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Korea is still the top shipbuilding nation in the world, but China is storming ahead, closing the gap at a fast pace. Photo: Rolf P Nilsson.
2007 – the year when record became norm
The world’s shipyards today have an order backlog that corresponds to almost half the size of the existing world merchant fleet. Last year, new vessels with a total deadweight of almost 80 million tons left building sites around the world and set out on their maiden voyages, and if you think this is impressive, just wait to 2010 when – based on the current order book – the shipbuilding output is expected to be almost the double, or 154.5 million tons, according to the London based brokering and analyst company Clarkson.
Last year, the world’s shipyards secured new orders with a total deadweight of 243.8 million tons, pushing the world order book to almost 510 million tonnes at the end of the year. If all those vessels will be delivered when said, the world merchant fleet will see an impressive growth during the next couple of years. Ships totalling 102.6 million tons of deadweight is planned for deliveries during this year, followed by a further 146.8 million tons in 2009. The rest – 260.5 million DWT – of the order book at year’s end is planned for deliveries in 2010 and beyond.
Measured in compensated gross tons (cgt) South Korea is still on top of the world’s shipbuilding league. Last year, the South Korean shipyard industry secured 73.2 million cgt in new orders according to Clarkson.
China storming ahead
But China is storming ahead on its route to become the largest shipbuilding nation in the world. The country’s shipyards received 32.3 million cgt in new orders, followed by Japan with 6.5 million cgt. Emerging shipbuilding nations in Asia continues to grow in the statistics.
Besides the three dominant Asian shipbuilding nations, smaller ones as Vietnam, Philippines, India and Taiwan received orders for a total of 4.5 million cgt last year.
More than half of the new orders in 2007 were for dry bulk carriers and when the order books were closed at the turn of the year, they contained bulk carriers in sizes above 10,000 DWT totalling 223.7 million DWT.
China was the leading receiver of dry bulk carrier orders last year, with more than half of the orders.
The value of the order book is estimated by Clarkson to USD 488 billion, or close to half of the value of the existing fleet.
Although the shipbuilding industry is enjoying its most sustainable boom ever, there are several question marks at the horizon.
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Ships totalling 102.6
million tons of deadweight
is planned for deliveries
during this year, followed
by a further 146.8 million
tons in 2009. |
Delays, cancellations and re-lets …
In perspective of the US generated financial turmoil, the almost inconceivable amount of financing needed has led to numerous speculations on whether we will se all those orders transformed into actual trading vessels in the near future. Most agree that shortage of financing will lead to delays, cancellations and re-lets, the question being in what extent. According to Clarkson, between half and two-thirds of the USD 488 billion still have to be financed. According to other estimates it could be up to three quarters.
Until now, shipyards have been able to cope with the surge in orders. Thanks to opening of new facilities and production efficiency measures, the shipyard industry has managed to keep the lead-time from contact to delivery to around three years.
An uncertainty is that several orders have been taken by yards that don’t exist today. SSG was recently told by a shipowner that he had to abandon plans to visit a Chinese shipyard. The reason was that neither the site nor the access road to the site existed. Still, the shipyard company claimed that they had secured some 30+ orders for the new site.
Capacity problems
The rapid expansion of the shipbuilding industry, primarily in Asia, has also lead to a shortage of skills and experience in the work force. Deliveries from equipment suppliers also seem to be an increasing problem. The order books of equipment manufacturers are over-brimmed and many companies are struggling with capacity problems at their production facilities and they are also facing an increasing shortage of skilled manpower.
Shipbuilding prices continued to soar during 2007, and prices for dry bulkers have increased by more than 200 per cent in the last five years. At the end of the year, tanker and dry bulk newbuildings were at an all time high.
Prices are driven by the current high demand for newbuildings and record-high time charter rates that enables shipowners to quickly amortise investments. The steel prices have also more than doubled since 2002.
You don’t have to be an Einstein to predict that newbuilding prices will fall. The questions are as always when and by how much. Demand will be pressed by massive deliveries from now and through 2010. In some sectors, high or even further increased steel prices short-term will also have a cooling effect on demand.
Increased yard capacity and decreased demand will lead to tougher competition in the shipyard industry, which will put further pressure on shipbuilding prices.
Deliveries are set to mount during 2009 and, if not before, prices will start to fall then, and according to several observers and analysts, the fall can be significant.
Latest update 19-03-2008 10:30
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