Foreword. Bernard Meyer CESA Chairman Foreword. Brussels, August 2011

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1 ANNUAL REPORT

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3 Foreword The global order volume for new ships has started to recover. In 21, orders at European yards increased almost fivefold compared to 29. Also the volume of ships delivered increased slightly while turnover grew by 2%. Despite these positive figures, still a weak demand as well as structural imbalances in the global market with unprecedented overcapacities continue to be a source of deep concern. The coming two years will remain very difficult for the industry. Only a few yards have been able to secure healthy orderbooks for 212 and beyond. Consequently, the employment impact resulting from the demand collapse from 28 and 29 will hit the European shipbuilding industry mainly in 211 and 212. Despite the current struggle, the European shipbuilding industry is convinced that medium-longterm prospects for the sector are bright. The use of the seas and oceans will significantly diversify in the coming decades. Based on their unmatched engineering competence, flexibility and innovation tradition, European shipyards are well equipped to supply highly specialised vessels to existing and new growth markets such as off-shore production of fossil and renewable energy, security and defence, ocean tourism, deep sea mining and many others. The new push for environmentfriendly maritime applications will boost business opportunities. Relevant system suppliers and ship repair and conversion yards will help the existing fleet to up-grade performance. New optimised vessels often offer fuel savings of 3% and more, thus providing good reasons to consider accelerated replacement investments. The maritime engineering and manufacturing industry will continue to be a growth market. The European industry must adapt to a rapidly changing business environment. The Asian maritime dominance, which began in shipbuilding, is spreading to all business segments. Local content requirements are attracting more and more the production of marine equipment. The collapsed ship financing market is slowly recovering. However, in the meantime, Asian banks have stepped in and will continue to expand their market share. It comes as no surprise that China is making best use of the surplus yard capacity and surplus tonnage to take care of their transportation needs. As China has been the biggest source of cargo volume growth, their domestically built ships can be quite sure to always have some work to do. The European maritime industries in all segments are feeling the pinch. A business as usual strategy will, in future, no longer succeed. It is high time, to close the ranks in the European business community and to define new ways making better use of the maritime excellence that Europe hosts in unmatched quality and quantity. Bernard Meyer CESA Chairman Foreword Brussels, August 211 1

4 CESA represents the shipyards in 17 European countries and covers 99% of the EU shipbuilding production and more than 85% of wider geographical Europe. European shipyards build, maintain, repair and convert complex ships and marine hardware for various commercial activities at sea, as well as naval vessels. With a total turnover of more than 3 bn EUR, CESA members provide more than 1, direct jobs for highly skilled employees, with a total employment effect of approximately 5,. 2

5 Index 1. Market development 4 2. Ship financing market LeaderSHIP International relations Research, development & innovation Safety & environment Social dialogue Ship maintenance, repair & conversion sector Naval sector Renewable off-shore energy Intellectual property rights Reports of the National Associations CESA Society 69 Annex 1: Statistics Annex 2: CESA Member Associations 77 Annex 3: CESA internal 79 Annex 4: Glossary 84 Annex 5: Picture references 86 Index 3

6 1. Market development Introduction The global shipbuilding industry supplies the most essential tool for the world economy to conduct global trade. Without ships, less than 1% of global trade as we know it would take place. Consequently, as long as the world economy grows, the shipbuilding market will remain a growth sector. Accelerated tonnage replacement towards more efficiency could reduce the supply and demand imbalance. China s rise in the output of manufactured goods as well as the need to imported energy and raw materials has fuelled the unprecedented boom which peaked in 27. In shipbuilding, this rise accelerated significantly over the past decade, as the chart below depicts. The plan to become the largest shipbuilding nation in the world by 215 was announced in Beijing in 25. The goal was reached in 21, in half the time foreseen. Massive Capacities Built Up (Production in CGT) * 1 Others * CESA membership Source: LR- Fairplay data Such a fast and forceful rise has brought supply and demand out of balance. Also shipping markets are negatively impacted as too much new tonnage is entering the market. It will take considerable time to bring oversupply down and return to a healthy and sustainable level of business activities. Market development With the outlook for meagre earnings in the coming few years, cost considerations are gaining additional importance. For the shipbuilding industry, this is a helpful trend because operating costs at time of increasing fuel prices give good reason to advance tonnage replacement provided substantial jumps in fuel efficiency can be obtained. Already the increased ordering activity for containerships at the beginning of 211 can be linked to such concepts. With 4% higher efficiency, the new vessels will be able to operate profitably at freight rates insufficient to cover operating costs of older vessels. A change in mind-set, taking much more consideration to full life-cycle costs, has started and will certainly see many followers in the future. 4

