Newbuilding prices to fall further in 2010.
Newbuilding prices can be expected to continue to decline this year but the decline should be limited to 10%-15%, Paris-based shipbroker Barry Rogliano Salles has forecast.
The broker noted that such a decline would take prices to a new low in the context of the current downturn but added that prices would nevertheless remain 20-40% higher than the previous low point reached in 2002.
In its annual review, BRS argued that there were too still too many negative factors weighing on the market to permit newbuilding prices to rise.
Among them, it cited continuing difficulties in obtaining financing, the high level of impending deliveries, downward pressure on prices from prospective buyers and increased competition between shipyards, but also from the second-hand and resale markets.
It argued that prices were nevertheless unlikely to descend to 2002 levels, citing rising raw materials prices, diminished downward pressure on prices from China and the higher cost of building standard vessels as a result of additional technical regulations, increased vessel size and higher equipment specifications.
?As a result, we believe that, if construction prices should fall further, they will only fall by 10% to 15% in 2010, which will bring us to a new low in this cycle, albeit 20% to 40% than the previous minimum seen in 2002,? BRS said.
?Overall, we expect the landscape of the shipbuilding industry to mutate under these pressures. Shipowners will become more selective, placing orders at those yards that have proved to be the most enduring.?
Looking to the medium term, BRS said that it was hard to be optimistic about the shipbuilding market"s prospects, given the level of newbuilding deliveries to come.
It forecast that, even taking into account order cancellations and postponements, deliveries this year, which are officially scheduled to total 227m dwt, could still be expected to reach 120 dwt-130m dwt.
?We have the feeling that many players, either on the shipyards or on the owners side, are in apnea,? it said. ?How long can they hold on??
BRS did not answer the question but indicated that there was some hope to be had from the rise in demolitions last year, which it said had increased substantially to 36m dwt or 110% of new orders.
?This trend should continue, and we believe that 30m to 50m could be sent to the scrapyards in 2010,? it said.
In his foreword, chairman Jean-Bernard Raoust said that China was the principal beneficiary from the current depressed state of the shipbuilding market.
It was not reducing its shipbuilding capacity and, last year, had over taken Greece as the biggest buyer of second hand tonnage.
?China will be able to build a fleet at moderate prices, as Japan did 30 years ago, and thus better control the transport of the manufactured goods and raw materials that its industry so needs,? he said.