Tuesday, April 11 2000

EC and Korea sign shipbuilding agreement
The European Commission and the Korean government yesterday initialed "Agreed Minutes relating to the World Shipbuilding Market." Quite how effective the arrangement will be in preventing Korean yards from quoting cut throat newbuilding prices remains to be seen. However, Korea seems to have made considerable concessions to avoid the shipbuildfing dispute with Europe being taken to the WTO (World Trade Organization).

According to Korean press reports, Seoul has agreed to halt additional loans to shipyards, and to instruct state-run financial institutions to enforce tougher capital adequacy standards on yards. Other points the two sides agreed upon involve banks imposing a flexible payment guarantee rate based on the credit ratings of individual shipyards. This would makie it more difficult for highly-indebted shipbuilders to win new orders. Additionally , the state-run Korea Asset Management Corp., will purchase from domestic financial institutions the non-performing loans issued toshipbuilders.

The European Commission and the Korean government have been involved since December 1999 in a bilateral dialogue ito find "an appropriate solution" to the problem of significant shipbuilding over capacity and steadily decreasing prices. The EC has been under pressure from European shipyards and labor unions. European shipbuilders believe these problems are largely the result of rash over expansion by Korean yards who have then been forced to quote prices as low as necessary to fill that capacity. Most European shipbuilders believe that IMF bail out funds have been misused to protect Korean yards from the consequences of underpricing.

An official European Commission statement on the deal is less than specific. It simply says that the agreement focuses on:

  • non-subsidisation,
  • banking,
  • financial transparency (with regard to international accounting standards),
  • commercial pricing practices and
  • an effective consultative mechanism.

"Within this framework," says the EC statement, "a request for consultation by either party could be made at any moment and could raise general and specific
matters relating to shipbuilding with a view to reaching a solution to any potential conflict. The aim is to promote fair and competitive market conditions in the world market and to work together to stabilize the market and thereby help raise the level of ship prices to ones that are commercially sustainable. "

Both sides "expect that the achievement of the objectives in the Agreed Minutes will contribute in a major way to restoring normal competitive conditions on the market " and that it "provides for an effective means of protection against sales of ships at prices below cost. "

Yesterday's agreement marks the first time that the Korean Government has commited itself to implement concrete measures to contribute to the resolution of this world-wide shipbuilding crisis. In particular, says the EC, "the text contains clear Korean commitments which will help raise prices to commercially viable levels. Moreover, the text also provides for an effective consultation mechanism, which can be triggered at the request of either party on any general or specific matter relating to shipbuilding.

The Commission promises , in collaboration with EU industry and Member States, to closely monitor Korean implementation of the agreement . It says it "will be obliged to request consultations at any moment if there is any evidence suggesting that Korea does not completely fulfil its obligations." While the Commission says it prefers dialogue and mutually agreed solutions, it insists it will be obliged to support the EU industry request to lodge a Trade Barriers Regulation complaint (T.B.R.) against Korea "should it become aware of cases of non-compliance with the obligations laid down in the Agreed minutes and if those cases cannot be solved in the framework of the consultation. "

Korean reports say the two sides agreed to meet every six months to gauge the level of implementation of the agreement.

New ownership for Davie
Canada's largest shipyard, Davie Industries, Inc., Lévis, Québec, has now been acquired by a U.S. consortium composed of Syntek Technologies and Transational Capital Ventures.

Situated on a 141 acre site on the St. Lawrence near Québec City, Davie is a major yard that has had some $85 million invested in modernization in recent years. As the result of the business failure of its previous owner, Dominion Bridge Corporation of Montreal, Davie has been operating under a trusteeship since August 1998. During this time the yard has successfully completed a major upgrade of what is now the Petrobras P-36 offhsore oil production platform, major refit work for the Canadian Navy, damage repairs to the cruise ship Norwegian Sky and the fabrication of seven sonar domes for Bath Iron Works in Maine.

The new ownership deal means that what Davie calls "all recent restraints " on its usual activities will be removed and the yard is vigorously promoting its experience as a major builder of jackup rigs for the U.S., Brazil and Mexico as well as modules for Canada's offshore industry together with engineering for semisubmersibles, helidecks and other offshore projects.

Even more ambitious projects might just lie ahead. One of Davie's new owners, Arlington, Va., based Syntek Technologies, is 100%-owned by its president, Dr. Reuven Leopold, who holds four degrees from MIT. His career highlights include a period at Litton Industries as Division Manager of two major classes of U.S. Navy ships -- the LHA/LHD class and the DD963/DD993 class and the top civilian technical job in the Navy as Technical Director Ship Design responsible for the design of all surface ships and submarines of the U.S. Navy. He was 31 years old at that time.

For over a decade, Leopold has held the position of president of Syntek , which has both commercial and government clients, including the CIA. Projects on which Syntek has worked include:


Another HAL newbuilding order
Carnival Corporation's Holland America Line has signed an agreement with Italy's Fincantieri Cantieri Navali S.p.A. for the construction of a fifth 84,000-ton vessel in a new series. The 1,800 passenger ship is expected to enter service in 2005, will cost approximately $400 million and will be constructed at Fincantieri's Marghera shipyard.

Like its sister ships, the new 84,000-ton, 951 ft vessel will feature "exterior elevators" on both the port and starboard sides that will vertically
transverse 10 decks to provide guests with panoramic sea views.

The propulsion system will includes a full-scale diesel-electric power plant, backed up by a gas turbine as an additional power source. and Azipod podded drives.

In addition to the five 84,000-ton ships, Holland America has two other ships on order from Fincantieri, including the 63,000-ton Zaandam, scheduled to enter service in May, and the 61,000-ton Amsterdam, which is slated to debut this fall.



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