Newbuilding orders, which to many involved in the shipping industry, are the main reason of today's low freight rates and subsequent financial problems that most ship owners are faced with since the start of 2012, appear to have steadied themselves over the course of the past week. According to the latest weekly report from Clarkson Hellas, "enquiries continue across a variety of sectors, with Dry Bulk and Containers in particular continuing to generate interest. Despite this, ordering this week has not been focused in these sectors, with the highlight of the week being another VLCC Tanker order being placed in China, only the second order of its kind this year" Clarkson said.
It added that "the past few weeks have seen a number of earning announcements being released by the Shipyards and these give an interesting insight into the state of the market. Given the pattern of ordering over the past few 18 months and its shift away from the conventional sectors, the results are perhaps not too surprising. In Korea, yards such as Samsung have announced a healthy increase in earnings and revenue, which has been supported by the success of their offshore and LNG product mix. In contrast, results from the publicly listed groups in China and some of those in Japan have been less positive, with revenues showing a decline. With the historical focus of these yards being on the Dry Bulk and other conventional markets, this really does highlight the challenging environment faced by these yards in the current climate.
To contest this, the shipyards have worked hard on their offerings over the past 18 months, not only in the form of new efficient designs, which with the recent Scorpio announcement over the positive performance of their new MR newbuildings ‐ is certainly looking like a positive step, but also in broadening their product ranges to help mitigate against specific sector demand fluctuations. With the market likely to remain challenging in the short term, it will interesting to see how successful these measures will be" Clarkson concluded.
Meanwhile, in terms of the weeks reported business; In Tankers, Dalian Ocean Shipping Company (COSCO Dalian) are reported to have placed an order with GSI (to be constructed at the Guangzhou Longxue) for 3 firm VLCC Tankers of approx 300,000dwt, with options for a further 2 units. These vessels will deliver from 2015 onwards, specific pricing has not been disclosed, but as brokers believe pricing lies in the mid USD 80s Mill. In Dry, Fednav are reported to have placed an order at Universal Shipbuilding for 1 x 25,000dwt handysized ice breaking bulker. The Polar Class 4 vessel will be built at Universal’s Tsu shipyard with the reported delivery scheduled for End 2013. No pricing has been disclosed for this bespoke vessel" the report said.
Of course, the main "weapon" in the ship owners' hands is the scrapping of older carriers, which helps the market absorb the influx of new tonnage. During the past week, according to Lion Shipbrokers, " Bangladesh and Pakistan markets are paying firm levels of $380-$410 for bulkers, $390-$430 for tankers & $385-$420 for container vessels. India remains at same levels as last week paying $410-420 for bulkers, $425-$435 for tankers and $420-$430 for containers. China has firmed paying $330-$340 for bulkers, $345-$355 for tankers, $340-$350 for containers. Turkish market is improved paying $285-$295 for bulker, $300-$310 for tankers and $295-$300 for containers" it said.
Similarly, according to Athenian Shipbrokers' comment on demolition activity, "whether the softening of market sentiment during last week in India can be attributed to the Diwali holidays or simply to cash Buyers finally succumbing to the law of demand alternatives in the Sub Continent, albeit at slightly lower rates than the ones quoted during the ‘surge’ of last 2-3 weeks. Bangladesh is showing no signs of recovery, while China seems to have gained once more market confidence as local breakers persist in offering attractive prices for Far Eastern based tonnage.
Overall 79 vessels (excluding five drillships) of a combined 3.2m dwt were delivered in September, up by 7.7% from 86 vessels of a cumulative 2.97m dwt, on the same month of last year.
With largely increased order for ultra-large containership, a total of 10 vessels, 1.1m dwt were contracted during the last month, reported Clarkson.
On the contrary, bulker and tanker segments made poor results, with six vessels of 475,000 dwt and six vessels of 440,000 dwt contracted, respectively.
Three major commercial ships took around 63% of overall new order, in dwt terms.
Chinese shipbuilders won 60% of global new order by having contracted 34 vessels of a combined 1.917m dwt in September, increased by 81% year-on-year. Korean shipbuilders made up 26% of global shares with 20 orders (five drillships excluded) of a cumulative 828,000 dwt, up by 24% y-o-y, while Japanese inked three vessels of a combined 229,000 dwt, plummeted by 73%, accounting for 7.2% shares.
