The oversupply in the dry bulk, tanker as well as in the container business gives people a much slower picture of newbuilding activity of 2012. Beside, the growing financing pressures for many shipyards especially from Europe are making the predication worse.
Seen from the recent market report from Golden Destiny, as the year draws to a close the newbuilding market seen slower activity in the last week, especially in the dry bulk and tanker markets.
According to the shipbroker, totally 18 new ordered were reported concluded worldwide with a tonnage of 454.600 dwt, 49% down week-on-week. The combined contract value is estimated at $656m.
New vessel deliveries hit new high in 2011 in the overall sluggish global economy. However, experts estimate that the delivered vessels are likely to decline in next year.
Clarkson classify all the shipbuilders to three groups: ultra-large shipyards (with orderbook over one million CGT), large shipyards (order catalog between 500k to one million CGT) and small shipyards (orderbook smaller than 500k CGT).
The delivery volume from ultra-large shipyards is projected to hit new high in Q1 2012 and then fall to 64% in Q1 2013 and 31% in Q1 2014.
As for the deliveries from large shipyards, the volume would fall by as much as 82% by Q4 2012.
Shipbuilding industry is to face new crisis if no enough new orders coming in short time. Besides, considering the growing financial distress, the industry may confront with delivery problems.
The newbuilding market has been remarkably active in the past three years with considerable new orders and order catalog. However, in the next three year, all the market players will have to cope with declining sales, inadequate new orders, falling ship value and other issues. Shipbuilders have to adjust strategies and attitudes to face new situations.
Global new orders this year have sharply decreased as low as in 2009, when shipyards suffered severe orders drought right after global financial crisis.
However, while new order for commercial ship plummeted, new order in terms of value is twice larger than 2009 due to massive contracts of high-value specialized vessels.
Meanwhile, newbuilding delivery is to exceed that from 2010, hitting all-time high.
According to Clarksons, new order in the first 11 months dropped to 1,141 vessels of 59.6m dwt, as low as 55.2m dwt in 2009. And it is just one fourth of 273m dwt during a boom in 2007 and falls short of half of 137.5m dwt from last year.
In terms of gt, cumulative 47.7m-gt newbuildings were ordered from January to November and about overall 50m-gt are expected to be newly ordered in 2011.
Meanwhile, new order value during January-November period turns out to be around $87.2bn, which doubles $40.4bn in 2009 and is close to $99.8bn from last year. This represents high-value specialized ship orders, such as LNG carrier, drillship, ultra-large boxship, etc., have led the newbuilding market this year.
In particular, South Korean builders sweeped new order market for high-value ships, winning $46.7bn, 24.5m gt of new order year to date, while Chinese secured $18.1bn or 16.9m gt.
Owners in the US placed $15.7bn of new order, Greece ordered $12.3bn, Norway $7.9bn, Denmark $6.7bn and Brazil $5.8bn. China only newly ordered $4.6bn.
Meanwhile, 2,259 vessels of 146.2m dwt have been newly delivered in the first 11 months and about 159.4m-dwt delivery is estimated for 2011, exceeding 151.1m dwt in 2010.
Newbuilding delivery would be in a downturn with 149m dwt in 2012 and 116m dwt in 2013 going forward.
In terms of gross tonnage, 90.3m gt has been delivered by November and 99m gt is expected to be delivered for this year, also exceeding 96.9m gt of last year.
China and South Korea would make a record-high deliveries of 67m dwt or 34.8m gt and 53m dwt or 32.4m gt respectively this year.
As of early December, world newbuilding orderbook stands at 6,195 vessels of 375m dwt, constantly in decrease after 618m dwt in the end of 2008, 535m dwt in 2009 end, and 487m dwt in 2010 end.
In terms of gt, newbuilding backlog recorded 240m gt as of the early this month, following 393m gt in late 2008, 335m gt in late 2009, and 299m gt in the end of 2010.
According to the statistics from Clarkson & Golden Destiny, the newbuilding market is quieting down as we get closer to the end of the year, showing a 47% week-on-week decline.
Totally 35 transactions were reported in the last week with offshore orders accounting for 66% of the total.
However we still see some orders of bulker, gas carriers and containerships. Dry market activity is very limited this week with Chinese shipyards still dominating the traditional sector.