7 1Market development World market During 21, the seaborne trade recovered the ground lost in 29 and certain segments saw significant improvements in demand for shipping services. Demand across complex and specialised activities at sea also picked up. As the consumer confidence started to restore, demand for merchandised goods picked up. Raw materials and bulk cargo was up in the market and offered some relief to bulk vessels owners. Slow and fragile, but the recovery in the maritime sector is underway. 9, World Commercial Shipbuilding Supply and Demand new orders completions 211- based on planned deliveries 8, 7, 1, CGT 6, 5, 4, 3, 2, 1, based on H1 H1 H1 Source: CESA based on data from IHS Fairplay One of the first positive signs came from liner shipping companies which started to report returning to black figures after the losses suffered a year ago. Control of the capacity through lay-ups and slow-steaming helped to improve the earning from the low levels of 29. At the middle of 21, several owners were already suggesting appetite for ordering new ships. Overall demand for new tonnage during the year recovered from the very low 29 baseline. Global new orders reached 38.5Mln CGT in 21, compared to 16.5Mln CGT a year ago. 2. World Commercial Shipbuilding Activity orderbook new orders completion CGT H1 211 orderbook new orders completions Source: CESA based on data from IHS Fairplay 5

8 Still, the future demand for cargo carrying ships remains uncertain as cargo growth is not enough to balance the fleet oversupply resulting mainly from the exaggerated order boom before the economic crisis. The global orderbook is still big compared to historical figures, standing at 128Mln CGT. The production capacity, particularly in several Asian countries, was expanded so forcefully that today s world shipbuilding industry could build nearly twice the ships needed. In 21, 3,76 ships totaling a record of 51.5Mln CGT were delivered, an increase of 16% compared to 29. Also this year, further growth is likely. M. Dwt Fleet Seaborne Trade Volumes Bill. Tons Cargo Sea Trade Trade scenario World Fleet (Dwt) Source: Trade & Fleet- Clarksons; Trade Scenario CESA 1 Market development Shipbuilding associations in China and Japan acknowledged that the production overcapacity could remain at a level double the newbuilding requirement. A downward capacity adjustment is hardly seen. Therefore, the global shipbuilding industry will continue to face an overcapacity crisis. Its consequences are globally felt up- and down-stream, across nearly all maritime sectors. Despite the 5.1Mln CGT cancellations of contracts for bulk carriers, the deliveries of this shiptype increased significantly. Within only one year, the production doubled, as the graph shows. World completions by shiptype in 21 (outer circle) compared to 29 (inner circle) Bulk Carriers 18,398 9,715 12,79 Containerships 7,942 6,796 Tankers 1,347 4,793 4,547 1,498 4,342 Other/General Cargo Ships 5,574 Gastankers 2,813 Ferries/Pass. Ships 1,89 Non Cargo Vessels 4,69 Source: CESA based on data from IHS Fairplay 6

9 1Market development Deliveries of containerships and other general cargo ships also accelerated compared to last year while tanker and gas tanker deliveries reduced. Slight increase of delivered tonnage was reported also for the non-cargo and passenger ships segments, but the market remains healthy and without indication of oversupply. In 21, the owners of specialised ships gained some confidence in the markets. This resulted in an increase of ordering to 7.4Mln CGT from 2.4Mln CGT in 29. European shipyards, specialised in the complex and demanding shiptype segments, managed to attract 3% of these orders. CESA Working Group on Market Forecast The main task of the Market Forecast Group is to look into further developments in the market with regards to supply and demand balance and shipyard capacity. The findings are discussed with experts from shipbuilding associations from China, Japan and South Korea during annual meetings. It is hoped that through such continuous dialogue an improved understanding can be reached and thereby contribute to a healthier and more stable development of the global shipbuilding market. European market The shipbuilding market in Europe improved in the course of 21. The total new orders during the year were five times higher than the low 29 level, reaching 2.5Mln CGT, according to LR-Fairplay. However, due to the prolonged period of low new orders, the European orderbook fell to 6.3Mln CGT at the end of the year, roughly 1.5 years production. 2 CESA Commercial Shipbuilding Activity orderbook new orders completion CGT Q1211 orderbook new orders completions Source: CESA based on data from IHS Fairplay Shipbuilding production increased marginally in 21 compared to the past year but remains lower than average for levels. With the orderbook at the lowest level in a decade, the output 7

