Shipbuilders are suffering from order cancellation which is hammered by spreading financial crisis and overcapacity.
It is reported tat shipbuilders are suffering from order cancellation which is expected to make another two comebacks in 2009 and 2010 hammered by spreading financial crisis and overcapacity. Barry Rogliano Salles Group, a French shipping brokerage firm predicted that 20% of global shipbuilding orders may be withdrawn in the following three to four years. The whole cancelled bulkers would reach 120 million DWT and standard ships and dry bulk ships may bear the brunt. Some report even estimated about 100 million DWT of dry bulk carriers on order will be canceled before 2012, taking up one third of the total global bulker orders.
Mr Liang Zhiyong shipping analyst of China Securities said referring to shipbuilding orders cancellation happened in Japan in 1970s, BDI and the other shipping indexes may move as W model after forming L model amid deteriorating recession, resulting two more rounds of withdrawal in this and next year. He said that unless depressed global shipbuilding market recovers and financing measures go well, 2009 will be the peak time of order cancellation.
Mr Liang's said, despite rising cancellations, most current withdrawn orders are unenforced and haven't been arranged to construct. It will put limited impact on shipbuilders even massive cancellation happens. He said that present withdrawal as a reasoned correction for irrational ordering in previous years. It will help to slow down excessive expansion of world fleets and adjust demand and supply between shipping and shipbuilding.
Statistics shows that China's new shipyards held 44.5% of the total orders at the end of January especially those with few performances holding 11.5% of the total, far towering above South Korea 7.7% and world average level down by 9.7%. However, fledgling shipbuilders that are always weak in the negotiation will accept request to defer orders even they could keep away from order withdrawal. Some shipyards may agree 30% price decrease or more, pressing China's shipbuilding industry to severer future than ever. Meanwhile, associated industries also expose heavier and heavier risks, resulting in shrinking earnings for suppliers of marine equipments. Most cancellations are speculative bubbles.
The cancellation of orders in the phase of construction should be attributed to shipbuilders' inferior delivery capability due to bankrupt or high production cost. A substantial part of abolished orders are speculative, as the opportunists had made contracts before they found enough financing guarantees or customers. According to a statistics, half of orders from Turkey are speculative. But world-class shippers, like Maersk Shipping Group would postpone orders instead of immediate cancellation.