June 1983 - Maritime Reporter and Engineering News

Canadian Government Actions Hold Promise Of Future Upturn

By Henry M. Walsh, President, Canadian Shipbuilding And Ship Repairing Association

REVIEW AND OUTLOOK The year 1982 began with a relatively healthy amount of work in hand but a weak order book.

CSSRA yard employment reached a 10-year high of 14,200 in March but by December this had become a 10-year low of 8,500, a drop of 5,700 people or 40 percent of the work force. The economic recession for most allied industries hit sometime earlier and has continued through much of 1982.

However, as 1983 began, there was good news. On January 6, the Government of Canada announced a series of measures to promote Canadian shipbuilding including the following elements: (1) Extension of customs and excise laws to goods used in resource exploration and development from the present 12-mile limit out to the limits of Canada's continental shelf.

(2) Closing of loop-holes to existing customs jurisdiction — resulting in 25 percent duty to all ships and 20 percent for offshore drilling rigs. (The existing fishing vessels rate structure is still being studied.) (3) Retention of the 3 percent Performance Improvement Grant and extension of 9 percent Shipbuilding Industry Assistance Program subsidy for ships delivered by June 30, 1985.

These measures were welcomed by the CSSRA. We had also looked for the re-imosition of the normal duty on fishing vessels over 100 feet in length and were disappointed when the decision on this question was delayed.

The Atlantic trawler fleet requiring replacement over the next 10 years will mean over $3 billion worth of shipbuilding work. Much of this will be lost to Canadian industry unless there is a change in the present policy which encourages domestic fishing operators to buy offshore. Not a single fishing vessel was ordered from our yards in 1982. However, five were imported in 1982 for a total of 27 trawlers brought in since 1979.

The Government indicated it expects to have the new policies in place this coming summer.

Meanwhile, during the first two months of 1983 there was some improvement in new construction outlook. In January, CN Marine awarded a contract for a 15,000-ton ferry. In addition to the much needed shipyard work the contract will be important for the allied industries. Tenders were also called for four Coast Guard and two Department of Fisheries and Ocean ships. These contracts will bring in work for some of our shipyards later this year. The selection of the winning consortium for the Canadian Patrol Frigate Program is due to be announced this coming June, but this will not result in actual shipyard work before 1984.

All shipbuilding yards are vigorously pursuing new commercial work. No doubt several will succeed but the domestic outlook in general is poor. That is why we have been urging the Federal Government to speed up their procurement for the long term needs of National Defense, Coast Guard and Fisheries and Oceans.

The new policies should bring in some new commercial orders by the end of the year — but the volume will likely be low because of the rather parlous state of the world economy and the cutthroat competition between Japan and Korea which is depressing shipbuilding prices around the world. As we were going to print there were positive signs of a turnaround for the world, the U.S.A., as well as the Canadian economy. Shipbuilding talks between Japan and Korea were being held which could lead to firmer prices and stability.

The pace of recovery as well as the world oil situation will have a direct bearing on the Canadian shipbuilding outlook for late 1983 and the following years. I remain optimistic that once the present slump is over, Canadian shipbuilding and allied industries can look to profitable opportunities well into the 21st century. Hopefully, 1983 will see the beginning of this new era.

PRODUCTION At the end of December 1982, Canadian shipyards had only 20 vessels and floating equipment under construction or on order with a gross tonnage of 186,642.

This reflects a reduction of 59.2 percent in the number of units under construction and a 35.1 reduction in gross tonnage. New orders for the year were down drastically from 38 in 1981 to 11 in 1982. Total gross tonnage of new orders for 1981 was 84,200 and in 1982 a meagre 7,567 tons, representing a decline of 91 percent.

Five of these orders in 1982, totaling 1,000 gross tons, were for the export market compared to 14 orders at 17,200 gross tons in 1981. No new construction orders were placed in 1982 by the federal government.

Although there were only 11 new orders in Canada in 1982, twenty-two foreign-built vessels were brought into the country including seven offshore vessels and five fishing trawlers. Imported tonnage was over six times greater than new orders.

During the same period there were no fishing vessel orders to Canadian yards reflecting the downturn in the fisheries as well as the fact that fishing vessels over 100 feet in length may be brought into Canada duty free.

During 1982 member yards delivered 39 vessels with a total gross tonnage of 115,251. The number completed was four more than in 1981, but the total of gross tonnage delivered was 29.3 percent less. Deliveries for export at 16 was the highest since 1979 and the gross tonnage at 28,900 was the highest since 1980. The 16 vessels exported comprised two barges, four tugs, four fishing vessels, four jackup drill rigs, and two seismic vessels.

The value of new construction by member yards totaled $652,- 918,000 in 1982, an increase of 35.5 percent over 1981. In constant dollars this reflects an increase of 18.4 percent. New construction for export was up 103.2 percent to $260,062,000 in 1982, while production on federal government contracts decreased from 10 percent of the new construction total in 1981 to 4 percent at $28,620,000 in 1982. New construction by region in 1982 showed an increase of 41.2 per- cent on the West Coast, 60.3 percent in the combined Great Lakes and St. Lawrence region, and a decline of 16.6 percent in the East Coast region.

The value of repair and conversion work carried out by member yards decreased by 5.6 percent in 1982 to a total of $296,- 228,000. The decline occured on the West Coast and in the St.

Lawrence regions. The federal government share of repair and conversion work increased from 22 percent in 1981 to 27 percent in 1982 at a value of $81,345,000.

The total dollar value of new construction and repairs and conversions in 1982 rose to $949,- 146,000, an increase of 19.3 percent over 1981. The estimated value of CSSRA Allied Industries marine production decreased by 2.6 percent in 1982 to a value of $151 million. The total CSSRA member production was over $1,100 million.

A l l i e d I n d u s t r i e s members' manufacturing and services actually decreased more than 2.6 percent when inflation is taken into account. With the downturn in the economy and the drastic drop in new orders, some prices of materials have decreased.

EMPLOYMENT Employment in the shipbuilding- and ship repair industry as reported by Statistics Canada for the first 11 months of 1982 averaged 15,671, an increase of 2.1 percent over 1981. Total overall employment reported by CSSRA member yards showed little change in 1982 compared to 1981; however, there was on average an increase of 17.2 percent on the West Coast, minor change in the Great Lakes region, a 16.2 percent increase in the St. Lawrence yards and a decline of 27.8 percent in the East Coast yards.

Average weekly earnings in the industry increased by 12.8 percent over the first 11 months of 1982 to reach an average of $515.12. Average hourly earnings grew by 13.0 percent to a 1982 average of $12.61. Average weekly hours of work decreased slightly from 39.9 hours in 1981 to 39.8 in 1982.

Average hourly earnings in the shipbuilding industry now stand at 15.9 percent above those in the durable goods industry as a whole and 23.5 percent above total manufacturing. This represents a further increase of the divergence recorded in 1980.

The dollar output per shipyard employee f o r 1982 increased from $66,584 to $79,520 an increase of almost 19 percent. In constant dollars this represents a significant output increase of 4.3 percent over 1981 and 55.7 percent over 1971.

Other stories from June 1983 issue


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