10 level is expected to fall further, as new orders often have a lead time of more than one year. The demand gap has hit all shipyards around the world very hard but the impact on European companies may be significantly deeper for several reasons: Smaller size made European companies much more vulnerable Banking crisis cut off access to financing in Europe more than in Asia Governments in several Asian countries responded very fast and consequently 1 Regardless of the fact that the European shipyards lost market shares, the fundamental prospects remain positive. The use of the seas and oceans is going increasingly beyond a mere transporting of cargo from one continent to another. The vast maritime space offers a host of business activities including fishing, off-shore oil and gas exploitation, maritime tourism, cable and pipeline laying, offshore renewable energy generation, sub-sea mining, security and defence, various research activities and many more. European yards strength lies with complex solutions for the various sea applications which can contribute substantially to harvest these opportunities. One prominent case may be the cruise sector. Nearly all cruise ships on the world market are made in Europe. However, within shipping, which understands itself mainly as a mode of transport, the cruise sector is peculiar, seen as operating floating hotels. In CESA Orderbook by Shiptype at 1 January 211 Non-cargo vessels 24% Ferries & Passenger Ships 47% 86% specialised ships Source: CESA based on data from IHS Fairplay Tankers 5% Bulk carriers 5% Containerships 5% General cargo ships 14% Gas Tankers.4% this sense, European yards contribute today to a small extent to the global cargo transportation. Much of the portfolio focuses on specialised tasks like super yachts, fishing, dredging, demanding services for the off-shore oil and gas industry, coast guards, naval vessels and many others. Also for specific transport tasks including short-sea shipping and inland navigation, project cargo with heavy lifting requirements, transport under ice-conditions or other particularly challenging cargos, Europe offers the solutions. Market development European shipyards have focused on building technologically complex hardware for use at sea, facilitating the creation of an excellent European network of suppliers of advanced maritime equipment. The European orderbook is covered more than 85% with contracts for such complex vessels. As the market fundamentals recover, the past years lack of orders are following suit and translate into dynamic ordering activity for specialised vessels. Ferries and passenger ships remain the segment dominating the CESA orderbook with 44%. From 3.6Mln CGT in the global orderbook, 3Mln CGT are contracted with European yards. The industry is confident on the outlook as popularity of cruising among Europeans but also in other parts of the globe continues to increase. During past years, the number of European tourists opting for a cruise increased by double digits, from 14% in France to 41% in Scandinavian countries. As cruise lines reveal new itineraries for each season, the growing trend is set to continue, bringing a wealth of benefits along the chain, from ship manufacturers to providers of tourist services. 8

11 1Market development CESA Orderbook by Shiptype 1% 9% 8% 7% CGT 6% 5% 4% 3% 2% 1% % Source: CESA based on data from IHS Fairplay Ferries&Passenger ships General cargo ships Non cargo vessels Gas tankers Tankers Containers ships Bulk carriers The outlook for non-cargo vessels, covering more than 22% of the European orderbook, also remains positive. This segment includes a wide array of ships - offshore supply vessels for oil and gas energy, vessels with heavy lifting capacity, dredgers, research vessels, cable laying vessels, wind turbine installation vessels as well as wind farm service vessels, fishing vessels - in total 271 ships for various complex tasks. A pick-up in industrial activities will have positive implications on demand for such type of vessels, as well as for the general cargo segment. Vessels for transport of specialised cargo cover another 13% of the European orderbook. The other 14% remain contracts for various types and sizes of tankers, bulkers and containerships. The strategy of focusing on highly valued specialised ships has paid-off as the turnover figures show and helped Europe over a decade to be the leader of niche markets. CESA Member Yards Turnover - Commercial Newbuilding Market 2, Turnover in mln EUR 19,366 18, 16, 14, 12, 1, 8, 6, 4, 2, 14,328 1,463 9,41 12,968 15,213 16,256 15,669 Source: CESA based on data from NA

12 Besides the natural growth of the market, there are additional growth prospects arising from regulatory requirements on ship emissions and safety. There will be a lot of testing of new concepts, which is good for smaller, flexible yards. There will be a lot of retrofitting, good business for the producers of respective systems and for repair and conversion shipyards. There will be a much more fundamental recognition of life-cycle costs with a more pronounced approach on maintenance. We will see new business models which engage the value chain in a different manner than traditionally known. Perspectives for new businesses can only be good news for the European shipyards as currently production is set to be interrupted at several facilities as the orderbooks of European yards have decreased both in cgt and value terms as an effect of the global economic crisis. A careful planning is needed to maintain a critical mass of the excellent supply chain, including its labour force in order to respond to the future demand. Value of Orderbook - Commercial Newbuilding Market Mln Euro 6, 5, 4, 3, 2, 1, 22,174 23,491 37,583 49,945 58,554 52,616 36,558 27,31 Source: CESA based on data from NA Market development CESA Working Group on Market Monitoring Tasked to monitor the general economic and policy developments related to the global shipbuilding market, the Market Monitoring Working Group of CESA also serves as an interface on these issues to the European institutions by offering quarterly briefing and discussion sessions. For several years, these meetings are regularly attended by officials from six Commission General Directorates. During these meetings, the group presents the latest market picture on the basis of statistical material and factual information and exchanges information relating to the world shipbuilding market developments and trends on supply & demand, cost factors, global production capacity. 1

