Leading shipbuilders have said they will keep mothballed dry docks closed to keep supply capacity tight — in a bid to drive up newbuilding prices as demand strengthens.
Newbuilding demand is gathering pace, with an increasing number of enquiries for early delivery dates from owners who are keen to position themselves for an upturn in the markets.
It comes as the global newbuilding orderbook stood at its lowest level as a proportion of the trading fleet for 30 years at the end of 2020, potentially priming the shipping markets for a boom in the coming years.
This has left many yards facing the question of whether they should reactivate capacity that was closed during the last recession to meet the current demand.
Hyundai Heavy Industries’ shut Gunsan Shipyard and two dry docks at Samsung Heavy Industries are typical of the facilities that could be quickly brought back into play.
However, the yards that were approached by TradeWinds said they wanted to maintain capacity at its current levels because inflationary pressures on steel and other materials had left them uncertain over future costs.
One manager at a yard, which has already slashed its capacity by 30%, said it did not want to jeopardise the 5% to 10% price increases achieved this year by flooding the market with capacity.
‘The price rises this year are barely covering our higher material costs,” he said. “We need to keep supply tight for further increase in prices.”
The shipyard said it has received genuine enquiries for containership newbuildings but at price levels that simply do not justify awakening its sleeping dry docks.
Boxship interest
There is understood to be strong interest in boxship ordering on the back of record earnings from the major operators. But one yard said similar levels of demand need to come from other sectors to justify the opening of facilities.
“We need more than just containership enquiries," he said. "Once we reopen shutdown dry docks, we will need enough newbuildings that will keep the shipyard busy for the next 10 to 20 years.”
Reopening dry docks would involve the rehiring of shipyard workers and sub-contractors, which is not easily done.
As ordering levels pick up, some yards, most notably China’s Yangzijiang Shipbuilding and South Korea’s big three mega yards, have already exceeded their order targets in the first three months of this year.
Yangzijiang has achieved 1.5 times its 2021 sales target of $2bn in less than three months after winning close to 60 vessels on the back of a boom in containership ordering.
Korea Shipbuilding & Offshore Engineering, which controls the Hyundai yard grouping, has raked in close to $1.9bn-worth of newbuilding orders this year.
