The shipyards’ game of risk

Genoa - It is not easy to make a dent in the European monopoly on the construction of cruise ships. The Japanese figured it out too late: the first experiment in the early 2000s literally went up in smoke: the hull of a unit whose interiors were still under construction in the basin caught fire. The second attempt was a bloodbath and because of a series of design errors, it set the Mitsubishi shipyards back a billion dollars. But Asia has persisted, and Beijing is not Tokyo. The strategy to enter the market is more prudent in China, and much more dangerous for Europe. The companies as of now have signed contracts for 68 new ships that will keep the shipyards busy until 2024, costing a total of over $45 billion. And this turnover is destined to increase, given that there are already reservations up until 2026 and three new commissions were signed yesterday. Only one of these ships is not being built in Europe, and Fincantieri, STX France and the German shipyard Meyer Werft are the absolute masters of the market. But China now wants a piece of this immense cake, not only out of greed, but also to improve the fate of its national shipbuilding industry, which fell into depression with the [international] shipping crisis. Cargo ships are no longer being built, but there is still demand for cruise ships and they produce high added value: they make money.

In China they know how to build bulk carriers, but they have no experience with swimming pools and lounge bars, and this is why the agreement with one of the European champions of the sector, Fincantieri, is of fundamental importance to Beijing’s strategy. In July the partner for the Italian group was chosen and it will be CSSC, the largest of the Chinese state-owned giants. Together they will build the first “Made in China” cruise ship. But Giuseppe Bono’s signature on the joint venture with the Chinese and the American company Carnival, which is the largest cruise line in the world, is frightening the sector, and eliciting reactions: Laurent Castaing, STX France’s chief, with a witticism, said that the Italians should hurry up and learn Chinese, predicting an invasion, and fearing a brain drain. The fear is pervasive, because the Italian group may have opened a breach in the vault containing Europe’s true treasure: know-how, which is jealously defended. “There will be no transfer of technology or knowledge,” Fincantieri explained. “The Chinese cruise market is growing strongly and is also supported by the government through a series of initiatives. Our choice is primarily a strategic one that is ahead of its time.” China “is an opportunity” for the company without risks.

The German and French competitors are accusing Bono’s company of being Beijing’s fifth column: “But everyone forgets that France opened up to the Koreans, who now hold over 60% of the ownership of Saint Nazaire,” the group’s top managers commented, “and precisely in 2001, France handed over the know-how for the construction of gas tankers to the Chinese, with the result that Europe was driven out of this segment. Then in Germany, three shipyards became the property of an Asian group that intends to build cruise ships in the country.” And this is just the beginning: the war of the shipyards in Europe has only just begun. And yet in Rome there is a project afoot which could be the response to a possible Chinese threat: a major European shipbuilding hub.

Various qualified sources confirmed that the sale of STX France ordered by a Seoul court to bring in cash was announced by Korea, but will be decided in Paris. The state which controls 33% of the shipyards has not yet decided on a partner and will have a decisive weight in the choice. The political level of the negotiations could facilitate the marriage with Fincantieri, which Castaing said was impossible only a few days ago. And that’s not all: the plan could also involve Germany and could bring with it the critical mass of German shipyards. Meyer Werft is an independent “family-managed” group, despite being a giant in the sector. It is the most probable candidate to take the risk if the chancelleries agree to it. This is also because the other shipyard, MW Werften, has already slipped through their fingers. A Hong Kong group, Genting, would like to acquire the shipyards, as part of a strategy that is the opposite of Beijing’s strategy with Fincantieri. This could be the Chinese backup strategy. Also because Italy ensures that the first “Made in China” cruise ship it will take at least another 10 years to be built and those units will be destined only for the Asian market. And they are already building at MW Werften. This is why a holy alliance of European shipyards seems so necessary.