13 The ship financing market has continued its consolidation path in 21. After the collapse in mid 28 and a difficult year 29, the return of more healthy charter rates in some market segments has helped to ease the tight situation. However, substantial financing gaps from the over-heated market, still weak earnings in many market segments and a substantial decline of asset values have remained a burden from the industry. The newbuilding price index, after dropping more than 4 points, stabilised at the beginning of 21 at a level seen last in 24. In addition, most currencies of the main shipbuilding areas, with the exception of the Korean Won, appreciated strongly against the US$ and led to further concerns to the export oriented shipbuilding sector. 2Ship financing market 2. Ship financing market Clarksons' Newbuilding Price Index Jan 2= Jan- Jun- in $ in in Won in Yen in Yuan Nov- Apr-1 Sep-1 Feb-2 Jul-2 Dec-2 May-3 Oct-3 Mar-4 Aug-4 Jan-5 Jun-5 Nov-5 Apr-6 Sep-6 Feb-7 Jul-7 Dec-7 May-8 Oct-8 Mar-9 Aug-9 Jan-1 Jun-1 Nov-1 Apr-11 At the same time, shipyards had to face rising costs of raw materials, especially steel plates and other metals like copper, nickel and aluminum. During 21 alone, the prices of hot rolled steel plates used in shipbuilding increased 33% in Europe and 17% in Asia, reaching already the 27 level. With the recovery of the ordering activity in 21, financing of new orders has been the most important factor for the shipyards to solve. In Europe, this has remained a critical matter throughout the year. Many of the traditionally strong players in the ship financing market were still occupied with the consolidation of their shipping portfolio and reduced the capacity for new projects. Additionally, changing regulatory requirements created further constraints on liquidity. According to Basel III, commercial banks will have to separate their lending portfolios, grade them according to risk and provide extra capital for loans to those falling in the high-risk categories. Particularly smaller companies and those where changes in the product portfolio increase the technical risk level have experienced a challenging market environment. Source: CESA based on data from Clarksons and In several Asian countries, state-owned banks have committed to offer financial relief from the first signs of the financial sector s meltdown. Many yards turned to their governments and Export Credit Agencies. In 28, the Korean government had already called for more insurance coverage to boost exports and help Korean businesses, among which exports of ships. The total aid from the Korean government to domestic shipbuilding and shipping sector surpassed EUR22Bn in guarantees, restructuring funds, loans and other instruments. In China, the official position was announced that after having taken the lead in the shipbuilding sector, the supporting services would need to be built up domestically. Several of the large state owned banks committed to build up expertise and experience to serve shipping projects. The much noted credit package of initially USD5billion credit volume to 11

14 Greek shipowners willing to buy Chinese made ships are examples of the approach. The offer was even doubled early 211. Other state-owned banks injected at least USD1Bn as refund guarantees for yards and regional banks also joined to support regional interests. Also in Europe, governments have recognised that guarantee instruments have become a necessity in the sector. Existing instruments were strengthening to the degree allowed under European competition rules, which include tight provisions for any financing instrument provided by state-owned banks. The so-called Temporary Framework, which allowed certain measures to facilitate liquidity to the market, was practically discontinued at the end of 29. The remaining provisions for 21 had no relevance to the shipbuilding sector. Despite the fact that the use of instruments under these provisions were very expensive, i.e. were mainly supporting the banks rather than the real economy, yards which used such facilities had to find again new arrangements. The competitive advantage of the high level of ship financing expertise in Europe and the high market volume has substantially eroded since 28. Today, supported by competitively priced state instruments, several Asian nations seem to take the lead also in this field. Common European guarantee instruments to complement existing national systems, as foreseen within LeaderSHIP 215, had unfortunately not matured. They could have been the ideal tool to respond to the crisis situation. Already in 23, the Council requested the European Commission to examine, together with the shipbuilding industry, whether a European entity, such as e.g. the European Investment Bank, could take a leading role in pre and post-delivery financing for shipbuilding projects. With meagre progress at hand, another study was undertaken for the Commission in 21. A workshop with Member States as a follow-up on these activities was held in May 211. It remains to be seen whether Member States are prepared to decisively tackle the challenges jointly. 2 Also on the side of the European Investment Bank, ship financing has come into the spotlight in the context of the review of the transport lending policy. The process is still on-going, with results expected for the end of 211. CESA Working Group on Financing Ship financing market Ever since LeaderSHIP 215, the CESA Working Group on Financing is exploring the possibilities of creating additional financing instruments for the shipbuilding industry and expanding the availability of pre- and post-delivery financing. The long-term priority is to establish European wide instruments to increase the available volume for financing of shipbuilding projects to enhance the competitiveness of the sector. As described above, the availability of financing has become a decisive factor for investments in new projects and especially in new technologies. In such situation, the EIB s Clean Transport Facility could be a suitable instrument to achieve the Europe22 targets. On the short term, CESA Ship Finance experts aim at revitalising the constructive dialogue with the EIB and other stakeholders in order to make effective use of such instruments. 12