During the last month, global newbuilding delivery declined by 32.5% y-o-y to 161 vessels of 12.01m dwt and three major ship types took up 98.6% of total delivery.
As for delivery by shipbuilding countries, China saw 9.6% decrease y-o-y to 67 vessels of 4.74m dwt. 42 vessels of 4.4m dwt, down by 5.2%, were delivered from Korean shipyard, while 35 vessels of 2.54m dwt, decreased by 35.5%, from Japanese.
China, Korea and Japan accounted for 39.5%, 36.6% and 21.1% of global newbuilding delivery, each.
Meanwhile, newbuilding orderbook in the world stood at 4,740 vessels of a combined 274.08m dwt, now. Chinese shipyards sit on 1,900 orders of 115.83m dwt, while Korean and Japanese secure 851 vessels of 73.43m dwt and 765 vessels of 58.48m dwt each. China, Korea and Japan took up 42.3%, 26.8% and 21.3% of global backlog, respectively.
The first week after the National Day holiday witnesses a surge of new orders both at home and abroad. Totally 51 vessels were ordered globally in the week, growing by 143% against the week before the holiday.
In last week, Chinese shipyards totally won orders for 32 vessels, 30 vessels more than the week before National Day and accounting for 63% of the total globally. The 32 vessels include nine bulkers, eight boxships, seven drilling ships and four tankers, whose owner are mostly from Europe.
Orders for foreign shipbuilders keep the same level with the week before the holiday and come up to 19 vessels. Korea still keeps the dominant position in newbuilding market, especially in high-value-added ships. Japanese shipyards receive no order in the period.
The depression and overcapacity in shipping market has seen no improvement till now. Therefore, shipowners are still prudent in ordering new vessels.
New orders for mega containerships and large tankers are projected to surge in the fourth quarter of this year. The total value will be about $5.0bn and will greatly mitigate currently order drought.
It is reported that Chilean shipping company CSAV is currently planning to order 20 9,000TEU or 10,500TEU containerships (including 10 optional units). About 10 shipyards including the Korean Big 3 are vying for the order. The present newbuilding cost for 9,000TEU boxship is about $80.0-85.0m apiece and $90.0-95.0m apiece for 10,000TEU unit. The total value for the order is up to $2.0bn.
At the same time, the Middle East shipowner UASC is in negotiation with Korean shipyards for the construction of ten 18,000TEU or 20,000TEU containerships. The total value is estimated at $1.5bn.
Besides, Taiwan-based YML is likely to order five 14,000-16,000TEU boxships at Korean shipyards by the end of the year.
In the tanker sector, UK BP Shipping is ready to order ten Aframax tankers and five Suezmax tankers in the fourth quarter. Korean builder Samsung Heavy Industry and STX is in intense competition for the project.
Meanwhile, Kuwait state-owned company KOTC is in negotiation for four MR tankers and three VLGCs at present.
Shipowners are likely to welcome a new order surge in the fourth quarter.
Newbuilding order seems to rebound around the world. According to Mysteel.com, during the third week of this month, a total of 29 newbuildings were contracted, up by 16 ships from previous week.
Chinese shipyards inked 13 vessels, up from 10 ships in the second week - four bulkers were booked by German owner, Dalian Shipbuilding Industry Co contracted four drillships (optional three ships included) from Norshore, etc.
Korean shipbuilders penned overall 12 vessels, while Japanese only won one bulker.
Meanwhile, some of marine thick-plate prices made in China also turned around coupled with increasing newbuilding contracts.
Eight major cities in China all saw increases in prices. In case of 20mm thick plate, price rose by CNY 50-60 ($8-9.5) week-on-week in Shanghai, Jinan, Ningbo and Tianjin.
Thick-plate prices slightly increases recently, however, steel mill industries consider that upturn in prices is limited as domestic shipbuilding industries are still struggling over market depression.
Global shipbuilders saw newbuilding orders fall to half, compared to a year ago, Nomura says.
In August new ship orders totalled 1.4m cgt worldwide, falling 51% year-on-year, the Japanese investment bank says.
Containership orders saw the largest decrease, down by 82% on a year ago.
Nomura said there were no LNG carrier newbuilding orders last month.
A total of 821 vessels of a cumulative 16.76m gt were contracted in the world, during the first six months of 2012, which declined by 47% year-on-year, in GT terms.
