The international shipbuilding market is more stable again. The decline between 2012 and 2014 could be stopped. Mainly big container vessels
have been ordered and the sizes of nearly all ship types rose
The global economic recovery has not gained momentum, yet. After further negative adjustments of its forecasts the IMF estimates just[ds_preview] 3.1% growth rate for the global economy in 2015. World trade is lacking drive. The forecasts were also corrected for the worse, so that the estimation in late 2015 is a growth rate of 3.2%.
These low growth rates in the global economy therefore do not qualify for new impetus in investment behaviour in the shipping industry. Favourable financing conditions with constantly low interest rates and low bunker prices did little to change this situation. On the other hand, the decrease in oil prices, overcapacity in individual market segments of the world merchant fleet, and high order backlogs had a negative impact on the propensity to invest. The overcapacity problem further depresses freight rates.
Incoming orders
With 1,564 orders, the decline augmented annualized (-25% by number) and turned out to be more profound than after CGT values (-9% or 31.1mill. CGT), as the trend to build ever larger ships continues particularly with container ships.
Despite the hitherto existing downward trend, new orders increased in the third quarter disproportionately compared with the first half of the year. As a background it may be suggested that many shipowners have pre-drawn orders to avoid new stricter emission limits (Tier-III regulations for NOx) as of 1 January 2016. Since the increases were largely due to stronger domestic contract awarded in China and Korea, it is also to be assumed that these were supported by government incentives as countermeasures to the slump in demand.
China’s CGT market share fell for the first three quarters in 2015: from almost 40% in recent years to some 30% now (9.3mill. CGT, 509 newbuilding contracts). Korea is in second place. Here the market share accounts for over 28% (8.8mill. CGT, 220 newbuidling contracts) and thus proves relatively stable. Japan, third in the world, was able to expand its market share in CGT to now also 28% (8.7mill. CGT), but received significantly more new orders in total (379) than Korea. Finland and Germany, both dominated by the Meyer Group shipyards, ranked fifth and sixth after the Philippines in fourth position (4%).
Most new orders measured in CGT were commissioned by shipowners from China (incl. Hong Kong). Their CGT market share was at 15% (4.5mill. CGT, 165 orders) for the same period. Though customers from Japan realized a higher number of 175 orders, their CGT-market share of all orders amounted but »only« to 14% (4.4mill. CGT) because these ships were smaller vessels on average. With a market share of 10% (3.2mill. CGT, 113 orders) Greece was in third place of the purchasing nations. Despite its great significance in shipbuilding, Korea ranked only eighth behind Germany with also 3%. Korea placed 33 orders and a tonnage of 0.9mill. CGT (3% market share).
For the purchasing nations China, Japan and Korea, a high proportion of domestic orders could be noted. As for Korea, 98% (CGT) of all orders were awarded to domestic shipyards. In Japan, there were 82% and in China 78%. In reverse, domestic orders in Korea amounted to 10% of all orders, in Japan it was 41% and in China 38% of the shipyards’ order volume was domestic orders. These figures visualize that the shipbuilding companies of these countries benefit from state subsidies for the shipping companies to a large extent. By contrast, orders by German shipowners were nearly 100% awarded to foreign shipyards.
When considering new orders by type of vessel very different trends could be traced. Container vessels enjoyed the biggest demand for the first three quarters in 2015, reaching a sharply increasing market share which rose from 13% in 2014 to 32% CGT market share (9.9mill. CGT, 233 orders). The »Super-Post-Panamax« units took the lead and thus vessels of 10,000 and 21,000TEU totalled 117 orders and 7.9mill. CGT (80% of the CGT volume of all container ships). The share of crude oil tankers significantly increased with 168 new orders (5.5mill. CGT). These vessels constituted the second largest market segment with approx. 18%. RoRo cargo ship orders also developed well while the share increased to 6%.
In contrast to growth segments mentioned some significant drops in demand were recorded for other ship types. Although bulk orders totalled 263 newbuilding contracts (4.5mill. CGT) and a CGT share of almost 15% of incoming orders and thus continues to be an important market segment, compared with the previous year (33%), the bulk share, however, has more than halved. Causes may be found in the commodity markets which show reduced need and in overcapacity in the fleet. As for offshore vehicles, the industry also faced slumps in demand. Since 2012, the respective CGT market share fell from 16% to only 4% for the first three quarters in 2015. In the current period 173 new orders (1.3mill. CGT) were awarded for this type of ship.
Despite the upturn in demand during the third quarter, newbuilding prices have not improved. The Index of Clarkson Research listing the prices of standard new vessels has declined by approx. 6% points in the first three quarters. However, the extent of the price decline was very different depending on vessel type and size. The largest decreases were registered with bulk carriers.
As for the Asian shipbuilding countries in particular, the lower order volume as well as the increasing shipowner resignations of their orders have led to substantial financial problems at the shipyards. Bankruptcies, billions in losses and overindebtedness of the shipbuilders accumulated for the year and provoked the governments and state-controlled creditor banks to start restructuring actions at the expense of the treasury. As an example the Korean shipyard Daewoo Group is to be mentioned, which is now saved for the third time by the state-owned banks since the 80s to prevent a closedown. This is again taking place without a much-needed reduction in capacity.