15 3LeaderSHIP LeaderSHIP 215 During the past 12 months, Europe has gone through a period of deep political crisis. The great success story of the Euro was contrasted by the sovereign debt crisis in the Eurozone periphery. The near collapse of several smaller Eurozone economies revealed the architectural shortcomings of the common currency. The lack of sufficient economic and budgetary policy coordination has been considered the main structural cause of the trouble. The recognition that further progress of the European integration is a necessity to safeguard future prosperity can turn the current crisis into a major boost for Europe. There are some similarities in the Eurozone difficulties which LeaderSHIP 215 shares. The industry s hopes that LeaderSHIP 215 could provide a solid base to forge a common and effective crisis response were not fulfilled. All efforts in 21 to activate European policy makers in this direction have borne no fruits. The willingness of the Member States to coordinate their efforts and to find common solutions was insufficient and the European Commission was not in the position to drive such a process. The CESA Board concluded that a full rebuilding of the initiative appeared necessary and appropriate. The lessons learned over the past eight years provide a valuable base to launch renewed efforts with an improved structural architecture. In particular Member States must be convinced to hold ownership of the initiative. Also the industry itself has to review its own commitment within the process. And finally a wider conceptual approach is to be conceived, covering not only classical shipbuilding, which a wider public understands as the construction of cargo ships, but encompassing all aspects of maritime engineering and manufacturing of any type of hardware applications for the oceans and seas. The new approach will be developed under the heading PartnerSHIP 22. While this new initiative is still young, it will be important to ensure that already at its very start the initiative is accompanied by sound policy decisions. CESA, therefore, considers on-going policy issues with relevance for the sector already in that context. With PartnerSHIP 22, Europe will build on its strength and unmatched maritime expertise, and facilitate a sound future for an industry indispensible to make the best and sustainable use of the oceans of opportunities. 13

16 4. International relations Organisation for Economic Co-operation & Development (OECD) For some time, the highest priority activity in the programme of the OECD Council Working Party on Shipbuilding (WP6) has been the recommencement of the Shipbuilding Agreement negotiations that were paused in September 25. In December 21, the OECD Council decided to terminate the negotiations because the differences of view among the key participants on the treatment of pricing have proven impossible to bridge. As a consequence, the WP6 will need to review its Programme of Work with the possibility of broadening the WP6 mandate, especially in the longer term (as from 213) after the current mandate expires. Besides Shipbuilding Agreement negotiations, the WP6 Programme of Work for includes: 4 Market distorting factors Export credits for ships Review of existing OECD shipbuilding instruments Shipbuilding market (supply/demand; characteristics) Environmental best practices Shipyard order books Inventory of governmental support measures International relations The OECD Council has invited the WP6 Members to consider among the above listed items which should be kept in the future and which should be worked on more in terms of in-depth and scope. In addition, the WP6 Secretariat has proposed greater engagement of industry and enhanced contacts with NMEs (Non-Member Economies). Even though the Shipbuilding Agreement negotiations have failed, CESA sees WP6 as the only existing global platform to address market distortions in shipbuilding and, therefore, should be kept in place. Concerning the future mandate of the WP6 and aiming at generating more concrete results, CESA takes the view that the WP6 Secretariat should conduct a market and policy monitoring exercise which could provide valuable information to the industry and governments as a neutral and independent organisation. Information to be gathered could cover, for instance, governmental support measures, the development of shipbuilding cost elements and shipbuilding market development including up- and down-stream markets as well as shipbuilding policies and public support measures. Such exercise could better facilitate a common understanding on shared concerns and form the basis for common objectives to be regulated. 14

17 4International relations Bilateral dialogues & upcoming free trade agreements (FTAs) The EU-South Korea FTA was signed on 6 October 21. The European Parliament gave its consent to the Agreement and approved the Regulation implementing the bilateral safeguard clause of the FTA on 17 February 211. The Council approved the Regulation implementing the bilateral safeguard clause of the FTA on 11 April 211. The Korean National Assembly ratified the FTA on 4 May 211. The provisional application of the FTA is expected on 1 July 211. CESA expects that this new level of trade relations would positively impact the trading conditions also in the shipbuilding sector. In the context of the existing bilateral agreement on shipbuilding, the socalled Agreed Minutes, the South Korean government agreed that the level of ship prices should reflect all of the factors of costs according to the definition of normal value under the WTO Antidumping Agreement. On the basis of the Agreed Minutes, the European industry has initiated a cost investigation in a case of injurious pricing by a Korean shipyard and has requested the European Commission to launch consultation. EU-Canada FTA negotiations were launched in May 29 and are expected to be finished by the end of 211. The content of the CETA (Comprehensive Economic and Trade Agreement) and its general modalities were agreed in June 29. Seven negotiating rounds have been held until June 211. So far, the negotiations have not yet touched upon shipbuilding. Nevertheless, it is likely that the high import tariffs (25%) would be abolished for certain ship types as the Canadian shipyards do not have the ambition to build containerships, tankers or bulkers. In October 21, the Canadian Minister of Finance announced a waiver of Canada s import tariff on imports of all general cargo vessels and tankers, as well as ferries longer than 129 meters. The Commission supports the goal of the European shipbuilding industry that the Canadian shipbuilding import market should be liberalised for all ship types. The key discussion would be when and how such liberalisation should process. Regarding public procurement issues, under the WTO Agreement on Public Procurement (GPA partners), the EU has bond itself much more than other parties. Thus, the purpose of this FTA is to have Canada follow the same binding obligations as the EU at this bilateral level. The EU-ASEAN FTA negotiations were launched in April 27. The negotiating process is based on a region-to-region approach. In December 29, EU Member States agreed that the Commission will pursue FTA negotiations in a bilateral format with countries of ASEAN. Negotiations with Singapore, Malaysia and Vietnam were launched in 21. The Commission continues exploratory informal talks with other individual ASEAN members with a view to assessing the level of ambition at bilateral level. The EU-India FTA negotiations were launched in June 27. So far, 1 rounds have been held of which the last one took place in October 21, followed by a number of intersessional meetings including chief negotiators meetings during the last week of January 211 in India and the first week of March 211 in Brussels. Important issues include how to get improvements on market access for goods and inclusion of government procurement. The EU-Mercosur FTA negotiations were officially re-launched at the EU-Mercosur summit in Madrid on 17 May 21. Five negotiation rounds have taken place since then. Until now, rounds have focused on the normative part of the agreement. The parties are working towards exchanging market access offers. Furthermore, the EU and China have launched negotiations in 25 to replace the trade and investment part of the old Partnership and Cooperation Agreement (PCA) from Trade and investment negotiating track 6th formal round took place in Beijing on 8-12 March 21. A technical round was held on September 21 in Beijing. One quarter of the economic and trade chapters is finalised and both sides are still hoping to close another quarter by the end of the year, but negotiations continue to be slow in major areas. The last round took place on 11 May