According to IHS, the first quarter saw 9.9m gt orders contracted while Q2 slightly declined to 6.9m gt.
During H1, Korean shipbuilders inked overall 108 vessels of a combined 5.78m gt, plummeted by 70% year-on-year Chinese booked 217 vessels of a cumulative 4.98m gt, dropped by 80%. On the other hand, Japanese bagged 169 vessels of a combined 4.27m gt, 10% more from the same period of 2011.
A total of 2,037 vessels of a cumulative 60.59m gt were delivered in the world during the first half of the year, grew by 13% year-on-year.
As of the end of June, global newbuilding orderbook stood at 6,210 vessels of a combined 185.9m gt, first stayed below 200m gt over the past six years.
During the first half, Chinese shipbuilders constructed 883 vessels of a cumulative 24.53m gt, 20% more than those built during the same period of 2011. Korean and Japanese each completed construction of 300 vessels of a combined 20.91m gt and 338 vessels of a cumulative 10.95m gt.
Also, a total of 97 vessels of a combined 2.59m gt were cancelled during H1, 2012.
Korean shipbuilding industries' new order for August recorded the lowest in 2012.
In a recent report from Clarkson, Korean shipbuilders only contracted six newbuilding Medium-range product carriers of a cumulative 0.15m cgt ($202m) in the last month, which represents the lowest monthly order over the last three years.
Overall 71 vessels of a combined 1.39m cgt were booked in August and Chinese shipyards accounted for 50% by having inked 35 vessels of a cumulative 0.7m cgt ($1.144bn).
Japanese contracted 13 vessels of a combined 0.2m cgt ($261m), more than Korean.
As for overall new orders for the first eight months, Korea booked 154 vessels of a combined 4.79m cgt ($16.416bn), while China and Japan penned 260 vessels of a cumulative 4.26m cgt ($8.849bn) and 77 vessels of a combined 1.49m cgt ($2.586bn) each.
In value terms, Korea's new order stands twice as much as that of China, since Korean shipbuilders contracted high-value vessels/units, such as LNG/LPG carrier, product carrier, PCTC, drillship, etc.
Meanwhile, global orderbook recently shrank up to the lowest point after around May 2005. Backlog fell under 100m cgt as of the end of July for the last seven years and at the end of August, it remained at 96.36m cgt (4,795 vessels).
China still at the top with 34.97m-cgt (1,935) orders on the book, representing 36.3% of orderbook in the world, followed by Korea with 30.18m-cgt (876) and Japan with 15.36m cgt (760), each accounting for 31.3% and 15.9% shares.
The Clarkson Newbuilding Price Index also continues to drop to 127 points at the end of August, the lowest point since March 2004, from 128.5p at the end of July. Comparing with the boom period in August 2008 having marked 190p, it plummeted by 33%.
Most of segments see decreases in prices, for instance, 180,000-dwt capesize bulker is traded in $46.5m, 4,800-teu boxship fell to $45m, etc.
Analysts say that while rate, second-hand price, etc., are still depressed, newbuilding price won't be able to rebound for a while.
China's order intake could be lower than Japan's in 2012.
Sources in Japan said that in 2011, China's order intake took 29.2% of global orders, lower than Korea's 47.2%. Also, Chinese shipyards have contracted overall 10.74m dwt during the first six months of this year, down by 50.3% year-on-year.
An industry player predicted that Chinese shipbuilding industries' 2012 new order would be lower than Japanese' order intake and be down to world's third place.
Another official revealed that among around 1,600-some shipyards in China, about one third of them are going through management crisis and will inevitably face restructuring.
China has been aggressively involved in newbuilding sales with lower labor costs, but from 2010, over-supply issue emerged. Moreover, amid Eurozone crisis and new order drought, some forecast that not a few Chinese shipyards would soon go into bankruptcy.
It will still not be late to invest in shipbuilders after seeing record-low newbuilding orders.
Uhm Kyung-Ah, an analyst at Shinyoung Securities in Korea said, "I won't change 'Neutral' recommendation for shipbuilding industries. Recently shipbuilders' shares have made a sudden rise, boosted by expectation that Eurozone Risk will recover. However, market has not been substantially improved."
She added, "Also, owners and energy companies are slowing down investment as they are pressured by economic recovery, therefore, there won't be as many orders as prospected before. As a result, it is suggested that buyers postpone investment in shipbuilders' shares after shipyards hitting the lowest level of order."