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Report: Marine Newbuild at 20-Year Low

Friday, September 16, 2016

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This year’s marine newbuilding numbers are likely to be at their lowest level in two decades, according to the Baltic and International Maritime Council.

In numbers released Monday (Sept. 12), BIMCO revealed that the first quarter of 2016 showed the second-lowest number of newbuild contracts in 20 years. Based on initial numbers, the industry group predicts the year overall will see the lowest number of contracts in more than 20 years.

'What the Industry Needs'

The contraction comes after a jump in contracts in 2013 and slight declines in 2014 and 2015, the group says; taking a long view, BIMCO notes, it may not be such bad news.

Shipbuilding in German yard
© iStock.com / anandoart

Europe was the only market to see an increase in newbuild contracts, with a spike of about 45 percent versus prior-year figures.

“A low level of contracting is exactly what the shipping industry needs in order to eventually restore the fundamental balance between supply and demand,” said Peter Sand, BIMCO’s chief shipping analyst.

Europe Up, Asia Down

Broken down geographically, the biggest manufacturing declines came in Asian countries, the report explains. In the first quarter of 2016, contracts were down about 86 percent in both Japan and South Korea, compared with prior-year numbers. China’s contracts were down 49 percent, measured in compensated gross tonnage (CGT).

Europe was the only market to see an increase in newbuild contracts, with a spike of about 45 percent versus prior-year figures.

Declining Order Cover

BIMCO notes that in the Asian nations especially, “order cover,” the time it takes a shipyard to finish its entire order book, is weakening. A longer order cover means high order numbers, low capacity, or a combination of the two; short order covers can mean trouble, in the form of low order number or an overcapacity.

Samsung-built ship
Samsung Heavy Industries

This past June, the government of South Korea announced it would hand out a $9.5 billion “bailout” to its “Big Three” shipyards.

Order cover for South Korean shipyards is currently less than two years, according to BIMCO. Both China and Japan have order cover numbers around 3 years. Europe, on the other hand, has an order cover of 5.3 years right now, the report states.

European shipyards, BIMCO notes, primarily manufacture cruise ships, tugs and ferries, whereas manufacturers in Asia make more dry bulk and container ships. Tanker contracts are down 80 percent globally compared with last year’s numbers, BIMCO says, and container contracts are down 84 percent.

South Korea Troubles

Last year, as South Korean shipbuilders lost money, workers walked out, complaining of poor management and lack of job security. This past June, the government of South Korea announced it would hand out a $9.5 billion “bailout” to its “Big Three” shipyards—Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries—to help them weather the economic difficulties. 

South Korea’s “Big Three” shipbuilders reportedly employ about 62,000 in that country.

   

Tagged categories: Asia Pacific; Daewoo Shipbuilding & Marine Engineering Co.; EMEA (Europe, Middle East and Africa); Hyundai Heavy Industries Co.; Latin America; Market; Market trends; Newbuilding (marine); North America; Program/Project Management; Samsung Heavy Industries Co.; Ships and vessels

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