18 4International relations In the context of the EU-China Shipbuilding Dialogue established by the Memorandum of Understanding signed in May 27, the first meeting took place in August 21. Information on capacity and market development has been exchanged. The second meeting is expected to be held in September 211 where shipbuilding strategies, policies and measures, and strategies for promoting innovation and green technologies in the sector could be discussed. EU and Russia are currently negotiating a new agreement replacing the 1-year old PCA as well. This new legally binding agreement should provide a comprehensive framework for bilateral trade and investment relations. The 12th formal round of negotiations took place mid December 21. The chief negotiators have agreed that work should focus now on the trade and investment provisions and, until there is sufficient progress in this area, the working groups covering non-trade areas of the new agreement will not be convened. In March 27, the EU and Ukraine launched bilateral negotiations of a new Association Agreement that will replace the present PCA that dates from So far, 16 rounds of negotiations have been held. The last one took place on 4-8 April 211 in Brussels. There has been progress in different areas, but still some outstanding key issues remain. JECKU The 19 th JECKU top executive meeting was hosted by China in Nantong on 28 October 21. More than one hundred senior executives from the leading shipbuilding companies in Japan, Europe, China, South Korea and the United States attended the meeting. The meeting covered extensive discussions on the global economic environment and the development of shipbuilding industry. Overcapacity has once again been identified as a real obstacle for recovering of shipping and shipbuilding market. In order to limit the damage to the industry to the minimum, the delegates agreed that careful and disciplined assessment of shipbuilding capacity based on market principles is necessary. CESA introduced environment protection as a new agenda item for JECKU. All delegates realised that environmental protection will impact the shipbuilding and shipping industry greatly which may enlarge the demand of highly efficient ships and meanwhile bring new challenges for ship design and construction. A wide range of technologies is available to reduce greenhouse gas emissions and other air and water pollutions. The shipbuilding industry, therefore, jointly advocates a change of mind set in the shipping industry to embrace the advanced technologies. The participants endorsed the proposal to continue the cooperation through the JECKU meeting process and hold the next meeting in the fall of 211 in South Korea. 16

19 5Research, development and innovation 5. Research, development and innovation Summary Research, Development and Innovation are essential to provide better maritime hardware to the markets and to sustain the competitiveness of the European industry. Therefore, CESA invests a lot of efforts in this area through its dedicated working Group COREDES as well as by running the Secretariat for the Waterborne Technology Platform. During the reporting period, the efforts focused on two main strands: (1) preparation topics and research proposals for the remaining calls under the Community Research Framework Programme 7 (FP7) and (2) preparation for the next Framework Programme 8 (FP8). As outcome of the dialogue started inside COREDES, the WATERBORNE TP and the European Commission developed the topics list, which has been inserted in the draft Work Programme 212 for the 5 th Call of FP7-Cooperation-Sustainable Surface Transport (SST). The element of novelty in the 5 th Call preparation was the process which has been followed; a preparatory meeting together with ECMAR and EMEC was held to set the basis for the topics, creating a kind of maritime engineering and manufacturing cluster facilitating the basis for a stronger collaboration and co-ordination in this area. In the meantime, the response of the sector to the 4 th Call was excellent in terms of quality and quantity of the proposals submitted. Around six projects have been funded under the two topics on green retrofitting. The FP8 preparation was developed in the frame of the WATERBORNE TP with the main objective to create a solid entry into the programme for the maritime sector. COREDES has been active in the WATERBORNE TP Support Group to sustain the work, which included a submission to the public consultation on the Green Paper on Research and Innovation. In addition, contributions were made also to consultations on the Strategic Transport Technology Plan which the European Commission expects to issue in autumn 211. This master plan will strategic research agenda establish the focal technologies to be supported by various Community initiatives. implementation Waterborne transport & operations Finally, in June 211, the CESA General Assembly Key for europe s appointed development Mr. Luciano and Future Manzon as new COREDES Chairman, thanking Mr. Willem Laros for the successful route work map 27during his terms of office. WATERBORNE TP The WATERBORNE TP undertook the preparatory work for the Calls mainly in the Support Group following an agreed procedure worked out by the Secretariat and adopted already in early 21. The Topics for the 5th Call were delivered to the European Commission in December 21. The document prepared by the platform was undoubtedly of good quality in terms of content provided and timely on the Commission schedule. Nevertheless, not all the Topics proposals have been taken 17

