About 90 newbuildings were ordered in the first three months of this year, almost half the total number logged in the first quarter of 2019, with activity expected to fall further as the coronavirus hits potential buyers worldwide.
Although official first-quarter figures have yet to be released, data from shipbroker Clarksons shows that 196 new vessels were contracted in the same period last year.
Clarksons Research said this month that it envisages newbuilding orders falling by 25% on the levels seen in 2019, and 50% on those for 2018, before recovering in 2021.
Red traffic light
The broker gave red-light warnings for cruise, car carrier, containership and offshore newbuildings.
It is slightly more positive for the tanker and gas carrier sectors, but described the overall order potential as “weak”.
Newbuilding brokers said the ordering climate was already weak at the start of this year. Owners had been delaying decisions on vessels while they assessed which type of propulsion system to opt for to meet the IMO’s decarbonisation targets for 2030 and 2050.
But the impact of the coronavirus pandemic is expected to slow new business further.
Brokers said South Korean shipbuilders are more exposed than their Chinese counterparts, as they have prompter berths available with delivery positions for 2021 still on offer at the country’s big three yards.
Affinity (Shipping) reported that DSME and Hyundai Heavy Industries’ orderbooks are already “well below” their average for the 2012 to 2019 period.
The broker said DSME needed orders totalling just shy of 1m compensated gross tons (cgt), and HHI 336,000 cgt to get back to their averages — the equivalent in LNG carriers of 20 and seven vessels, respectively.
One South Korean shipyard team member told TradeWinds this week he had not had any new business to work on for over a month, and others sounded despondent about new business prospects.
But marketing teams are understood to be working intensely, particularly now some of the virus-related restrictions are being lifted in China and Korea.
Hostile
Shipbuilders do have some key projects that are ongoing, although their numbers are scant compared with those anticipated at the beginning of this year.
Brokers flagged up Hapag-Lloyd's ongoing tender for six ultra-large containerships that is rapidly becoming a tug-of-war between Chinese and Korean yards. Shipbuilders are also chasing similar business for Asian boxship giant Ocean Network Express, and requirements for tanker tonnage from Sonangol and Bahri.
LNG project business for Qatar and Mozambique are also in the works but could be delayed.
One newbuilding broker said yards might see some speculative moves on large tankers in the current high rate environment for VLCCs but suggested that owners would likely wait for newbuilding price falls.
Mark down
He described the situation for yards as “hostile” and said shipbuilders, particularly those in South Korea, really needed to see new orders in the next few months to get some cash flow.
In mid-March Clarksons Research revised its newbuilding order potential down nearly 44% from its initial forecast of 1,345 vessels for 2020 to a revised base case of 756. It also lowered its corresponding 2021 figures by almost 27% from 1,695 to 1,238 ships.
The broker said this assumes “very low” newbuilding activity until August with a pickup in activity from September, some “statement orders” from Chinese owners or leasing companies, plus some tankers and gas carrier contracts.
These numbers are set against an average order volume of 1,822 vessels for the period from 2010 to 2019, and a minimum of 743 vessels logged in the previous 10 years.
The broker’s research arm expects the newbuilding orderbook to fall to 8.5% of the world fleet by the year-end, down from 10% today. It contrasts this with 2009, when it stood at 50% of the world fleet.