In offshore and special project market, some European players as well as Russia and Brazil are still active in finalizing their new orders negotiation before the end of the year.
As Clarkson says, the industry is now concerning more about how the market will go in 2012. Given the state of global economy and current financing availability, we can see much of the 2012 newbuilding market. Yet uncertainties are still hanging over the market.
The emerging sectors are still projected to play an essential role in the shipbuilding market as more and more shipyards begin to enter the sectors. The competition is to going more intense and cruel.
According to Clarkson, the key of winning orders in the further lies in yards’ capability of designing vessels of flexibility both through fuel efficiency and their economy of ship scale. With all the major yards across Korea, China and Japan all continuing their work in developing these, there will no doubt be numerous opportunities for owners as the year progresses.
In November, the prices for new-built bulker, tanker and containership all witnessed declines. According to the statistics, the month-average prices for VLCC, Suezmax tanker, Aframax tanker, product tanker, Capesize bulker, Panamax bulker, Handymax bulker, Handysize bulker, 82k CBM LPG carrier, 160k CBM LNG carrier, 4,800 TEU boxship and 1,700 TEU’s are evaluated at $99.73m, $61.60m, $52.80m, $35.50m, $48.75m, $29.00m, $27.00m, $ 22.73m, $73.00m, $202.00m, $59.88m and $31.45m, falling by 0.30%, 0.65% ,0.40%, 0%, 2.26%, 0.43%, 0.92%, 1.52%, 0%, 0%, 0.21%, 0.16% respectively.
Through this month, totally 168 new vessels are ordered globally, 47.37% up month-on-month, of which offshore orders accounting for about 40%. Shipyards in China, S.Korea, Japan, USA and Singapore respectively win 47, 33, 16, 18 and 12 of the total.
As the world's biggest offshore rig builder by volumes, Keppel Corp. is continuing to get enquiries for new vessels after its orderbook hitting new high record this year.
"You can't control the world financial system and markets, but so far, enquiries are still active, and that augurs well for us," says Tong Chong Heong, the chief executive officer of Keppel FELS, “the current global oil prices remain supportive of investment in exploration and production” Keppel indicates.
According to Tong Chong Heong, the current downturn in the global economy, the sovereign debt crisis in Europe even together with a slowing U.S. economy haven't reduced demand for energy and current global crude oil prices are high enough for investors in the sector.
Tong disclosed that they haven’t taken too many speculative orders for all its customers have been players in the drilling business. "Fortunately for us, all the orders that we have are bona fide customers. There really have been no speculators building rigs. We are very careful who we build for," he said.
According to him, worldwide drilling companies are still making money, which is a "positive sign” for all the bulkders.
Keppel has received orders worth S$9 billion so far in 2011, taking total orders in hand to S$10 billion, which will keep its yards busy till the third quarter of 2014.
Brazilian national oil company Petroleo Brasileiro SA or Petrobras is spending nearly US$225 billion till 2015 to raise its oil production. Keppel has expressed its confidence in this project tender.
Newbuilding prices of every vessel-type hit monthly lowest in December. Therefore, South Korean builders are said to be in consideration of setting a down-sized 2012 target.
According to Clarksons on 8 December, the Clarksons Newbuilding Price Index in December recorded the monthly lowest point of 139 this year. The index has gone up to 190 during a boom period in 2008 then sharply decreased to 136 after global financial crisis. Although it recovered to 140-level in early 2011, now dropped as low as that in 2009.
Newbuilding price of each vessel type also dropped. Bulker prices, in particular, has plummeted, all sizes down by over 10%. 76,000-dwt panamax bulker decreased the most to $29m, down by 15.94% on early 2011, 180,000-dwt capesize and 57,000-dwt handymax declined by 13.15% and 12.9% each, as well.
Tanker has dropped by 5-9%, suezmax plunged by 9.42% from $66.75m to $61m and aframax decreased by 7.45% to $52.75m on early this year. VLCC showed the smallest fall, down by 5.23% to $99.5m.
Builders, now planning management strategy for 2012, are facing difficulties by down-grading newbuilding price.
A Korean yard, asked to remain anonymous said, "As projected global economy for 2012 worsens, setting a new order target for 2012 about the same as 2011 is currently in review."