20 on board by the Commission, because a new fact came into the picture: a decision was taken at the level of Commissioners for Research and for Mobility to exploit synergies between the two areas and to establish a new method of work for which the R&D priorities will be from now on under the responsibility of both departments. This decision means that the R&D topics have to take into account policy priorities of the Directorate General for Mobility (DG MOVE) as well. Measures reflecting this development have been taken already in the preparatory work for the 6 th Call. The WATERBORNE TP consultation process went faster than the previous year and the Topics were delivered already mid July 211 to both DGs. The proposed topics cover the following area: (1) Towards Zero Emission; (2) Safety in Operative Conditions; (3) Competitiveness for SMEs; (4) Goal Based Standards preparatory work for application; (5) Shaping the R&D needs for the WATERBORNE Sector. With regard to the FP8 preparation, a Working Group of the Support Group was established with nearly ten participants from the main WATERBORNE TP areas. This group met four times over the past months and finally published the WATERBORNE TP Declaration, which draws the focal line for the maritime sector in FP8. The European Commissioner for Research and Innovation, Mrs. Máire Geoghegan-Quinn, presented on 21 June 211 the outline for the future EU R&D funding programme under the title: Horizon 22 - the Framework Programme for Research and Innovation. It will enter into force on 1 January 214, with an allocated budget of around 8b (nearly 3b more than FP7). With Horizon 22 a new, integrated funding system will be implemented covering all research and innovation funding currently provided through the Framework Programme for Research and Technical Development, the Competitiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT). These different types of funding will be brought together in a coherent and flexible manner. Research and innovation funding will focus clearly on addressing global challenges. The initiative aims at reducing bureaucracy making access to programmes and participation easier and simpler. In this new landscape, the WATERBORNE TP Declaration is the cornerstone document which sets the strategy in 22 perspective updates of the WATERBORNE Strategic Research Agenda and WATERBORNE Implementation Plan have been released. Research, development and innovation VisiOn 22 Waterborne Transport & Operations A Key Asset for Europe s Development and Future STRATEGIC RESEARCH AGENDA OVERVIEW - ISSUE II - May 211 Waterborne Transport & Operations Key for Europe s Development and Future WATERBORNE TP Secretariat c/o CESA Rue Marie de Bourgogne B-1 Brussels, Belgium STRATEGIC RESEARCH AGENDA IMPLEMENTATION Waterborne Transport & Operations Key for Europe s Development and Future Route Map Issue 2 - May 211 The 2 nd European Maritime Research and Innovation Policy Conference was held in Brussels in June 211. Nearly 2 participants attended the conference aiming at introducing the WATERBORNE TP Strategy to the wide industrial stakeholders and to the policy makers. 18

21 5Research, development and innovation During the Annual WATERBORNE General Assembly in Brussels, the WATERBORNE TP Board was partly renewed. Mr. Govert Hamers fulfilled his term of office after four years of successful and committed work. Likewise, also Mr. Bernard Anne from Bureau Veritas as Vice-Chairman as well as Mr. Willem Laros as Secretary completed their terms. The new Secretary is Mr. Luciano Manzon and the new Vice-Chairman is Mr. Mario Dogliani from Rina. Mr. Willem Laros agreed to serve as Chairman for a transitional period until a new chairman will be appointed. EU R&D Framework Projects CESA is the co-ordinator of three Co-ordination and Support Actions in Call 2 and participant in several other projects, some of which still running from calls under FP6. CASMARE The WATERBORNE TP mechanism has successfully fulfilled its scope throughout the reporting period: aligning and co-ordinating the research efforts at European level in the maritime sector. The co-ordination action CASMARE has put in place a number of actions and tools to support the functioning of WATERBORNE TP. Among the foreseen deliverables, in particular the detailed mapping on the status of the Waterborne Strategic Research Agenda (WSRA) against running projects under FP7, an update of the WSRA and a review of WATERBORNE s scope can be highlighted. In the monitoring process, 56 projects established under FP7 on several thematic priorities have been taken into consideration and mapped against the WATERBORNE TP Strategic Documents. 19

