Shipbuilding in Denmark

The long ocean voyages by the Vikings marked the start of Denmark's proud seagoing tradition and the growth of an industry of shipbuilding and marine equipment. Denmark is an island kingdom with an extensive fishing industry. The Danish shipbuilding industry produced every type of vessel, from pleasure yachts to supertankers. Denmark used to be one of the leading shipbuilding nations in the world. At the start of the 20th century, Burmeister & Wain (B&W), along with with Carlsberg brewery, was Denmark's largest industrial enterprise, a position it held for most of the century. It was famous for its products abroad, and had a reputation domestically as one of largest workplaces in this country with very strong trade union traditions among its members: many of the shop stewards were communists.

Up to the Great Depression, shipbuilding was the first Danish industry to have a high ratio of real capital to employment and output; and its history, from its origins in the middle of the 19th century to the Great Depression, was marked by incessant innovation in the Schumpeterian sense. Its establishment and early growth was a triumph of entrepreneurial struggle against disadvantageous transportation costs for raw materials and the scarcity of skilled laborers and engineers that reflected the economy of a primarily agricultural country.

Shipbuilding did not dominate the Danish industrial economy in the sense that cotton textiles may be said to dominate Lancastershire or coal and steel the Ruhr. In 1950, the industry employed only 6.3 percent of the industrial labor force; and exports of new ships constituted approximately the same percentage of total industrial exports. Danish shipping firms ordinarily purchase abroad as much new ship tonnage as shipbuilding companies sell abroad, the basis for this being the specialization of the domestic industry.

By the middle of the 20th Century the industry's relatively modest status did not seem likely to change for the better in the near future. Relative to industry in general, shipbuilding had been falling behind since the beginning of the Great Depression. The industry that pioneered the Diesel-motor ship was said to be afraid of Swedish competition in the domestic market if the proposed Nordic customs union were to become a reality. Whatever may be the causes, the fact was unquestioned that shipbuilding had been almost stagnant for two decades.

This all came to an end in 1996 when the state stopped the flow of subsidies to the shipyard and B&W closed down. It was followed by most of the other big shipyards. Elsinore, Nakskov and Svendbor g- three provincial towns known for their shipyards, which attracted workers from the surrounding regions - were turned into islands of unemployment for some time.

The once powerful Danish shipbuilding industry, which had thousands of employees and yards in all regions of the country, witnessed a fatal decline in orders for new ships, and many shipbuilding yards have shut down over recent decades. This was mainly due to severe competition from South Korea, which Denmark, together with the other shipbuilding countries in the EU and the trade unions, accuses of unfair competition in form of state subsidies and unrealistically low prices. However, new modern industries are growing where shipbuilding once ruled, and Danish shipyards are being taken over by the windmill industry.

About six weeks before the turn of the century the Århus Flydedok shipbuilding yard was sold by auction. All equipment and usable items were sold, from lathes to mobile cranes, from notice boards to paintings of local landscapes. A little further north, in Frederikshavn, Danyard- which is owned by the Lauritzen company - delivered its last new ship on 14 December 1999 and was then closed down. Two important, and once busy, Danish shipyards thus had to close down on the threshold of the new century. They were the latest of a large number of Danish shipyards which have been forced to close down due to lack of orders - orders which are today going to the flourishing shipbuilding industry in South Korea. Over the two-year period from 1995 to 1997, South Korea increased its share of the global market from 12% to 23%.

New industries moved into the old premises, such as production of windmills, which has attracted new labour. Many of the former workers in the shipbuilding industry organised in the National Union of Metalworkers (Dansk Metalarbejderforbund, Dansk Metal) are now working in the factories of the Vesta windmill group in Nakskov, Frederikshavn and Ringkøbing. Between 600 and 700 workers are now producing mill towers and wings instead of ships.

The total production of the Danish shipbuilding industry has been more than halved during the past 15 years:

• 1985 - 444,000 tonnes, corresponding to 3.1% of world production;
• 1995 - 419,000 tonnes, corresponding to 2.9% of world production; and
• 2000 - 150,000-200,000 tonnes (estimate), corresponding to 1% of world production.

The following shipyards closed down in the course of 1999: Danyard Frederikshavn, Århus Flydedok, Nordsøværftet (Ringkøbing) and Svendborg Værft. At the beginning of 2000, the remaining shipyards building new ships were Ørskov Stålskibsværft and Danyard Aalborg- both privately owned - and Lindø Værft, the biggest shipyard in Denmark and owned by the Maersk group, which is itself owned by Mærsk Mckinney Møller, Denmark's biggest shipping company. Denmark no longer had any state-owned shipyards.

The 1999 annual report of the Danish association of shipyards does not give rise to optimism for this sector. Only a single confirmed order was obtained by a Danish shipyard - the building of a trawler at Ørskov Staalskibsværft in Frederikshavn. There was also an order from Maersk Line for mega-container ships from the company yard Lindø in Odense.

Total employment in the Danish shipbuilding industry - including both the building of new ships and repair work - has been reduced by two-thirds over the past 15 years (according to figures from Dansk Metal):

• 1985 - 15,400 employees;
• 1995 - 10,500 employees; and
• 2000 - 5,000 employees.

