The report “Business Opportunities 2000 – 2005 For Shipyards and Suppliers” presents forecasts of the short and medium term annual newbuilding demand, i.e. contracting during 2000 to 2005 of 13 major commercial ship types each divided into 2 to 5 size ranges. Total contracting in number of ships and compensated gross tons (CGT) is divided by shipbuilder country or area. Newbuilding price forecasts per type and size of ship are also presented.
A “window” of business opportunities has opened in the newbuilding market especially for shipyards and equipment suppliers in Europe due to the strong upturn in the newbuilding market that followed the termination of the Asian crisis late last year. Furthermore, price increases of over 30% in local currencies have been seen in Europe since October 1999.The Asian crisis resulted in a short downturn in the contracting of newbuildings during the 2nd half of 1998 and the 1st half of 1999. The subsequent very strong upturn in newbuilding orders has filled orderbooks of South Korean and Chinese yards two to three years ahead. Since late last year price increases of 10-15% in US Dollars have been seen, which together with the strengthening of the US Dollar against most other currencies has resulted in price increases in, e.g. D-mark of over 30% in the course of 12 months.
The new market report from MSR-Consult concludes that strong contracting is expected at least one year ahead. South Korea and China, however, are expected to see declining influx of newbuilding orders due to the generally well covered production capacity two to three years ahead. This situation will strengthen the influx of orders to yards in Europe as well as in Japan, and result in further price increases in the coming twelve months. One point of uncertainty is stressed in the report: The possibility of an extended oil crisis and its damaging effects on the world economy and thus on the newbuilding market which, however, would not be felt until some time during the 2nd half of 2001 or later. The consequences of an alternative scenario have thus been analysed.
European yards are currently experiencing an increasing influx of orders and furthermore increasing market shares in spite of the booming market. The intake of orders in terms of CGT (compensated gross tones) has, in fact, been fairly high in the latest years due to a strong demand for cruise ships and the dominating position of a few European shipyards in this market. Now, the ordering of cargo ships at European yards is increasing strongly, following a having since the middle of the 1990s, which is likely to benefit European yards and equipment suppliers more broadly.
Japanese yards have seen a strong upturn of over 100% in the intake of orders since the low-point in late 1998 and early 1999, and a further strengthening in 2001 is foreseen. The strength of the Yen against the US Dollar and European currencies has, however, limited the price increases in Yen, which puts pressure on Japanese yards and equipment suppliers to lower costs.
The European shipbuilders and equipment suppliers may, however, soon face new challenges: The newbuilding market for cruise ships is expected to decline strongly after several years of substantial ordering and of very high ordering in the latest two to three years. In fact, the present volume of newbuilding orders corresponds to over 50% of the fleet.
On a global basis the total newbuilding market is expected to be strong during the rest of 2000 and well into 2001. Later in that year a weakening is expected in certain segments that, like the cruise market, have seen or are today seeing strong ordering of newbuildings. The weakening tendency is expected to be more pronounced in 2002 due to a certain weakening in important segments of the freight market, which is likely to dampen the interest of shipowners to contract new tonnage.
In the case of crude oil tankers the age profile of the fleet as well as increasing tonnage demand result in continued strong ordering of new tonnage in the coming three years or more. See figure 2. The new regulations currently under discussion at IMO regarding a shortening of the lifetime of single hull tankers will not change this forecast significantly. This, however, is on the condition that the phasing out of the oldest ships, the so called “pre-marpol” ships, is determined by the market within a final date of end 2005, as the major part of this fleet of ships would have been scrapped in all cases. A shortening of the time limit and a tightly controlled time schedule, which seems to be the chosen model, could crease major disturbances in the freight market and newbuilding market.
Increasing influx of orders and increasing prices have arrived in the middle of the heated debate between Europe and South Korea over contract prices and costs of building ships in connection with the clamed price dumping of Korean yards. As further price increases are foreseen a victory for European interests is in sight, although primarily generated by market forces. But the sweetness of victory will probably be short due to the expected weakening in demand, and especially due to the expected downturn in the demand for cruise ships and the increasing competition from the expanding Chinese shipbuilding industry in the years to come.
The report may be purchased from MSR-Consult.