As we have seen earlier, there is a substantial discrepancy between the demand expected by shipbuilders and the demand foreseen in the sectorial analysis, espe cially regarding the type and size distribution of ships in the world’s production during the period up to the middle of 1975.
It would therefore be advisable to define the conditions under which the necessary adaptation may be made.
The following remarks can be made in this respect:
a) As an overall average, the annual increase of the theoretical capacity in c.grt expected for 1969-75 is only 3.05% per annum. Such a rate corresponds to a rather slow increase in productivity in the world shipbuilding industry if labour force remains constant, or to a somewhat higher increase if the reductions in the labour force and working hours observed during the past few years continue in the future.
In other words, the flexibility of newbuilding supply during the past few years as regards the increase of output measured in gross tonnage, should be much lower when considering the situation in terms of compensated tonnage.
However, as we have seen earlier, it is not impossible that, during a period covering 6 years, it should prove necessary to reduce some of the increase coefficients which are now applied for the specialized ships.
b) The risk of overequipment in production facilities for very large vessels does not imply unemployment in the yards equipped with these new facilities.
On the contrary, it seems that all their theoretical output capacity in c.grt should probably be used to meet demand.
c) In the shipbuilding industry, the principle according to which “he who can do more can do less” is widely applicable and it is quite possible to build, in big docks or on large slipways, ships much smaller than those of maximum size allowed by such facilities.
At all events, it is better to make use of existing equipment, even in inadequate technical conditions, rather than leaving it idle, and this reasoning is even more obvious in the case of new investments which have only just commenced to pro duce a return on capital.
d) As regards production costs, the competitive position of the most up-to-date yards will certainly not be as good if sophisticated ships, with a high conversion coefficient, are built instead of series of big single-deck ships.
Effectively, the building dock or slipway is only one part of the industrial concern formed by a modern yard and it is with large ships in view that, in general, the lifting devices and the metal production lines have been designed and, as far as the latter are concerned, rationalized and automated.
Apart from material factors, the considerable changes in the types of ships built have caused considerable problems in the rational use of shipyard labour forces. Under the circumstances, production problems may be encountered in these “super yards” in building medium sized and/or highly specialized vessels and it is only their high value per grt that will render such contracts financially attractive. How ever, although, as regards turnover, the substitution of smaller ships, of higher value per unit, for bigger ships of lower price per ton, seems to bring the same end result, the situation is quite different for the organization of the shipyards themselves, as regards the use of production facilities as well as the skill of labour and staff.
e) The foreseeable medium-term fall-off in demand for large oil tankers and bulk- carriers will cause the major shipyards to intensify their marketing efforts for the other types of ships so as to obtain the necessary orders enabling them to take advantage at least of their output capacity in c.grt, although failing to reach their objectives in grt. However, as their equipment will not be used at the optimum level, they will have to take this factor into consideration in respect of the prices they will quote on the international market.
This phenomenon will make the competition of the major shipyards less dangerous for the other yards than it could be expected at first sight.
f) During the next few years, no other shipbuilding country seems likely to enjoy such a tactical position of advantage of a social and economic nature, as that of Japan during the shipbuilding crisis which characterized the beginning of the last decade.
In fact, the wage increases granted by the Japanese yards in the past few years, have been relatively more rapid, on average, than those of most of their European counterparts.
This evolution has noticeably diminished the difference in cost prices which was favourable to the Japanese yards and had enabled them to absorb a considerable part of the additional demand recorded since 1962.
In the circumstances, it will probably be in the interests of the Japanese ship builders, during the next years, to fight against a decrease of the newbuilding prices on the international market, contrary to their attitude during the maritime crisis subsequent to the first closure of the Suez Canal.
The appearance on the international market of the yards of the socialist countries is too recent and marginal a phenomenon to allow, especially taking into account the lack of flexibility of planned economic systems, to consider that some of them could become, between now and 1975, the possible successors of Japan in a dominant position on the newbuilding international market.
In spite of these reassuring elements, there are still serious doubts as regards the possible medium-term development of the newbuilding international market. The essential adaptations will be difficult from both the technical and financial points of view. They will therefore be likely to entail, if they are not scheduled sufficiently in advance, deteriorations in competitiveness for a certain time, at least for some types of ship.
Furthermore, it is possible that, once this adaptation has been carried out, the actual capacity in c.grt of the major shipyards may prove to be much higher when building a high percentage of sophisticated ships, than in the case of a complete specialization in the production of very large vessels.
In order to give a more complete answer to the questions raised by the adaptation of newbuilding supply to the future requirements of the world merchant fleet, a very detailed survey on the present building potential of the world shipyards would be needed. Such a survey would allow a better evaluation of the possibility of developing this capacity according to the type and size of ships in demand, on the one hand, and on the other hand, the flexibility of the main production
factors, among which we can list: labour force, equipment, supply sources and financing requirements.
Thus, it would be advisable to take into consideration other criteria in addition to demand and output tonnages since, in spite of the advantages in this field of the notion of compensation, the AWES c.grt system remains too closely dependent on the grt because it is not possible to multiply and/or modify the compensation coefficients frequently enough to adapt them to the changing realities of production. In the absence of such surveys, it seems however reasonable to think that the development of the newbuilding world market during the next few years will be better for the shipbuilders than it appears from the plain comparison between supply and demand in grt.
Furthermore, the whole of the world supply and demand do not, in practice, meet on the open international newbuilding market. Certain domestic orders—and not the smallest ones—are practically reserved, de jure or de facto, for the yards of the shipowners’ country.
It would therefore be advisable to classify supply and demand forecasts not only according to ship types but also according to flags and shipbuilding countries or groups of countries.
The Working group had not the time nor the means to carry out such surveys which exceeded widely the limits of a medium-term and long-term prospective study of world newbuilding supply and demand.
However, they wish to observe, at the end of this second part of the report, covering the evolution of the shipyards’ capacity, that the influence of the situation prevailing on the international market must not be exaggerated, as regards the prospects of any national shipbuilding industry considered separately.
Indeed, in most national industries, the peculiar contingencies of the local economy play a pre-eminent part and it is quite conceivable that their weight could be sufficient to cancel most of the effect of external factors.
The above remark will be further commented in the second part of the conclusions of the present report in which will be discussed the particular prospects of the group formed by the shipbuilding industries of the European Economic Com munity.
CH APTER IX
CONCLUSIONS
A. M edium term econom ic prospects of the w orld shipbuilding industry