Shipbuilding market outlook H2 2024

In a five-part series mid-year we take stock of shipping markets in the first six months of the year and look ahead to the remainder of the 2024 with experts Maritime Strategies International (MSI).

In this final part of the series the Seatrade Maritime Podcast talks with Adam Kent, Managing Director of MSI, about the performance and outlook for the shipbuilding market.

You can listen to the full interview as a podcast in the player above

Newbuilding orders in H1

“Contracting ​during ​the ​first ​half ​of ​this ​year ​has ​come ​in ​at ​around ​50% ​of ​the ​total ​volumes ​that ​we ​saw ​during ​2023. ​So, ​the ​year ​started ​off ​on ​a ​positive ​footing,” Kent tells the podcast.

The biggest surge in ordering has been seen in the tanker sector driven by VLCCs and product tankers. Kent notes that the majority of these tanker orders, including VLCCs are now going to Chinese yards whereas 12 – 24 months they would have been most likely contracted at Korean yards.

The container sector which saw ordering tailing off towards the end of 2024 has staged an unexpected rebound. “But ​with ​the ​recent ​rate ​increases, ​we've ​seen ​a ​large ​number ​of ​​owners, ​both ​liners ​and ​non ​operating ​owners,  ​going ​back ​to ​the ​yards ​and ​ordering ​large ​volumes ​of ​container ​ships.  Danaos, ​Eastern ​Pacific, ​and ​Navios ​have ​all ​recently ​added ​to ​their ​order​books,” he says.

Another sector where MSI is seeing a lot of ordering activity this year is for VLGCs with ammonia capabilities where owners are looking to the future and the growth of the clean ammonia shipping market. There are now around 70 ammonia capable VLGCs on the orderbook

Newbuild delivery dates

If you are looking to order a newbuilding now Kent says a few yards are still squeezing in deliveries for 2026.  “But ​the ​majority ​of ​vessels ​that ​will ​be ​ordered ​in ​the ​second ​half ​of ​this ​year, ​will ​find ​a ​delivery ​date ​more ​likely ​in ​2027 ​and ​even ​into ​2028,” Kent says. But is also dependent on the owner and which yard they are ordering at.

Newbuild prices

A levelling off in pricing had been seen at the start of 2024. “But ​with ​the ​recent ​surge ​in ​orders ​for ​containers ​and ​tankers, ​we've ​seen ​new ​building ​prices ​sort ​of ​edge ​up ​a ​little ​bit ​further.”

New yard capacity and increased production

The increased newbuilding order activity of the last few years has seen shipbuilding yards become profitable again, but many remain cautious on expansion.

One strategy has been to reactive yards from the 2008 – 2013 that had been mothballed. These include STX Dalian which has returned as Hengli Heavy Industries, and now plans a $1.27 billion expansion, and Rongsheng Heavy Industries that also returned with new owners. Meanwhile since recording the episode private Chinese shipbuilder Yangzijiang Shipbuilding has also announced an expansion of its facilities.

“The ​other ​way ​that ​capacity ​can ​expand ​is ​to ​increase ​productivity. and ​I ​think ​this ​is ​something ​that ​the ​korean ​yards ​have ​struggled ​to ​do ​recently,” Kent explains. “Whereas ​China, ​on ​the ​other ​hand, ​we've ​seen ​output ​go ​through ​the ​roof ​during ​2024.”

Over the last four years average output by Chinese yards in the first half of the year has been around 10 million gt of vessels, in the first half of this output stood at 16 million gt. This can be partly accounted for by a slow down in the Chinese construction industry with workers plying their trade with shipbuilders instead boosting productivity.

Outlook for newbuild orders

“We expect ​to ​see ​new building ​carry ​on ​relatively ​strong ​this ​year, ​given ​the ​heightened ​earnings, but ​we ​do ​think ​as ​we ​​move ​across ​into ​2025, ​that ​we ​will ​start ​seeing ​a ​drop ​in ​some ​of the ​contracting,” Kent forecasts. Moving into 2025 some owners are expected to be put off by long lead times and high prices, as well as uncertainty around future fuels.

“So, ​we ​do ​expect, ​see ​contracting ​come ​down ​next ​year. ​We ​do ​expect ​deliveries ​to ​carry ​on ​that ​sort ​of ​a ​rampant ​rate ​that ​ultimately ​means ​that ​the ​yard ​forward ​cover ​will ​drop.”