Shipbuilding overcapacity warning from OECD

The OECD Council Working Party on Shipbuilding (WP6) says the economic downturn has hit shipbuilding hard where new orders have contracted by up to 90% and cancellations have increased. This situation is likely to result in significant excess shipbuilding capacity and the outlook is unlikely to improve for some time. There was agreement at a just-concluded WP6 meeting that governments should avoid actions that increase protectionism or distort the shipbuilding market, and that serious efforts should be made to restart paused negotiations on an international shipbuilding agreement..

The Working Party on Shipbuilding met in Paris on 9-10 July 2009 to discuss the impact of the global economic crisis on shipbuilding, government responses to the crisis and possible future measures to deal with the longer term effects. The meeting concluded that, in virtually all economies, the unprecedented financial crisis has led to a sharp contraction in investment, economic activity, employment and international trade.

While initially shipbuilding was to some degree insulated from these effects because of very strong order books, in the last six months new orders have fallen by over 90% and cancellations are increasing. There is therefore growing concern about significant overcapacity. Few of the economic stimulus packages introduced by governments have directly benefited the shipbuilding industry. So far support provided to the shipbuilding sector has largely been restricted to improving liquidity through loans, and providing guarantees in order to assist buyers to finance orders and shipyards to finance new construction. There is a need for concerted action to address the growing problem of overcapacity in the shipbuilding industry and participants agreed that governments should avoid measures that increase protectionism and distort the shipbuilding market.