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Shipowners prefer to cancel orders

Shipowners prefer to cancel orders
More and more ship owners are actively looking to either delaying scheduled deliveries or cancelling orders.

More and more ship owners are actively looking to either delaying scheduled deliveries or cancelling orders.

As the global dry bulk orderbook stands at massive heights more and more ship owners are actively looking to either delaying scheduled deliveries or cancelling orders, especially for ships with expected delivery at the second half of 2010 and 2011. Hellenic shipping companies couldn't be absent from this trend, as ship owners are trying to turn the balance of supply/demand back into their favor, which would push freight rates up again One of the companies reportedly cancelling vessel orders was Marmaras Navigation, owned by Diamantis Diamantides, which managed to cancel an order for two capesizes, contracted last September at South Korea's Hyundai Heavy Industries. The vessels were ordered just before the dry bulk market bust for $220 million. With Marmaras Navigation being a private company, the details of the cancellation agreement haven't been made public. Market sources however indicated that the order could have been cancelled by the shipyard which didn't manage to provide the necessary bank guarrantees.

According to a report by Howe Robinson released last week, the current dry bulk orderbook stands a whopping 3,000 vessels scheduled for delivery between today and 2011. These orders have been submitted by 479 known ship owners at 155 different yards in 15 countries. Only during 2009 a massive 992 new buildings with a total capacity of 75.6 million dwt are expected to be delivered. Out of them, one finds 171 capesize vessels representing 26% of the existing fleet, according to Howe Robinson. With recession in most economies now being more than obvious with few exceptions, one wonders as to how will these vessels be employed.

Not only that, but as analysts point out, each time the Baltic Dry Index posts gains, the flow of older carriers towards scrap yards is being held back. As the index drops, older units are on their way back for demolition. The overflow of supply was expected to occur, as was a market correction, even before the financial crisis broke out. One can realize that with recession now a reality, it will take at least 2-3 years before demand comes close to matching supply. Howe Robinson predicts that iron ore volumes are unlikely to grow more than 5%, while coal trades are forecast to decline.

So, how will the supply of vessels fare? Well, Maritime Strategies International says that about 11.4% of the orderbook will be delayed, but only 6.7% will be cancelled in 2009. Cancellation rates are expected to pick up in 2010, reaching 22% and peak in 2011 at 22.9%.

Is that enough? Apparently not. Fleet growth for 2009 varies between 18%-21% for capesize vessels, 6% for panamaxes and 13% - 15.3% for handymax bulk carriers. On the demand side, Chinese imports of iron ore could see overall 2009 levels rise by as much as 46 million tonnes, from 856 million tonnes in 2008. On the downside European and Japanese demand for seaborne iron ore is set to fall. Coal trade is forecast to fall by 14 million tonnes to 857 million, while grain trades are expected to remain flat at 369 million tonnes.


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