Significant drop expected in 2009

Amid slack demand and contract cancellations, prices of new buildings are expected to continue their downward trend.

Amid slack demand and contract cancellations, prices of new buildings are expected to continue their downward trend set from the fall of this year up until today. This prediction was given by Clarksons at a latest report, where it is indicated that a significant drop in newbuilding prices should be expected for 2009, in fact such a fall is ?inevitable?. This should happen, in order to generate newbuilding demand.

?The yards can look forward to a very difficult year in which they can expect to spend more time addressing their clients" problems than actually selling ships. It is at least some comfort to the yards in an otherwise gloomy environment that they can also expect to see their cost bases deflating as steel, equipment and labour costs all moderate so, they may well be able to protect their margins in the short term even if prices fall significantly? Clarksons said.

Looking back in 2008, anyone involved in the shipping business can assert that it has been a year of mixed emotions. The first half of the year was a buoyant one, with high freight rates and a newbuilding market that was defying gravity in terms of pricing. According to Clarksons however, ?the strength of prices disguised the looming problem that volume was thin and, although the yards were enjoying very high prices, demand was insufficient to replenish or extend their orderbooks as buyers baulked at ever higher prices. The seizure of the credit markets in the autumn burst the asset bubble and we have been in a period of deflation ever since?.

Moving into 2009, the leading maritime research company predicts that it too is equally likely to have a split personality, with the market likely to still be feeling rather fragile for the first half of the year, before hopefully emerging ?from under the duvet in the 2nd half and showing some signs of life?.

www.TurkishMaritime.com.tr