European Union shipbuilders are investigating deals struck by non-European competitors amid claims yards are deliberately taking on loss-making work.

The Community of European Shipyards Association is probing recent deals to establish true cost after members complained of “irrationally low-priced contracts”.

Allegations of dumping, an illegal practice under international trade rules, are hard to prove in shipbuilding, given the worldwide nature of the market and the mobile product. Evidence that contracts are being struck at below cost would however trigger consequences if the finger pointed at South Korea, according to Cesa, because the South Korean government has pledged this would not occur.

On Monday Cesa is expected to warn Seoul that such evidence would lead to action on behalf of the European Commission and could jeopardise South Korea’s free trade agreement with the EU.

A document prepared by Cesa states: “Should the [loss-making] shipbuilding be located in the Republic of Korea, Cesa will formally file a complaint with the European Commission, referring to Article 3 of the so-called agreed minutes. Under this binding bilateral 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 World Trade Organisation antidumping agreement. 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.”

The Brussels-based industry body is to release the results of its first investigation within a month, according to Cesa secretary general Reinhard Luken.

There is however no such bilateral agreement with China, where capacity has rocketed. An EU-China dialogue group has been set up but has never convened.

Past WTO trade rulings on shipbuilding have met with mixed results for European yards, though there are suggestions new legal action might be more successful as WTO case law has moved on, Mr Luken said.

“We will investigate deals which European yards have tendered for,” he said. “In some cases there are published prices. There will obviously be a range of uncertainty of 1% or 2%. Even if we find deals struck at 5% or 6% below our estimated cost our case will not be that strong, but it might be larger.”

There were yards in Asia managed by “reasonable people”, Mr Luken said. He named Hanjin Heavy Industries & Construction, South Korea’s fifth largest shipbuilder, which announced in early January it would not take on “low-priced orders”. Hanjin also announced a worforce reduction of 30%.

“The market is damaged by the actions of a few,” Mr Luken added.

Source: Asiasis

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