The first half of 2012 has seen a decrease in global newbuilding investment by over 50%, year-on-year.
During the same period, Korean shipbuilders contracted around $14bn, against Chinese having inked $6bn. However, Korean new order lower by 63%, comparing with $38.2bn contracted in H1 2011.
According to Clarksons on July 5, overall 485 vessels of a cumulative 8.77m have been contracted in the first six months of the year.
Korean shipyards contracted 114 vessels of a combined 3.31m cgt, totalling $14bn, during the same period, followed by Chinese having singed 182 vessels of a cumulative 3.03m cgt, $6bn.
In June, Korea only booked seven orders of a cumulative 210,000 cgt, totalling $332m, recorded monthly lowest this year in value terms. On the other hand, China penned its monthly largest orders, 36 vessels of a combined 872,000 cgt, $1.88bn and took back the first place from Korea.
Overall 913 vessels of a cumulative 20.8m cgt have been invested in the first six months, down by 58% on the same period of 2011.
Korean shipbuilders, comparing with 251 vessels of 9.63m cgt, totalling $38.2bn, contracted in H1 2011, have seen around 63% drop in value terms. Also, China's overall new order for H1 2012 has been cut in more than half from the same period last year with record of $12.2bn (344 vessels, 6.58m cgt).
Global orderbook is rapidly declining as well. As of July 4, global orderbook stood at 104.7m cgt (5,142 vessels), comparing with 123.2m cgt (6,313 vessels) in early January.
Korean shipyards secured 30.86m cgt (931) order on the book, down by 6.66m cgt (235) from early of this year.
Chinese shipbuilders' backlog stood at 37.13m cgt (2,091), down by 9.7m cgt (544).
LNG-FPSO sector is getting new impetus as Korean shipyards are ready to "realize" (build) the cutting-edge concept.
Also, prospect is that demand for shuttle carriers and offshore support vessels to service the floating production units would be rising.
Petronas will build a 1.2-million-tonnes-per-annum (mtpa)-capacity FLNG at Daewoo Shipbuilding & Marine Engineering while Samsung Heavy Industries is being readied for the construction of Shell’s monster FLNG unit, for which steel cutting is expected to start this autumn.
The two FLNG projects sanctioned to date will not be the last. Petronas is already well into the contractor selection phase for its second floater and Inpex, working with partner Shell, is progressing its Abadi FLNG project off Indonesia.
Many other FLNG projects are being studied and developed in various stages worldwide.
Moreover, FLNG projects will need LNG carriers to serve them and act as shuttle vessels between the floater and the receiving facilities.
Despite continued concern over Eurozone crisis, with slowly reducing over-tonnage commercialship, newbuilding investment from European countries are expected begun in the second half of 2012.
Moreover, if oil price can be maintained at some $90 (on WTS basis), ordering for offshore production/drilling facilities are to continue until next year.
Analyst Jun Jae-Chun, Daishin Securities of South Korea forecast that shipping finances during H1 was particularly drastic, however, it will slowly recover after the end of June, when is due date for European banks' recapitalization.
Jun analyzed that Korea Big3 shipbuilders' average new order for 2012 and 2013 is more than $11.5bn, 2013 will see 47% more commercial ship order than 2012 and 12% more orders, in value terms, for Samsung Heavy Industries, Hyundai HI and Daewoo Shipbuilding & Marine Engineering. Also, Big3's new order for offshore production facility is expected to be around $13.6bn this year, up by 94% from 2011, and $15.6bn in 2013.
Analyst Oh Sung-Kwon of Kyobo Securities said, "International oil price, which recently dropped to $90, seems to rise up to $100 in the long term, which would be favorable to shipbuilding industries with increasing investment in offshore drilling/production facility."
He added, "In July, Big3 will bring good news, starting with Angolan project, followed by offshore projects in Nigeria, Vietnam, etc.," and forecast, "Amid unstable commercial ship market, Samsung and Daewoo will have no difficulties in achieving yearly new order targets, with majority of offshore plant contracted."
Also, analyst Moon Jung-Up, Daishin Securities analyzed, "Depressed commercial ship newbuilding market will start to slowly recover in H2."
