early 2021 was container ships, which are now built almost exclusively in East Asia, and particularly in South Korea, which saw its market share skyrocket as high as 67% in the first quarter of 2021. This is putting serious strain on several shipyards in northern Europe, which are faced with a lack of orders during a period of crisis.
Thanks to the strategic and operational skills of its managerial class, Italian shipyards and their supply chains were able to put together a portfolio of orders that made it possible to overcome the lack of business caused by the pandemic. This was due in part to acting in synergy with shipowners, which made it possible to limit the cancelling of orders to a minimum, albeit not without sacrifices. In spite of this, the unbalance caused by the high degree of concentration on the passenger segment of the Italian and European portfolio of orders jeopardizes the entire naval engineering system, especially now that the sector has been hit so hard.
In this context, Assonave has continued to implement its strategic plan, which is based on promoting activities to ensure the survival and competitive strengthening of the naval engineering sector in the short and long term, while maximising the competitiveness of its members. The first guideline concerns activities to stimulate demand in the short term and support the sector’s activities from an economic and financial standpoint; here, the key instruments are the Italian and European financial incentives provided by the EU’s long-term budget for 2021-2028 and the opportunities arising from the Recovery Fund and the Italian National Resilience and Recovery Plan, along with associated funds. In this field – and thanks in part to the preparatory work carried out by Assonave at the Italian and European levels – specific budgets have now been made available for many topics related to our sector, such as: the renewal and greening of the Mediterranean local public transport fleet, environmentally-friendly maritime propulsion systems and alternative fuels (hydrogen), last-mile accumulation systems, green and digital maritime infrastructure, cold ironing for ports, land protection initiatives such as the national plan for environmentally-friendly dredging, the production of offshore renewable energy, and the maritime applications of cyber security.
These initiatives can both generate jobs today and strengthen the competitiveness of our system tomorrow. These opportunities are augmented by those generated by the recent MOU that launched the Co-Programmed Partnership (CPP) with the European Commission on “Zero Emission Waterborne Transport”. With a budget of € 530 million, it makes it possible for the Italian naval engineering sector, for the first time, to share with the European Commission the target of zero-emission maritime transport by 2050, thanks to the development of new technologies that will also generate orders for the construction of new ships.
Another guideline comprises the activities aiming to safeguard the European naval engineering industry from East Asian anti-competitive practices, so as to ensure a new market phase once the current crisis has been overcome. In the past, the Asian naval engineering industry was able to replace the European one in most market sectors, gaining 50 points of market share in 50 years. This took place thanks to the use of structural dumping practices supported by constant state subsidies against which the European industry was unable to act, since WTO rules on fair competition do not apply to our sector, as ships are not a good that can be imported in the traditional sense of the word. This legal loophole, to which we have called attention for years, renders our sector helpless against anti-competitive practices, and must be closed as soon as possible. The recent regulation on foreign subsidies published by the European Commission is a potential initial step forward if it is properly amended, and if it will be possible to add another amendment on pricing so as to block Asian structural dumping practices.
A final line of intervention must include training, information, networking, and collaboration activities, with the aim of achieving the economies of scale that Assonave has long been promoting in its members’ favour. These activities, which are fundamental, would end up being useless without the effective implementation of the first two strategic guidelines, which fall within the purview of government policies. In this context, it is up to associations to act in order to allow the executive branch to understand sector dynamics and identify the most effective and durable policies. This is the goal Assonave has set for itself in the coming years, which will be a decisive time, with a high risk of leaving room for the Asian competition to expand in sectors in which European shipyards still maintain a presence. As we have said, Italy and Europe are undergoing an unprecedented crisis that was triggered by the pandemic, but it is still possible to overcome it and emerge even stronger than before.
In order for this to happen, these resources must be made available to companies in the naval engineering sector, while solving the longstanding issues associated with unfair competition. A turning point in this regard appears possible, and will allow us to once again play a key role.
On the sidelines of the meeting, Assonave’s Chairman, Ambassador Vincenzo Petrone stated: “The European and Italian metal engineering industry is emerging from an “annus horribilis” caused by the pandemic’s repercussions, which affected the cruise industry most of all. However, all the conditions are in place for vigorous recovery in the short term, while in the middle term we will have to be able to respond to two challenges: the technological challenge of decarbonisation and the commercial challenge of Asian anti-competitive practices. This requires an awareness, in Italy and elsewhere, of the strategic importance of the naval engineering industry, as we know that sometimes this awareness is lacking”.