Archives for posts with tag: shipbuilding

Despite an uptick in ordering, 2017 was another difficult year for the shipbuilding industry, with contracting remaining well below trend and most shipyards continuing to feel the pressure. Some sectors saw improved contracting activity, while deliveries remained relatively firm, but shipbuilders will be looking to see more positive changes before predicting a return to better times.

For the full version of this article, please go to Shipping Intelligence Network.

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After reporting on a range of gloomy statistics in 2016, has shipping been able to pick itself up from ‘rock bottom’? Strong trade volumes, a record S&P market and improving bulker and containership markets have all provided some welcome relief. But challenges in the tanker, gas and offshore markets continue while uncertainty around environmental regulation builds. As ever, it’s been an interesting year!

For the full version of this article, please go to Shipping Intelligence Network.

At this time of year, icy conditions are not uncommon, but the warmth of the festive season is usually enough to melt even the coldest of hearts. Going into this year, shipping market activity might have still felt pretty iced up for many, but increased activity in a number of core areas in 2017 has seen the shipping market temperature rise a little…

For the full version of this article, please go to Shipping Intelligence Network.

 

Just prior to Halloween, the UN announced that levels of CO2 in the atmosphere reached new record levels of 403 ppm in 2016. The shipping industry remains a broadly efficient transportation solution in terms of emissions per tonne of cargo, but the news will only increase the focus on what new action may now be necessary, against the spectre of substantial fleet growth over the last decade.

For the full version of this article, please go to Shipping Intelligence Network.

2017 is shaping up to be a record year for secondhand sales volumes. Meanwhile, newbuilding activity remains at historically low levels. As a result, the ratio of secondhand to newbuild activity has surged, and while this is an indication of the current market environment, it might also be interpreted as an indicator of the ‘market mechanism’ starting to re-balance industry fundamentals.

For the full version of this article, please go to Shipping Intelligence Network.

British cycling star Chris Froome has taken on one long cycle after another, currently tackling the Tour Of Spain following his fourth Tour De France victory back in July. Two long cycles are ongoing in the shipbuilding sector too, and this week’s Analysis takes a look at the progress of the delivery cycles in the merchant vessel and mobile offshore sectors, through a challenging period for the industry.

For the full version of this article, please go to Shipping Intelligence Network.

Shipping is a cyclical industry and for shipyards the current trough in newbuilding orders has put further pressure on capacity. While the scale of the current surplus appears huge, this is not the first time that the shipbuilding industry has grappled with excess capacity. Looking back to the past, and specifically the shipbuilding cycle of the late 1970s, what can be learnt from previous experience?

Enjoying The Highs

The shipbuilding industry has a habit of ramping up production capacity rapidly. In 2010 shipyards broke all previous delivery records, outputting 53.2m CGT (in dwt and GT terms deliveries peaked in 2011). Compared to 2004, early into the most recent ordering boom, this was a 122% increase in deliveries. Looking back to the mid-1970s, there was a similar burst of activity as strong newbuild demand saw yard output double between 1972 and 1976 to 10.2m CGT.

What Goes Up…

As in the late 1970s, economic downturn and its impact on the shipping markets led to a significant fall in yard deliveries after their peak in 2010. The initial decrease in output was faster and sharper in the 1970s, with deliveries declining by 64% between 1976 (Year 0) and 1979 (Year 3). The current cycle has seen a more gradual fall in deliveries, declining 34% between 2010 and 2014 with 178 yards reported to have completed delivery of their orderbooks in 2012 (Year 2).

…Must Come Down

Shipyard output is still in decline. Though the surge in ordering in 2013 has helped support delivery volumes, current estimates are for an 18% fall in shipyard output in 2018. Many anticipate that the current delivery cycle will dip around 2019 (Year 9), suggesting a shorter cycle than before. It also seems unlikely that delivery levels will fall by as much as in the late 1980s, as the same pattern would imply a further 47% reduction in output from 2018 estimates to around 15m CGT.

Time To Recover?

After the 1970s crash, it took over a decade for shipbuilding output to recover. Today, following one of the weakest levels of newbuild contracting on record in 2016, the overcapacity which has characterised the global shipbuilding industry in recent years is even more prominent. While 353 shipbuilders currently have a vessel (1,000 GT or above) on order, almost half of these shipyards have failed to win a contract since the start of 2016.

If the current shipbuilding cycle were to follow the same pattern as in the 1970s, we would only be 7-8 years in, with a full recovery still some way away. However, the situation will improve if contracting levels increase. Trade growth, the replacement of older, less efficient ships and stricter environmental regulation could support yard capacity in the future through a recovery in newbuild demand.

Looking back at the shipbuilding cycle of the 1970s, it is clear that the industry has faced similar challenges in the past. It seems unlikely that we have reached the bottom of the current cycle, and pressure to remove capacity remains. Shipbuilders will be hoping that newbuild demand drivers come through quickly to stem the duration of this particular downturn.

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