Orders won by major South Korean shipbuilders halved in the first six months of the year from a year ago mainly due to the sluggish market in the midst of the European financial crisis, industry sources said Sunday.
The country's three biggest shipbuilders - Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. - clinched orders worth a combined US$17.3 billion during the January-June period, down 50.8 percent from a year earlier.
Hyundai Heavy Industries, last year's market leader, secured a mere $4.93 billion in orders over the six-month period, while Samsung Heavy landed shipbuilding deals worth $6.5 billion and Daewoo Shipbuilding won $5.87 billion worth of contracts, they added.
The sharp decline in orders is mainly attributable to weakened demand in Europe, hit hard by severe debt problems, sources said.
The top three companies' orders from European buyers accounted for 57.5 percent of their total orders last year, but the rate fell to 39.9 percent in the first half of this year.
"A drop in orders may affect our sales in coming years," said an official of a local shipbuilding company. "We will strive to win orders to build high value-added ships in the second half."
Amid new orders having plummeted by 50% compared to last year as a total of 373 new orders of a combined 16.5m dwt have been placed during the first five months of 2012, offshore-related special vessels, gas carriers and MR product tankers have been outstanding, as overall 101 offshore newbuildings, majority of them being offshore supply vessels, 45 gas carriers (14 LNG carriers and 31 LPG carriers) and 41 MR PCs having been ordered.
According to Clarkson Research, during January-May, 115 bulkers have been contracted - 48 panamaxes, 32 handysizes, 24 handymaxes, 11 capesizes, etc.
Of a total of 70 tankers contracted during the same period, most of them were MR PCs with 41 contracts being placed, followed by VLCC (seven inked), aframax (seven), etc.
Only nine boxship contracts have been placed by May, eight of them are small-size vessel under 2,200 teu.
Meanwhile, overall, $22.3bn has been invested in new ship orders in the first five months of the year, which represents a year-on-year decline of 47%.
$10.9bn has been invested in offshore sector, $3.6bn in gas carrier ($2.7bn in LNG carrier and $900m in LPG carrier).
Investment in the tanker sector only remained at $3bn, while majority of tanker investment has been in the MR product sector ($2.8bn). A total of $3.2bn and $300m have been invested in bulker and containership.
As for new order by shipyard country, South Korea placed the 1st with $11.7bn fresh order intakes, followed by China ($3.6n), Brazil ($1.9bn), Norway ($1.4bn), Japan ($1.3bn) and Germany ($900m), etc.
In case of investment by owner country, Norway took the first place with $5.4bn investment, followed by the US ($3bn), Japan ($2.3bn), Greece ($2.1bn), Brazil ($1.7bn) and China ($1bn).
Last month has seen a month-on-month increase by 11.2% in new orders to 1.23m cgt, however, compared to May 2011, new order plummeted by 62% last month, which represents a current newbuilding market still under depression.
According to Clarkson Research, in the first four months this year, only a total of 5.2m cgt were invested, the lowest record in Clarkson statistics.
Chinese shipyards contracted 0.66m cgt in May with lower pricing, accounting for 53.5% of overall contract, while South Korean and Japanese shipbuilders won 0.32m cgt and 0.2m cgt, taking 26.2% and 16.7%, respectively.
However, due to low-price orders, China booked less orders than Korea in value terms, even after contracting two times larger tonnage. During the same month, Korea bagged the largest order totalling $1.05bn, followed by China ($967m) and Japan ($371m).
Also, during January-May, Korea won a cumulative orders of 2.84m cgt, ahead of China with a combined of 2.08m cgt.
Chinese shipyards are placed in a situation that they need to lower the price in order to secure new orders, as being fallen behind of Korea and Japan in technology or ship quality, amid some warning China's reckless pricing competition.
CSSC-affiliated Guangzhou Shipyard International (GSI)'s General Manager Han Guang-De calls for resistance to price wars between yards to protect margins.
And he pointed out that as Korean shipyards currently offering lower price, China's global price competitiveness is getting weaker.
