Japanese shipbuilders are looking to push newbuilding prices to new highs over the summer as they face significant cost increases.
Reports in Japan suggest bulk carrier builders will seek to achieve prices as high as $40m for a 64,000-dwt ultramax vessel and $35m for a 35,000-dwt handysize.
By comparison, China Merchants Bank Financial Leasing recently concluded a deal for a series of four 63,000-dwt bulk carriers at New Dayang Shipbuilding at a price of $32.5m each.
Japanese yards are typically more expensive than their Chinese counterparts. But the new price levels still represent a significant hike from the last prices paid in Japan.
Taiwan Navigation recently disclosed it paid $32.3m per ship for two 40,000-dwt bulk carriers ordered at Namura Shipbuilding.
The Japanese yen recently traded at a 20-year low of ¥130 to $1 — a factor that should give Japanese yards an advantage in the export market.
However, the yards argue that a cheap yen has the disadvantage of pushing up the cost of imported materials and equipment. It has also added to domestic inflationary pressures, and the cost of raw material imports, such as iron ore for steel mills.
Current steel plate price negotiations between Japanese yards and steel mills are reported to be in excess of ¥150,000 ($1,100) per tonne, which is twice the price level of two years ago.
Similar rises in the cost of other materials and equipment have forced Japanese yards to take prices up to another level.
Another worrying development for Japanese yards that specialise in bulk carriers is that domestic owners, which are their main customers, have been reducing their exposure to the sector.
The withdrawal is partly in response to lower levels of demand from the country’s main domestic operators, such as NYK Line, Mitsui OSK Lines and K Line.
Japanese owners have also been hurt badly in the past when operators defaulted on charter contracts for newbuildings that were ordered at a high price. So, they are wary of investing in the sector at a time when prices are increasing again.
Instead, they are investing spare cash in similar lease finance structures developed for the airline industry.