09-Nov-2015

ITEM 1.2.1: INTRODUCTION TO CGT MEASUREMENT

WP6 workshop on supply and demand

Paris, 09 November 2015

Contact: Structural Policy Division Mr. Laurent DANIEL, [email protected] Ms. Karin STRODEL, [email protected]

Background

Purpose of the compensated gross tonnes (cgt) system: “cgt is a unit of measurement intended to provide a common yardstick to reflect the relative output of merchant shipbuilding activity in large aggregates such as ‘World’, ‘Regions’ or ‘Groups of many yards’”. (OECD, 2007) • Reflecting workload. • Accounting for complexity (output, design, working methods, …).

11-12 June 2015 WP6 Meeting: • Some participants indicate that there is room for improvement of the current cgt system, in particular for mega-yachts and offshore vessels.

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History of the cgt system

Late 1960s/Early 1970s: Initial development of cgt: – First devised by shipbuilder associations (i.e. CESA and SAJ). – Subsequently adopted and promulgated by the WP6 for its widespread use within the industry. Revisions and updates in 1984 and 1994 – 1984: introduction of conversion coefficients (i.e. table of cgt coefficients) depending on ship type and dwt. – 1994: series of partial and intermediate revisions accounting for technologies and new ship types. Major overhaul in 2007 – Joint development of new cgt system by CESA, SAJ and KSA, coming into force on 1 January 2007. • cgt calculations based on a formula. • gt rather than dwt as basis.

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Cgt system since January 2007

푐푔푡 = 푨 ∗ 푔푡푩

A controls for the ship type. B denotes the influence of ship size. gt is the vessel’s gross tonnage.

Source: OECD (2007).  Macroeconomic scope.  Expressed in man-hours.  Relation of man-hours to CGT using a factor derived by OLS regressions.

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Difficulties & Limitations (1/3)

• Selected shipbuilding associations and yards: – Current practices to calculate cgt for offshore vessels and mega-yachts do not reflect the real workload and value of building these ships. • Offshore vessels are more and more sophisticated and each project is totally different to the others. – Some yards do not even use the cgt coefficients for big offshore projects because they consider that it is absolutely not fitting the reality.

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Difficulties & Limitations (2/3)

• Differences in production depths* by ship yards, e.g. purchasing raw materials or even entire steel blocks.

• Different degree of rationalisation and range of shipbuilding equipment (e.g. cranes, machine tools) and productivity.

• Despite ships of same size and type, still various differences within ship types on hull-form, maximum speed and means of propulsion, equipment and quality level.

* i.e. Amount of parts and blocks produced in a shipyard, relative to the amount which is subcontracted to outside suppliers. 09-Nov-2015 6

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Difficulties & Limitations (3/3)

• Controlling for series effects (i.e. learning curves) when evaluating ship yard capacity.  Cgt reflects workload for first ship produced without adjustment for efficiency improvements for subsequent vessels built.

Number of man-hours (y) on number of ships built (x)

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Issues for discussion and possible future work on the cgt system

• Should we revise the current cgt system? – Identification of ship types for which a revision is needed? – Revision only for some ship types (i.e. separate category for mega-yachts, offshore vessels)? • What to do ? – Improving the formula? • Role of the WP6 ? – Cooperation with experts (e.g. shipbuilding associations, shipyards, data providers, others) – Providing suggestions for improvements of the cgt system? – Work load?

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Thank you.

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References

1. OECD (2007). Compensated gross ton (cgt) system, Danny Scorpecci. 2. Pruyn, JFJ; Hekkenberg, R.G. , 2010, CGT Dis-ambiguated, The Yacht-Report (includes an interview of Mr. Chris van Hooren) 3. Pruyn JFJ; Hekkenberg R.G. ; van Hooren C. M. ; Determination of the Compensated Gross Tonnage factors for superyachts, International Shipbuilding Progress 01/2010; 57(2010):127-146 • Reference 3 includes a possible approach to revise the cgt system for mega-yachts with: – The fundamental assumptions to use, – Details on data collection, and – Validation process.

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