Newbuilding orders keep on plung

Newbuilding orders keep on plunging in March

The third month of the year proved no exception to the previous ones, since from November onwards, newbuilding orders on a worldwide basis remain under the 1 million-dwt monthly mark. As shipowners are scaling back investments, shipyards are bound to suffer in earnings.

Chinese yards in particular appear to be in dire straits, as Worldyards shipbuilding database indicates that thus far 55.65% of the total 7,862 million cgt in cancellations have occurred in China. While the current global orderbook stands at just shy of 158m cgt, owners are practically absent from newbuilding orders. The world new ship contracts kept low at 693,700 dwt in March the fifth month with turnover down 1 million dwt. CANSI"s newly published survey this week showed China's ship industry continued the downturn from end 2008 to January and February grabbing very few new orders. It's expected the new orders will keep rare in H1 then rally in H2.

Shipbuilders like Shanghai Waigaoqiao Shipbuilding Co Ltd and Hudong-Zhonghua Shipbuilding Co Ltd revealed that they started to feel hard to receive new orders, though they had relatively plentiful holdings which could spread to 2011 and 2012. Meanwhile, order cancellation continued. During January to February there was an accumulative cancellation of 13 ships equal to 664,000 dwt.

Mr Tan Nai Feng vice director of information department under CANSI, introduced China should deliver ships of 56,580,000 dwt in 2009 in line with the signed contracts. But, Mr Tan gave a conservative estimate that the country will complete about 40,000,000 dwt this year under the financial crisis, which means the rate of handing-over will just post at 70%.

A further indication of an absence in new orders, is the fact that ships sold for scrap currently outpace newly ordered ones. Clarkson said at the beginning of the week, that global ship orders were for 26 vessels and 1.3 million DWT (deadweight, the weight of freight that can be loaded in a ship) in the first quarter of this year. But a whopping 237 ships of 7.5 million DWT were broken up for metals. Bulk carriers, the cargo ships that carry grains and minerals, were heavily affected by the slump in the industry and dismantled in particularly large numbers. Ninety-nine ships were dismantled from January to March this year, more than last year's total of 93.

The researcher said that ?with the global economy still largely in a state of disarray, the macro environment will remain a crucial factor in determining not only appetite but ability of owners to commit to contracting. As we move into the second quarter of the year it will be interesting to see how the market develops although yards openly admit they are still primarily focused on protecting their existing orderbook and reluctant to give too much away in terms of pricing going forward with renegotiations in mind?.

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