SHIPPING MARKET OUTLOOK 1.3 The Shipbuilding Market structures accounted for 62%.In 2012 there has been a significant fall in contracting activity, Well,it looks as though 2012 will finally see with ordering down 46%in deadweight and the peak of the shipbuilding cycle,with about the same in CGT.But within this lower deliveries of 169m dwt.Admittedly.this is the tonnage of orders the pattern remained similar. third year running we have called the peak,and Bulk vessels,especially bulk carriers, the shipyards have just kept on going.But the accounted for 45%of the total and specialised icensed to The orderbook is now so depleted that this really 55%. Offshore and LNG ordering remains must be the peak.The problem in predicting active,but the container market was quiet. peak deliveries accurately has been that over Basically most of the Asian shipyards are now the last three years,although many contracts targeting the specialised vessel market,though have slipped into the next year,the mass the marketing emphasis on eco-ship designs for cancellations never happened.Each year a the bulk sector remains active. similar number slipped out at the end of the year,making slippage a zero sum game. Shipbuilding Prices Kong Polytechnic University. Shipbuilding Capacity Against this background,shipbuilding prices have continued to edge downwards.In In 2011 the world's shipyards delivered 49.7m September the Clarkson Newbuilding Index compensated gross tons (CGT)of new ships stood at 127,having fallen by 9%over the first which is a fair indication of current yard three quarters of 2012;the price reduction has Distribution capacity.In 2011 China was,for the second been controlled,however.A VLCC is currently year running,ahead of South Korea with reported at $95m;a Capesize at $46m and a deliveries of 19.2m CGT,a 39%market share. LNG tanker at $201m.Although these prices South Korea's production was 16m CGT giving reflect some discounts,and for the yards may is restricted: it a 32%market share.Japan and Europe include little profit,or even possibly a small produced 9m CGT and 2.7m CGT respectively. loss,they can hardly be regarded as "bargain" please prices.For example,10 years ago a new VLCC During the first three quarters of 2012 the was priced at $65m,and while there have some global orderbook has continued to fall,from currency movements and increases in the price 123m CGT at the start of the year to 100m CGT of steel and some equipment,it is difficult to in August.At current production levels this see how this could add up to more than $30m. represents around 2 years work for the yards,a significant reduction.However the rundown is Looking Ahead less dramatic in CGT than in deadweight,and the orders held by the yards for delivery in 2013 Shipyards are facing a difficult year in 2012, are now 39m CGT,roughly 80%of their with a much lower level of ordering and the current output level.This reflects the fact that focus very much on delivering the existing the source some of the major yards,especially in South orderbook,which they are doing with great Korea,have booked significant quantities of gas success.But the outlook is discouraging.The and offshore orders,which have a very high major shipping markets edging into depression work content relative to their deadweight(CGT and the specialised vessels which have helped is a measure of labour capacity) to boost the orderbook for some yards have,by their nature,limited potential.In addition,there The Product Range Required by the Yards is a shortage of commercial bank finance with the result that CGT deliveries so far this year Over the last 18 months the product mix of are running at three times the rate of new vessels contracted has changed significantly, orders.Today's prices are still not particularly switching away from bulk vessels to the more tempting to speculators and the continued specialised types.For example,in 2011 tankers confusion in the industry over the shape of the and bulk carriers accounted for only 38%of future "eco-ship"suggests that the Autumn http://www.clarksons.nel 01/11/2012 06:20:04 15304 contracts placed,whilst specialised vessels, marketing season is going to be a tough one for particularly LNG,containers and offshore the shipyards. Clarkson Research Services 12 Autumn 2012Clarkson Research Services 12 Autumn 2012 SHIPPING MARKET OUTLOOK Well, it looks as though 2012 will finally see the peak of the shipbuilding cycle, with deliveries of 169m dwt. Admittedly, this is the third year running we have called the peak, and the shipyards have just kept on going. But the orderbook is now so depleted that this really must be the peak. The problem in predicting peak deliveries accurately has been that over the last three years, although many contracts have slipped into the next year, the mass cancellations never happened. Each year a similar number slipped out at the end of the year, making slippage a zero sum game. Shipbuilding Capacity In 2011 the world's shipyards delivered 49.7m compensated gross tons (CGT) of new ships which is a fair indication of current yard capacity. In 2011 China was, for the second year running, ahead of South Korea with deliveries of 19.2m CGT, a 39% market share. South Korea's production was 16m CGT giving it a 32% market share. Japan and Europe produced 9m CGT and 2.7m CGT respectively. During the first three quarters of 2012 the global orderbook has continued to fall, from 123m CGT at the start of the year to 100m CGT in August. At current production levels this represents around 2 years work for the yards, a significant reduction. However the rundown is less dramatic in CGT than in deadweight, and the orders held by the yards for delivery in 2013 are now 39m CGT, roughly 80% of their current output level. This reflects the fact that some of the major yards, especially in South Korea, have booked significant quantities of gas and offshore orders, which have a very high work content relative to their deadweight (CGT is a measure of labour capacity). The Product Range Required by the Yards Over the last 18 months the product mix of vessels contracted has changed significantly, switching away from bulk vessels to the more specialised types. For example, in 2011 tankers and bulk carriers accounted for only 38% of contracts placed, whilst specialised vessels, particularly LNG, containers and offshore structures accounted for 62%. In 2012 there has been a significant fall in contracting activity, with ordering down 46% in deadweight and about the same in CGT. But within this lower tonnage of orders the pattern remained similar. Bulk vessels, especially bulk carriers, accounted for 45% of the total and specialised 55%. Offshore and LNG ordering remains active, but the container market was quiet. Basically most of the Asian shipyards are now targeting the specialised vessel market, though the marketing emphasis on eco-ship designs for the bulk sector remains active. Shipbuilding Prices Against this background, shipbuilding prices have continued to edge downwards. In September the Clarkson Newbuilding Index stood at 127, having fallen by 9% over the first three quarters of 2012; the price reduction has been controlled, however. A VLCC is currently reported at $95m; a Capesize at $46m and a LNG tanker at $201m. Although these prices reflect some discounts, and for the yards may include little profit, or even possibly a small loss, they can hardly be regarded as "bargain" prices. For example, 10 years ago a new VLCC was priced at $65m, and while there have some currency movements and increases in the price of steel and some equipment, it is difficult to see how this could add up to more than $30m. Looking Ahead Shipyards are facing a difficult year in 2012, with a much lower level of ordering and the focus very much on delivering the existing orderbook, which they are doing with great success. But the outlook is discouraging. The major shipping markets edging into depression and the specialised vessels which have helped to boost the orderbook for some yards have, by their nature, limited potential. In addition, there is a shortage of commercial bank finance with the result that CGT deliveries so far this year are running at three times the rate of new orders. Today’s prices are still not particularly tempting to speculators and the continued confusion in the industry over the shape of the future "eco-ship" suggests that the Autumn marketing season is going to be a tough one for the shipyards. 1.3 The Shipbuilding Market Licensed to The Hong Kong Polytechnic University. Distribution is restricted; please remember to acknowledge the source. http://www.clarksons.net 01/11/2012 06:20:04 15304 Licensed to The Hong Kong Polytechnic University. Distribution is restricted; please remember to acknowledge the source. http://www.clarksons.net 01/11/2012 06:20:04 15304