Last month, Korea contracted for commercial ship, despite a weak market, particularly MR tanker, LNG/LPG carrier, etc., as well as specialized vessels like drillship, livestock carrier, etc.
During the same month, China still won orders for mainly bulkers, while small boxships, aframax tankers, and VLGCs were also contracted, while Japan inked for VLCCs and small-and-medium size bulkers.
Meanwhile, in case of semi-submersible drilling rig segment, which is not included in Clarkson data, South Korea's Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Hyundai Samho HI contracted for two units, one and one each. And UAE's Lamprell and Singapore's Sembcorp contracted one jack-up rig each.
China's Jiangsu Rongsheng Heavy Industries has first made a move into an offshore rig sector, by having contracted one semi-submersible barge rig and one tender rig from Singaporean owner PrimePoint in May.
Shipyards around the world were scrambling for newbuilding orders during these past few days, when the international focus of attention was Hellas, hosting the biannual international fair of Posidonia, which traditionally draws most major shipyards. According to the latest report from Clarkson Hellas, "the newbuilding market has been a little quiet this week with both owners and yards alike journeying to Athens for this year’s Posidonia. Historically the event has offered an excellent opportunity for both the yards and owners to meet and finalise discussions and has, in the past, often led to numerous contracts being signed. However, in a pattern reminiscent of 2012 so far, the volume of activity has certainly been lower than previous years, though we have still seen orders placed in the Tanker, Dry and Gas sectors.
With the summer holiday period now looming on the not too distant horizon, attention will begin to shift to how the market will evolve in the second half of the year. Within China especially, the excess supply of capacity along with the continued limited demand, will most likely sustain the recent downward pressure on pricing. The hope must remain for the yards that not only will the global economy begin to pick up again, but also, on a purely shipping basis, that the extensive design development work carried out throughout 2012 will begin to reap benefits as the year progresses" said Clarkson Hellas.
In a similar report, Piraeus-based shipbroker Golden Destiny mentioned that "shipyards are struggling to survive with South Korean shipbuilders being in the frontline by winning the biggest share of newbuilding activity this year among Japanese and Chinese yards. IHS Fairplay data showed that South Korean shipbuilders won 4,73 million dwt of new orders in the first quarter of 2012, while Chinese builders had 4,35 million dwt and Japanese 2,8 million dwt. In Europe, Germany’s P+S Werften, one of the big few yards left in the country, is under pressure to agree on EUR 110million ($137,5 million) in cost cuts and debt relief to assure another EUR 182 million from the federal and state budgets in an emergency aid. Furthermore, STX France has extended short time working during summer, as the unit of South Korea’s STX is facing falling volume of business. Union leaders at the French yard said that they have been told that existing short time working will be prolonged this summer with 12,700 days of lay-off planned for July and August. From the end of May, newbuilding business keeps its low track with no more than 10 fresh contracts being reported in the last two weeks as the imbalance in the freight markets persists and the oversupply issue hunters the prosperity of investors" said Golden Destiny.
It continued by mentioning that "in the dry bulk carrier sector, the activity remains subdued as the BDI hovers again below the psychological barrier of 1,000 points mark, while some new deals came to light in the tanker and gas tanker segment. Offshore newbuilding projects are still in the preference of investors with Daewoo Shipbuilding and Marine Engineering of South Korea receiving its first order for LNG FPSO at a value of 909.8Bn won ($777 million). The project will be built for Malaysia’s Petronas for delivery in June 2015 and is about 300m in length, 60m in width and can store up to 180,000 cubic meters of LNG 20,000 cubic meters of liquefied carbonized hydrogen condesates".
Overall, the week closed with 14 fresh orders reported worldwide at a total deadweight of 292,000 tons, posting a 100% week-on-week increase due to a 75% increase in the offshore newbuilding activity. This week’s total newbuilding business is down by 30% from similar week’s closing in 2011, when 20 fresh orders had been reported and containers were grasping the lion share by recording 6 newbuilding contracts. In terms of invested capital, the total amount of money invested is estimated at region $1,255 billion with 57% of the total number of orders being reported at an undisclosed contract price. The offshore segment appears the most overweight by holding 80% of this week’s total amount of money invested due to the high valued LNG FPSO contract won by DSME of South Korea.
