Shipbuilders to Compete Neck and Neck for New Orders

Time: 2016-06-02 11:14
Major shipbuilding nations will be put to the test during 2016, as the shipbuilding industry enters one of the toughest years in recent history, according to IHS Maritime & Trade.

Competition between shipbuilding nations is expected to intensify as a consequence of diversification in other sectors.

Chinese yards seem to be destined to enter the technically complex areas of cruise vessels and liquefied natural gas (LNG) tankers, while some of the recent Japanese yards’ orders for container ships and tankers are expected to add to the build-up in competition.

Huge demand for shipping and commodities in the period after China’s accession to the World Trade Organization (WTO) that drove demand for cargo space appears to have come to an end, IHS Maritime & Trade principal analyst, Dalibor Gogic, said.

The tanker sector saw only a few ships booked in different sub-segments; for crude oil tankers, this is still in the single digits. A glut of orders in 2015, a lack of available finance, and a risk adverse mindset among shipowners appear to be affecting the orderbook numbers for this year. As in other trades, the numbers seem to coincide with the introduction of the IMO’s Tier III emission standards regulation in January. Product tankers follow a similar pattern with only 16 ordered in the Handysize segment and about 9 ordered in the MR (medium range) sector.

Dry bulk seems to be suffering badly as a result of the current prices. With the exception of 30 VLOCs booked this year, activity was unsurprisingly minimal. When taking into account the number of dry bulkers booked in the first five months of this year, this number is actually worse than in 2009 and 2012, Gogic said.

Another suffering vessel fleet sector at the moment is container ships. Like the dry bulk fleet, orders are at a record low and it remains to be seen if current market conditions will impede bookings for the rest of the year.

Specialized sectors, such as the LPG and LNG sector, have received a lot of attention from investors in the past few years. However, the combination of the large number of deliveries in recent years, delays in some projects, and low crude oil prices, which are typically used as a benchmark for LNG prices, has pushed freight returns for the spot market lower recently. So far this year, there were no orders for LNG ships, while only a few LPG vessels were ordered in the VLGC and small sizes this year.

Other specialised fleets, such as cruise vessels, are generating a lot of interest in new markets in Asia. Contrary to the large commodities fleets, this sector is seeing much stronger demand. Another sector that seems to be doing very well is ro-ro cargo vessels, with demand largely driven by fleet renewals.

While the tanker fleet outlook remains cautiously optimistic on demand for cargo space and future freight rates, the freight rates are expected to soften towards the second part of the year as more ships are expected to hit the waves, particularly in the crude oil tanker segment. Demand for both crude oil and products is expected to remain healthy.

The dry bulk fleet is expected to have very low number of orders this year, while the container fleet could face a very low ordering activity throughout this year as overcapacity threatens the very survival of shipping lines.
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