Introduction to CGT Measurement

1. 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, LaurentC.DANIEL@oecd.org
Ms. Karin STRODEL, Karin.STRODEL@oecd.org

2. 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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Background

3. 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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History of the cgt system

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Cgt system since January 2007
Source: OECD (2007).
 Macroeconomic scope.
 Expressed in man-hours.
 Relation of man-hours to CGT using a factor derived by OLS regressions.
𝑐𝑔𝑡 = 𝑨 ∗ 𝑔𝑡 𝑩
A controls for the ship type.
B denotes the influence of ship size.
gt is the vessel’s gross tonnage.

5. • 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 (1/3)

6. • 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.
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Difficulties & Limitations (2/3)
* i.e. Amount of parts and blocks produced in a shipyard, relative to the amount which is subcontracted to outside suppliers.

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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.
Source: OECD (2007).
Number of man-hours (y) on number of ships built (x)

8. • 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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Issues for discussion and possible
future work on the cgt system

9. 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.