French orders to foreign shipyards

20
The second major development is the continuing consolidation
within the industry, not exceptionally surprising
in this land of mergers and acquisitions but quite new in
shipbuilding. The country's orderbook stands at only
619,000 gt in September 1999. The six largest American
shipyards are now in the hands of three major defence
companies, an indication of the fundamental importance
of the military in American shipbuilding.
Outlook
After ten years of slides, will the stabilisation of ship
prices this year be the forerunner of better times for
shipbuilding? Nothing could be less certain.
The drop in prices at the beginning of the year is a direct
consequence of weak demand, which caused a significant
reduction in the orderbook. When orders began to come
in, prices automatically rose.
However, overcapacity is still a threat to this equilibrium
and the nineties have made us perhaps a little too used
to yearly increases in the world orderbook.
We have possibly underestimated the importance of the
fact that at each apparent hesitation in orderbook
expansion, another drop in prices immediately followed.
Unfortunately, no upward cycles can continue indefinitely
without a correction. Therefore, a sustained drop in
demand lasting a certain time must be anticipated.
Forecasts by the Japanese Shipbuilding Association were
rather pessimistic concerning the coming years.
In view of these circumstances and taking into account low
sales prices that are now compromising the profitability
and permanence of a growing number of shipbuilders,
an acceleration of reforms deferred may now be expected.
For some, these will be compulsory and could cause the
following events:
• The closing of weaker, smaller yards.
• Reduction of some production capacities due to lack of
new orders.
• Delay of some development projects due to financing
and profitability problems.
For others, actions will be voluntary, spurred by the search
for better productivity. This will involve:
• Production increases to attain critical size allowing overheads
reductions and better terms from suppliers.
• Improvements to production methods.
• Co-operation agreements as a prelude to mergers.
First, this should result in a decrease in the number of
shipyards and an increase in individual production. Then,
in a second phase, we may witness a reduction in overcapacity.