David Jordan, general manager Clarksons Research, for Clarkson Platou Asia told a UK Defence Club seminar in Singapore on Tuesday that shipyards were facing declining global order coverage.
“What we’re dealing with the newbuilding market at the moment is this perfect storm. We’ve got the freight market being weak, we’ve had this over ordering in 2013 driven by the involvement of private equity and this move towards eco-tonnage, and then at the end of 2015 we have NOx Tier III obligations and financing conditions,” Jordan said.
“We’re really starting to see levels of contracting and deliveries that we last saw in the late 1990’s/early 2000’s.”
Last year was described as one of the worst years for global contracting levels on record and while 2017 was 20 – 30% higher it was still very low with just 575 vessels ordered as of Monday this week.
On the deliveries front numbers have declined deeply from 4,300 in 2010 to 2,200 last year and around 1,200 to 1,300 this year.
As a result the global orderbook for shipyards is in sharp decline. “The orderbook has shrunk dramatically in the last couple of years. It currently stands at about 3,500 vessels, which equates to about 10% of the fleet. It’s shrunk about 20% since the start of the year and only about one third of the size it was at the height of the boom in December 2008,” Jordan said.
The number of yards taking at least one order in 2017 stands at 108, this compares to 700 in 2007, and around 300 in 2012/2013.
With sharply declining orderbook global yard coverage has continued to decline to around 2.5 years across all yards. Most buoyant are European yards with 4.5 years coverage, primarily from cruise ship newbuild orders, Chinese and Japanese yards with around 2.3 years coverage, and worst hit Korean shipbuilders with just 1.2 – 1.3 years coverage.
The difficult situation for yards means that global shipbuilding capacity has declined by 30% since the peak to 46m gt.
“Looking ahead towards the end of the decade we are looking at declines of around 20% and the majority of this decline will be at Korean yards. In China capacity is expected to fall as well,” Jordan concluded.
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