22 The mapping shows that around 22% of the total number of projects which are running under the transport heading are not or scarcely related to the WATERBORNE Research Priorities. This could be explained by the fact that the impact of WATERBORNE TP at the time of the projects preparation was not yet widely recognised. The feeling is that this trend has already changed significantly in 29 and 21 due to the time elapsed after the first release of the Strategic Documents and a more precise internal organisation. With regard to improved protection of intellectual property, the recommendations provided could be included in the general condition for the IP protection in the European funded projects. The recommendations are directed to the participants and to the policy makers. They are divided in three phases: before the proposal, along the duration of the project and after the end of the project. The most important one is that the project consortium must be committed to the European interests and refrain for a fixed period of time from transferring, giving access to or disseminating the project results to third parties established in a country not associated to the EU. In the review of the WATERBORNE TP scope, three main areas are identified: Sustainable maritime transportation. Low GHG emission Waterborne products and processes. Sustainable energy generation and conversion from the sea. Waterborne products for renewable energy generation form the sea (including offshore wind energy). Sustainable food generation from the sea. Waterborne products for the exploitation of the seas for the societal needs (food from the seas, aqua-farming, fisheries, coastal spatial planning, floating structures). More info can be found on EMAR 2 RES 5 Research, development and innovation The scope of this Co-ordination Action, under the perspective of Transport, is to establish a liaison among the Marine and the Maritime Community and to identify possible common strategic objectives. The project has successfully achieved all its targets for the first period installing the foreseen committees and panels and running six technical workshops attended by more than 7 experts to sketch the future of Marine and Maritime Research under the transport perspective identifying the main areas for R&D collaboration among the two communities. These are: Impact of maritime transport on the marine environment [biological and chemical impacts] Treatment of ballast water Accidental and operational emissions to the sea Accidental and operational emissions to the air Development of hull coatings/anti-fouling 2

23 5Research, development and innovation Water as a common medium [ physical relationships] Resistance and propulsion Underwater noise and vibration Impact on seabed morphology in restricted waters Monitoring climate change and the benefits of operational oceanography to maritime transport, e.g. Collection of meteorological and oceanographic data [ship to scientists], Sensors, Telemetry Provision of end user information services through the integration of measurement, modeling, and prediction, using meteorological and oceanographic data Marine core information services to support e-maritime, e-navigation, traffic management, weather routing, arctic navigation, weather and sea state (tides, currents, waves) forecasts, oil spill monitoring, ballast water dispersion and global ship routing, etc. Relationship between maritime transport & climate change, e.g. Impacts on operations on ports & harbours, navigation & routing Impacts on vessel design, consequences of extreme weather, low carbon objectives More information to be found on VISIONS OLYMPICS The Support Action Visions Olympics (continuation of VISIONS NoE) will aim at capturing revolutionary concepts for maritime transport and ocean exploitation from the unbiased minds of European universities students. The project will offer out of the box concepts and ideas for the future of European maritime transport, develop these ideas within an environment where purpose driven innovation is cultivated and performed in a risk free environment, build bridges between universities and industry, enhance the skills of future employees in a highly competitive environment, and offer targeted dissemination to industry. The Year 21 Contest has been launched and successfully carried out during the academic Year After an in-depth analysis of the European market and technological situation, three thematic areas have been identified by a panel of Maritime Experts as: Research Area 1 (RA1): Transport challenges for offshore energy generation & conversion. Research Area 2 (RA2): Transport challenges for sustainable food generation from the sea. Research Area 3 (RA3): Sustainable waterborne transportation On these 3 areas, student teams have been called to submit their project ideas in two steps: Step 1 - Abstract submission (by January 21) Step 2 - Full project idea submission (by April 21) 21

24 Results of the first submission round are: 136 students originally registered for the competition. The students are from 7 European countries plus 1 EU candidate country (Turkey). 1 universities participated in the competition. 32 ideas were registered of which 27 abstracts were finally accepted. 22 final projects were submitted by the time of the deadline of 31 May 21. Among those 22 project ideas, 6 were shortlisted for in-depth experts evaluations. Building on the experts analysis, a High Level Jury of maritime personalities formed by 6 industrial and research representatives awarded the three winning ideas. The Award Ceremony took place during the 2nd European Maritime Research and Innovation Policy Conference in Brussels on 16 June st prize: Ultra Large LNG Carrier 3 rd prize: Ballasting System of the NOBAX vessel 2 nd prize: River - Sea Shipping Concept 5 Research, development and innovation The second LOOP is progressing along the same scheme of LOOP I. Also for this LOOP II, after an in-depth analysis of the market and the technological situation, special focus has been given to the Green Shipping research area consisting of three sub items: (RA1) Safety at sea (RA2) Green logistics (RA3) Energy efficient ship On these three areas, student teams have been called to submit their project ideas in two steps: Step 1 - Abstract submission (by January 211) Step 2 - Full project idea submission (by April 211) More information can be found on CESA is also involved as partner in the following projects: VECTORS TRA212 THROUGHLIFE FLAGSHIP 22