London: As much as 10% of today's combined capesize/panamax orderbook, and up to 20% of the handysize book, including supramax units, may not be built, according to a recent study on the supply and outlook for dry bulk tonnage by investment bank Lazard. Explaining the basis for these assumptions in a webcast interview with Norwegian shipping paper Tradewinds, analyst Urs Dur says the smaller sizes are more vulnerable that capes and panamax because a greater volume of such ships have been nominally contracted at "greenfield" yards, many of which are in Asia, and on a speculative basis.
The bank believes that even assuming 7% annual compound growth in tonne miles, shipbuilding supply will exceed demand from the second half of 2009 until at least 2011. It warns investors not to count on 30-40% of orders not being delivered, as some have suggested. More cautious in the interview than in the study, Dur says 5% of the dry bulk orderbook overall may not get built whilst another 5% could be severely distressed, perhaps by long delivery delays, not being built to specification or by facing financing issues.
Dur believes that less experienced shipbuilders, including both greenfield and non-greenfield yards, could face solvency issues whilst some owners, placing speculative orders for dry bulk tonnage, may run into credit problems. Investors should be careful, therefore, to invest in companies that have longer-term strategies, he says. [26/5/08]
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