With the final weeks of the year now upon us, ship owners appear to be moving towards conluding their newbuilding orders’ agreements, before entering the new year. As a result this past week saw a fair amount of deals being concluded. According to the latest weekly report from Clarkson Hellas, as we enter December and the final few weeks of the year, one could be forgiven for thinking that the shipbuilding market would begin to quieten down. “Though enquiry does remain a little subdued, the week has seen further reports of new business being concluded, with vessels being ordered across a wide spectrum of sectors and this should provide those (yards) still aiming to hit their yearly order targets a little optimism and potential festive cheer.
In terms of the reported business this week; Shanghai Waigaoqiao are reported to have won a further pair of 206,000dwt Capesize Bulkers from clients of Polembros Shipping. We understand these vessels are the declared optional units from their deal done a little earlier in the year and are provisionally due to deliver End 2013 and 1Q 2014. It is perhaps no coincidence these options have been declared around the time when the Baltic Cape Index has climbed on consecutive days for over a week and has this year increased by over 240% since its low point in January. This upward trend has clearly helped to temper some owners concerns over the forward orderbook and with the current levels of pricing and the general lack of ordering (in this size) this year it is perhaps not surprising to see this latest addition to the orderbook. Pricing for this latest deal is understood to be at the same level as the initial units, in the region of USD 53 Mill per vessel. In other dry news, clients of Kyma Ship Management are reported to have placed an order at Jinhai Heavy Industries for 1 option 1 x 64,000dwt Bulk carriers. The firm unit is expected to deliver in early 2014 and pricing is believed to lie in the region of USD 28 Million” said Clarkson in its report.
In a separate analysis, Piraeus-based shipbroker Golden Destiny said that “on the newbuilding market, the activity remains at low levels, presenting a total 19% decrease comparing to last week. Overall, the week closed with 17 fresh orders reported worldwide at a total deadweight of region 275,800 tons, while the total invested capital cannot be calculated since from the recorded orders, the contract price of just one has been revealed. Bulkcarriers are holding 29.4% of the units and 81% of the total dwt ordered and the offshore sector which was again active holds 41% of the reported orders. Comparing to the activity of similar week of 2010, the activity is down by 56%, when 39 vessels had been reported worldwide at a total deadweight of 2,789,400 tons. In 2010 bulkcarrier orders were holding a 64% and tankers a 25.6% of the total ordering activity” said Golden Destiny.
Including second hand vessel and demolition deals, the week ended with a total of 35 transactions said the shipbroker, a figure up by 52% from previous week and up by 6 % from a similar week in 2010, when 33 transactions had been reported and secondhand ship purchasing activity was 15% lower than the ordering business. Currently, the highest activity has been recorded in the secondhand market, by 53 % while it is interesting to note that this week the reported dwt that went for scrap is 7.7% higher than the ordered capacity. In the second hand market, Golden Destiny said that “for one more week the buying momentum was towards modern units, especially in the bulkcarrier and tanker sector. Tankers hold the lion share both in number of units changing hands but also in terms on the invested capital. Overall, 26 vessels reported to have changed hands this week at a total invested capital in the region of US$ 334.6 mil, with 8 transactions reported at undisclosed price terms. In terms of the reported number of transactions, the S&P activity has increased by 100% from last week’s activity, and down by 3% comparable with previous year’s weekly S&P activity when 29 vessels induced buyers’ interest with tankers grasping 44.8% of the total volume of S&P activity. In terms of invested capital, the tanker sector appears as the most overweight segment by attracting about 72.7% of the total amount of money invested and bulk carriers to follow with 12.3%” concluded Golden Destiny.
Newbuilding bulkers are steadily ordered by owners, in comparing to depressed newbuilding demands for tankers and boxship.
According to Clarksons, there are continued newbuilding inquiries for bulkers in various sizes in the market. Also, Chinese yards would keep scoring newbuilding contracts with low-price and of newly-developed fuel-efficient ship.
Meanwhile, Clarksons forecast South Korean major shipbuilders would concentrate on offshore special ship next year as well, adding a recent new order being placed at Daewoo Shipbuilding & Marine Engineering for two newbuilding subsea pipe layers from Odebrecht-Technip joint venture, totalling $500m.
Golden Destiny said that no newbuilding contract for tanker was disclosed last week and troubled shipping market slows down new order for standard commercial ship.
In containership sector, STX Offshore & Shipbuilding's 2+4 16,000-TEU are the only new order that came in the fore last week.
