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Newbuilding prices rise

Newbuilding prices rise
Newbuilding prices appear to have bottomed out following a rise in ordering activity and improved sentiment in the shipbuilding market since the start of the year.

Newbuilding prices rise as orders grow

Newbuilding prices appear to have bottomed out following a rise in ordering activity and improved sentiment in the shipbuilding market since the start of the year.

After slashing contract prices last year in a desperate bid to fill shipbuilding slots left vacant by cancelled or delayed orders, many Asian shipyards are reporting that their 2011 schedules are full, indicating that values are set to stabilise.

?In South Korea, remaining yard capacity in 2011 has all but been taken up, and even in China there are very few remaining 2011 berths,? London-based broker Clarksons reported in its Shipping Intelligence Weekly report.

?Yards, after such a terrible 2009, are now in a position to breath a little easier as they are starting to see a level of enquiry and orders, allowing a benchmarking of newbuilding pricing across almost all sectors.

?This in turn means we have probably reached a realistic pricing floor for the foreseeable future.?

In February 2010, 43 vessels were ordered, compared to just 15 contracts signed in March 2009.

The broker said in the short to medium term, rising newbuilding prices would be driven by the improving dry bulk sector, with yards expected to slowly push prices up as they were ?less concerned? about their orderbook coverage as it now stretched into 2012.

South Korea"s Hanjin Heavy Industries has confirmed that the $53.5m capesize contract signed by Greece"s Star Bulk Carriers last week filled one of its last 2011 slots. ?We were almost sold out,? said Hanjin"s London office general manager Yong-Soon Kwak.

Although the notably low price paid by Star Bulk was a hot topic of talk among brokers and owners last week, average capesize newbuilding values have stabilised at around $56m for the last four months, according to data from Clarksons, having fallen from a peak of $99m in August 2008.

In the containership sector, contract values for 3,500 teu vessels have climbed $1m to $37m since the end of 2009.

?It is true that in the course of the last two months interest in newbuildings has come back and the prices seem to have marked a rather marked upward trend, particularly in the medium-sized dry bulk vessels,? said George Banos, shipbuilding consultant at Greek brokerage George Moundreas.

?I am not sure if this interest will continue, but for the time being I would rather describe it as moderately strong and we have no sign that the prices will go down further.

?One of the main reasons for such an interest in placing newbuilding orders now is prices: compared with one and a half years ago they are dramatically lower.?

In fact, newbuilding values are so low that it is cheaper to order a new ship than buy a modern secondhand vessel.

Having plummeted by two thirds in the last three months of 2008 following the global financial crash, five-year-old capesize prices have risen from a low of $42m in January 2009 to around $62m in March, Clarksons data shows.

As has been the case in the past, newbuilding prices are expected to follow suit now that secondhand prices are showing a marked rise.

Mr Banos said he knew of ?very few? available 2011 berths, with many owners now having to order ships with delivery in 2012 and beyond.

?It is very difficult time to speak generally, but all the main [South] Korean shipbuilders have been trying to temporise their production,? Mr Kwak added.

?It is not true in our case, but some of the other shipyards that had slots in 2011 have kept them empty to use as a bumper for delayed vessels.?

He said dry bulk carrier contracts, such as the Star Bulk order, were more preferable to shipyards with 2011 slots, as constructing these ships was easier than more complex vessels such as tankers.

?We do not have a lot of time for the design work, so this is a very tight schedule for 2011 delivery,? said Mr Kwak.

?For the time being we have been more focused on the bulker carrier: it is a natural trend.?


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