Golden Destiny added that "in the tanker segment, Norwegian Frontline following its previous order placed in the aframax segment for four units of 115,000dwt in Chinese yard, Guangzhou Longxue, it has now confirmed a LPG contract for up to six 82,000 cu.m units from Jiangnan Shipyard Group at a price below $70 mil each. Frontline’s newbuilding investments are being justified by its completion of a $210 million private placement with an agreement to acquire a total of 16 firm newbuilding contracts and eight fixed price optional contracts in the crude and product markets. In the MR tanker sector, private equity Alterna Capital of USA has doubled its existing orderbook by exercising its option from an earlier order placed in April for two more 50,000dwt units at STX Jinhae for delivery in 2014.
In the container segment, newbuilding activity has been dwindled significantly from last year’s levels with Japanese shipbuilders facing strong competition from Chinese and South Korean yards. An interesting box ship alliance was disclosed this week among Japanese shipbuilders Mitsubish HI and Imabari Shipbuilding to collaborate on box ship technology. The groups said: “Mitsubish HI and Imabari Shipbuilding will become capable of flexibly accommodating bulk orders, construction of multiple ships of the same design, thus strengthening and expanding their respective business for high value added container carriers.” Both yards believe that their strategy is viable because lines are increasingly moving towards ultra large container ships that offer lower slot costs. The three year collaboration agreement encompasses all box carriers of all sizes and propulsion systems. The yards will consider the appropriate ship type, propulsion system and other technological features. In the liner segment, state-owned China’s Huanghai Shipbuilding is setting a shipowing arm and sources suggest that is going to order a 30,000dwt multipurpose vessel at a price in the region of $30 mil for its new outfit. Furthermore, China’s Jinhai Heavy Industries is said to have won an order for four 28,000 dwt multipurpose units from a domestic owner for delivery in 2014 at an undisclosed contract price, while the order is at the stage of letter of intent" concluded Golden Destiny.
In May 2012, overall 29 offshore-related vessels/units were invested - four semi-submersible drilling rigs, two drillships, three jack-up rigs, four FPSO conversion and 13+3 offshore supply vessels.
According to Eworldship, during the same month, there were orders for eight boxships, 20+16 gas carriers, 37+6 bulkers, 27+2 tankers, 4+2 PCTCs, 10+10 livestock carriers, 10+1 other vessels.
South Korea, China and Japan inked most of the orders. Particularly, offshore facilities and high-value vessels took the largest proportion of Korean new orders.
Chinese shipbuilders' orders still concentrated on bulkers and they have started to work hard to bag newbuilding high-value vessels. In May, China penned 31 bulkers of a total of 43 vessels ordered in the world, while it contracted three drilling platforms, six gas carriers, four tankers.
Meanwhile, Korea mostly contracted for offshore-related or high-value vessels, during the same month. Of total of 29 orders, 12+3 vessels/units are from offshore segment, mostly high-value drilling rigs. Also, Korea won 30 gas carriers, 16 tankers, 4+2 PCTCs and 10+10 livestock carriers.
Japanese shipyards seem to eye on eco-friendly bulkers and tankers, rather than offshore segment. Japan sealed orders.
According to Clarksons on June 7, Chinese shipbuilders contracted 40 vessels of a cumulative 661,000 cgt in May, while South Korean yards booked 18 vessels of a combined 324,000 cgt during the same month.
However, Korean shipyards contracted around $1.048bn last month, exceeding China's $967m.
From January to May, 2012, Korean shipbuilders have contracted a cumulative of 2.84m cgt (99 vessels), $11.7bn, while Chinese shipyards have inked 2.08m cgt (142 ships), $3.6bn.
Meanwhile, during the five-month period, as for newbuilding delivery, Korea recorded 7.32m cgt (241 vessels) and China 7.61m cgt (437).
As at the end of May, China secured 38.72m-cgt orders on the book and Korea's backlog stood at 31.73m cgt but the difference between the two countries are getting smaller.