Deliveries
The global decrease in production from 2012 to 2014 did not continue in the first three quarters in 2015. With regard to the number of 2,213 ships delivered during this period, deliveries on annualized basis were comparable to those of the previous year. Due to the increasing ship size, the tonnage amounted to 30mill. CGT, however this was a 10% increase compared with last year.
As before, China had the lead in the first three quarters with 736 deliveries and a tonnage of 10.6mill. CGT in the shipbuilding countries’ ranking with a CGT market share of 35%. The Korean and Japanese shares remained relatively constant at 31% and 19%, respectively. The Philippines rank fourth and achieved a share of almost 3%. German shipyards were not listed among the top ten shipbuilding nations. Together the SEA-Europe members reached 5%.
Bulkers continued to dominate deliveries and had the largest CGT market share of all types of vessels with 32% (532 delivered ships with 9.7mill. CGT). After the sharp cutback in completion from 2012 to 2014, these deliveries gained ground again extrapolated for the year as a result of extensive award of contract in the years 2013 and 2014. This again gave rise to the overcapacity problem. Even the tanker segment grew over the previous year. Crude oil tankers increased their CGT market share to 6%, while product and chemical tankers climbed to 8% and gas tankers to 10%. Container ships were in focus and increased their CGT share of 14% in 2012 to currently 22%. Offshore vehicles were subject to losses for the first three quarters – extrapolated to the full year. This was mainly due a result of falling oil prices. Compared with last year, their share fell by over 3% points to currently approx. 8%.
Order backlog
At the end of the third quarter 2015, the order books were slightly below the level at year-end 2014 in total numbers (6,105). The tonnage level rose slightly, fuelled by the ever larger ships reaching 111.9mill. CGT. The order backlog volume in value totalled 296 bill. $ at the end of the third quarter, according to Clarkson Research. Thus, the figure was only slightly below that at the end of 2014 (324 bill. $).
Despite lower losses compared with the end of 2014 the Chinese shipyards had the largest backlogs with 2,406 orders and 40.3mill. CGT (CGT share of 36%) by the end of September. Korea’s shipyards achieved a slight increase in volume with 821 orders and 31.5mill. CGT which represented 28%. The Japanese shipbuilding companies improved their backlog to 969 ships with 17.4mill. CGT and thus increased their stake to 19%. Behind the shipyards of the Philippines and Brazil (2% each), the German shipbuilding made it to 6th position with 1%.
At the end of the third quarter 2015 bulkers still dominated global order books. Both in terms of CGT and in total this type represented around a quarter of the portfolio (28.3mill. CGT, 1,466 orders). Container ships formed the second largest segment at 18% CGT market share (19.7mill. CGT). Due to the dominance of large units, however, container ships in total numbers (505 vessels) only had a market share of 8%.
Likewise gas tankers had a 15% CGT share and a 6% share of the total backlog. In contrast, offshore vessels with 17% market share were equivalent to the second largest segment next to bulkers, while the offshore CGT share with 9% was significantly lower. The same was true for the other non-cargo-carrying vessels with a share of almost 17% (3% according to CGT).
Stable order situation in Germany
Overall, the order situation of German maritime shipbuilding had relatively positive results in civilian shipbuilding during the first three quarters in 2015. However, large discrepancies between individual companies occured. New orders remained stable compared with 2014 showing potential to surpass previous year’s figures by more and already generally known orders for the final quarter.
In the first three quarters German shipyards received six new contracts with a volume of 507,000 CGT worth 2.9 bill. €. Almost 100% of the order volume came from foreign customers. Deliveries included seven vessels with a volume of 208,000 CGT worth 1.0 bill. €. In addition, three platforms for offshore wind farms worth 0.3 bill. € were delivered.
Backlogs have increased both by CGT and in value at the end of the third quarter 2015 compared with late 2014. At the end of the third quarter a total of 38 orders were still in the German maritime order book with a tonnage of 1.9mill. CGT worth 12.1 bill. €. Two contracts for offshore platforms gave rise to the total value of the order backlog of 12.5 bill. €. In terms of value of the product segments passenger ships with 64% and yachts with 27% had the largest specific share in the order backlog of German yards. These were followed by offshore vessels with 4% and offshore platforms with 3%.
The German shipyard’s total revenue (enterprises with more than 50 staff including boat, yacht and inland shipbuilding, naval and repair/retrofit) totalled 3.1 bill. € for the first three quarters. Against the background of the relatively prosperous previous year (6.4 bill. €), revenues were relatively low projected for the whole of 2015. However, a corresponding employment slump has not occurred. Timing factors in settlement often result in strong fluctuations in quarterly and annual revenues due to the differing volume of respective orders. An overall stable situation is reflected by the development of employment which increased by 1% from December 2014 to September 2015 (17,900 to 18,100).
The situation of the companies in the German maritime shipbuilding supply industry is difficult. The more export orientated individual companies acted towards Asian shipbuilding countries, the more they were affected by the global slump in demand. The low price of oil and the turmoil surrounding the Brazilian state-owned oil company Petrobras, as well as the sanctions in Russian business have particularly seriously affected the offshore industry and stopped many projects. Ongoing economic policy events, such as the persistence of the crisis in Greece, the large refugee onslaught in Europe in particular, growing nationalism in many countries and the growing threat of international terrorism pose additional risks for economic development in the recent future
VSM