Denmark is strictly observing the EU Council Regulation (EC) No. 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding, which allows state aid for each shipbuilding contract up to an amount equal to 9% of "contract value before aid". This scheme will expire for orders concluded before the end of 2000, for delivery before the end of 2003.

There is a close cooperation between the Central Organisation of Industrial Employees in Denmark (Centralorganisationen af industriansatte, CO-industri), the National Union of Metalworkers (Dansk Metalarbejderforbund, Dansk Metal) and the Association of Danish Shipbuilders (Skibsværftsforeningen) concerning all matters related to shipyards. The organisations also have a close cooperation with the Ministry for Trade and Business, so that all matters concerning the shipyards and the shipbuilding industry which are on the agenda of EU Council of Ministers meetings are discussed by the three parties prior to the meeting.

The Danish shipyards are members of the Confederation of Danish Industries (Dansk Industr i, DI) and thus covered by the collective agreements concluded between Dansk Industri and CO-industri. No special agreements exist for the shipyards. In January 2000, CO-industri and Dansk Industri concluded a new collective agreement that will run for a period of four years. The old agreement had run for a period of two years. Wages are agreed locally.

A European day of action in the shipbuilding industry was staged on 5 November 1999 by trade unions affiliated to theEuropean Metalworkers' Federation (EMF) in the European countries involved in the sector. The aim was to call attention to the crisis in the European shipbuilding sector and to persuade EU industry ministers to take steps to safeguard the industry. The day of action included stoppages, demonstrations and rallies, press conferences, leafleting and petitions to national ministers (EU9911208N). In Denmark, CO-industri targeted its protests at political circles. This took the form of a written communication to the members of the Industrial and EU Committees of the Danish parliament (Folketing), the Minister for Foreign Affairs, the Minister for Trade and Industry and Danish Members of the European Parliament.

In this communication, CO-industri pointed out the problems which the Danish shipbuilding industry is facing, primarily as a result of the heavy dumping on the part of South Korea which has destroyed the international shipbuilding market and has led to a fall in the prices for construction of new ships of up to 35%. The president of CO-industri, Max Bæhring, used this opportunity to suggest that effective trade policy sanctions should be imposed on South Korea if the EU failed to reach an amicable agreement through negotiations. In 1998, CO-industri supported the abolition of state subsidies to the European shipyard industry by the end of 2000. In principle, CO-industri is not in favour of state subsidies, including to the shipbuilding industry. However, the 1998 EC Regulation concerning abolition of direct production subsidies to shipyards was based on an assumption of orderly conditions on the international shipbuilding market. The situation today is far from orderly, stated Mr Bæhring. South Korea is pursuing a pricing policy which has led to a fall in prices of more than 30% for many types of vessels since 1997, and shipyards in South Korea are selling ships for less than the production price. That is what we call "dumping", said Mr Bæhring in his communication.

The EU Framework on State Aid to Shipbuilding1 (referred to "Shipbuilding Framework" or simply "Framework"). The Framework was adopted in 2003 for three years with effect from 1 January 2004. Itwas subsequently prolonged without amendments in, respectively, 2006 and 2008 [this later Framework expires at the end of 2011]. It is Denmark's overall position that the shipbuilding industry ought to be covered by the Treaty's ban on state aid that distorts competition and not be subject to special exemptions. Similarly, Denmark takes the view that existing schemes that distort competition should be phased out.

Generally, the future prospects for both the Danish and the European shipbuilding industry are not very bright unless agreements are concluded at the international level - primarily with Japan and South Korea - concerning the development of prices for the building of new ships. The price policy pursued by South Korea means that its shipyards during the first six months of 1999 obtained 68% of all orders for container ships, compared with 44% in 1998 and 15% in 1997. The situation is extremely critical. Only highly effective shipyards - and in Denmark this means only the Lindø yard - will be able to cope with the international competition. At a meeting late in December 1999, the South Korean association of shipyards strongly refuted allegations by the EU of price dumping and of indirect state subsidies being used as means of obtaining a larger share of the orders on the global market. The EU has not been convinced by the arguments submitted by South Korea and is considering introducing sanctions if no progress takes place in the negotiations before the end of February 2000.

In Denmark it has an almost symbolic value in relation to the future that new modern industries have absorbed labor from, and taken over the premises of, the old industry. The production of windmills in Denmark is very large-scale - and also "energy-friendly" seen in an international environmental perspective. Nevertheless, it remains a fact that the status as almost a "national treasure" that the shipbuilding industry used to hold will probably never be restored. With its production of container ships, Lindø Værftet is the only shipyard which is capable of keeping up with foreign shipyards when it comes to the building of new ships.

Denmark has experienced a reduction in national shipbuilding capacity as a result of the closure of a number of shipyards. Thus, Danyard and Ørskov Christensens Staalskibsværft A/S both closed down in 2003, while Odense Staalskibsværft announced that it will close when the last ship in the current orderbook had been delivered in 2012. The reduction in Danish shipbuilding capacity in this decade was a continuance of developments over the last three decades.