As is the case during this time of year, the biannual international fair of Posidonia is expected to draw the crowds and help conclude many newbuilding deals which have been in the making for the past few weeks. Offering the opportunity of direct meeting between ship owners from the world's largest ship owning nation (Hellas) and shipyards from all around the world, Posidonia has always been the largest gathering of the international shipping community.
As expected prior to this event, things tend to slow down in the sale and purchase and newbuilding markets. In its latest Lion Shipbrokers noted that owners and brokers alike are enjoying the pleasure of networking in Posidonia's social events. "On the dry bulk side, we have few fresh candidates coming from Japan market, attracting dozen of inspections. We understand that owners of supramax MIMOSA (53K BLT 2007/JAPAN CR 4X30T) have invited & received offers on the low side this week and are now inviting for more inspections. In addition to our last week’s report, we understand that modern panamax sisters XIAO XIAO & XIAO YU (76K BLT SEP & NOV 2011 HUDONG/CHINA) have changed hands en bloc within China for $24 mill each including 2 years time charter back at a rate of $17,000 per day. Last week’s reported sale of geared panamax FEGGITES (69K BLT 1989 HYUNDAI/S.KOREA CR 4X30T SS DUE 02/2013, LDT 10600) for $5.7-5.85 mill from Chinese buyers have fallen through, as vessel is again circulated in the market for sale. Korean controlled older handymax OCEAN TRADER (40K BLT 1987/S. KOREA CR 4X25T LDT 8968) has been snapped by Chinese buyers who waived inspection and paid $4.2-4.3 mill, having a scrap price of $3.6 mill, indicating further softening of 80’s built tonnage prices. Syrian buyers have acquired older handy NIKOLAOS (34.5K BLT 1984/JAPAN CR 4X25T LDT 6596) for $3.2 mill with dry-dock surveys due, basis prompt delivery at Iskenderun-Turkey. Further to our last report, we picked up that handy APEX BULKER (33K BLT 2003 KANDA/JAPAN CR 4X30T) has changed hands within Taiwan for the firm price of $14.5 mill. We heard that 10-year old handy AZURITE OCEAN (32K BLT 2002 HAKODATE/JAPAN) has been inspected by 10 parties, half of them being Greeks" said Lion Shipbrokers.
It went on to add that "in the tanker segment, MR resale GAN-TREASURE (EX H 2176, 51K BLT 2012 HYUNDAI MIPO/S. KOREA) has gone to Greek buyers for $31 mill. In addition to last week acquisition of MR FREJA FIONIA (54K BLT 2007 SHIN KURUSHIMA/JAPAN PUMP-ROOM) for $21.5 mill, clients of Thenamaris have also purchased aframax RUBY RIVER (107K BLT 2004 KOYO/JAPAN) for $21.5-22 mill. Russian buyers have committed en bloc chemical tanker sisters WEDERSTERN & ODERSTERN (11K BLT 1992/GERMANY IMO 2 COATED/COILED) for $4.5 mill each. Great Eastern of India have disposed their older LPG unit JAG VIRAJ (17.5K BLT 1991 HYUNDAI/S. KOREA) for $9.5 mill to clients of Negmar of Turkey" mentioned the shipbroker in its report.
"On the container/mpp front, Greek buyers have paid the firm price of $5 mill for cellular & geared BV 1700 type containership MARLENE S (23K BLT 1995 MTW/GERMANY 1684 TEUS CR 3X40T LDT 7000) basis dry-docking survey freshly passed. Hi-spec, super-ice class MPP unit ATLASGRACHT (12K BLT 1991/HOLLAND 1 BOX HO/3 HA 679 TEUS) has gone to undisclosed buyers for the strong level of $7.5 mill" added Lion.
Finally, "in the demolition sector, the situation in subcontinent is still unstable and rates continue being weak due to overcapacity of breaking yards & lack of end-users. This week’s prices are ranging between $405-415 for bulkers, at $430 for tankers and between $415-418 for container vessels. China was not active this week while Turkey was affected negatively paying $330 for bulkers & $340 for tankers and containers" the report concluded.