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February 1, 2010

European shipyards to investigate Korean pricing

Some European shipbuilders, it seems, still see their problems as including artificially low pricing by Korea.

In view of what it calls "cases of unrealistically low offer prices in the shipbuilding market" and complaints by several members, CESA (the Community of European Shipyard Associations) is to establish a cost investigation procedure to "assess realistic production costs for what seem to be irrationally low-priced contracts."

CESA says the investigation will involve experts from the field and take the concrete project specification as well as the specific conditions of the respective builder into account. Only contracts for which European yards have tendered will be taken into consideration. Should the results indicate that the reported contract price is substantial below the estimated cost, CESA will contact both customer and builder for comments.

"Should, in such a case, the construction be located in the Republic of Korea," says the association,"CESA will formally file a complaint with the European Commission, referring to Article 3 of the so-called 'Agreed Minutes.' Under this binding bi-lateral agreement, the Korean Government agrees that the level of ship prices shall reflect all the factors of costs according to the definition of a normal value under the WTO Antidumping Agreement. CESA will seek clarification on the basis of this commitment through the consultation process established by the Agreed Minutes. Should the consultations confirm serious shortcomings on the implementation of commitments by Korea, an impact on the ongoing ratification process of the Free Trade Agreement between the European Union and the Republic of Korea might be expected."

CESA says it is taking these steps to contribute to a stabilization of the market.

"A sharp decline in market prices, particularly if these are unsustainable in comparison to production costs, would be detrimental also to shipowners, as they undermine a market correction on the supply side," says CESA. "Unrealistic price levels also reduce the value of the existing fleet affecting the refinancing options for owners."


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