Meanwhile, as offshore energy development project increases, shipbuilders in Norway, China and the US are securing a steady new order for offshore support vessels, such as AHTS, PSV, etc.
Dry bulk carriers have continued to be the “weapon of choice” for ship owners around the world, as demand for newbuildings remained on the high during the course of the past week. According to the latest weekly report from Clarkson Hellas, “the level of enquiry in the newbuilding market has continued to remain active this week with interest mainly focused in the Dry Bulk sector; and with the news in the shipping markets being dominated this week by the Chapter XI filing of General Maritime this is perhaps unsurprising, especially when combined with the continued challenging environment within which many tanker owners continue to operate in, that short term interest in tanker newbuildings remains a little subdued. As reported last week, there was a spate of orders placed within China for various sized dry bulk vessels and we continue to see newbuilding opportunities within the Dry Bulk market generating interest amongst owners. The combination of the newer efficient designs and attractive pricing are keeping interest levels high and we expect further business to be concluded in this sector over the coming weeks.
That being said however, there have been no reported dry bulk orders this week and instead we have seen a return to the pattern of earlier in the year with offshore and containership orders being contracted. DSME have this week signed their long discussed deal with the Odebrecht-Technip jointventure for a pair of Subsea pipe-laying support vessels. These have been penned at a reported price of circa USD 500 Mill in total, with deliveries scheduled from 2H 2014. This order continues to highlight the importance of the offshore sector to the major Korean yards and reinforces the view that they will increasingly look to strengthen their position in these specialised sectors as they look towards an uncertain 2012 for the more standard commercial vessel types” said Clarksons.
On a similar mood, Piraeus-based shipbroker Golden Destiny stated that for the second consecutive week, no business has been revealed in the tanker and container vessels segments, with special projects grasping 69% of the total volume of ordering activity. “In the bulk carrier segment, some activity has been revealed in the handysize segment by an undisclosed owner in a Korean yard, while a notable order has been reported in the capesize segment by a Singapore player, The-Hu, in a Chinese yard at a price region $53 mil with delivery in 2013. The significant slowdown of newbuilding business, during the last two weeks, gives positive signals in the already distressed vessels’ supply picture and brings renewed hopes that the market uncertainty seems to have refrained significantly the ordering momentum.
Overall, the week closed with 16 fresh orders reported worldwide at a total deadweight of 285,000 tons, posting a 100 % week-onweek rise, while is down by 79% from similar week’s closing in 2010, when 28 vessels had been reported worldwide at a total deadweight of 1,228,200 tons. Bulk carriers are holding only 18.7% of this week’s newbuilding business compared with a 39% share a year ago. The total amount invested for newbuilding units is difficult to be estimated as 69% of this week’s newbuilding business has been reported at an undisclosed contract price. The amount invested in the bulk carrier segment is region $103mil, when last week was $144 mil for six newbuilding orders” said Golden Destiny.
Meanwhile, in a recent speech during a shipping conference in Athens, BIMCO’s chief shipping analyst, Peter Sand, said that “with the yards being eager to fill their order books, newbuilding prices are likely to fall further, most certainly tempting some owners to place new contracts. But this would merely protract the oversupply situation further. The shipyards on the other hand have a responsibility too and they need to consider other business options seen; with the youngest world fleet ever, building yet more new ships merely to fill yard capacity is simply not a sustainable option for shipping industry as a whole. If newbuilding yards are not closed down to a large extent, the surplus overcapacity gap should rather be used for purposes like retro-fitting of energy-efficiency-improving equipment, scrubbers reducing SOx emissions, repair facilities or a place for green recycling of over-aged tonnage. Alternatively, using the yard facilities for manufacturing e.g. wind mills or large steel structures for roads or buildings might be considered” said Sand.
He went on to mention that “during 2007, a record of 93.6 million CGT was contracted, topping-off an only one-year-old record of 67.8 million CGT in 2006. The break of the crisis resulted in just 15.8 million CGT being contracted in 2009. The industry need to concentrate on fleet replacement, bringing old tonnage to recycling as new ships are delivered. It is certainly not the right time for speculative and asset playing activities in respect of contracting for new ships. The contracting level in 2011 year-to-date provides some optimism as owners appear to be abstaining from another round of excessive contracting” he concluded.