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2018 Shipbuilding Review: Mind The Unit!

We all know shipbuilding is one of the toughest businesses around but just how tough was 2018? Well it seems the answer depends on which unit of measurement you use! Using DWT, ordering fell 14% to 77m dwt while using CGT, a better reflection of the work content of building vessels, ordering increased by 2%. On balance its seems that conditions remain challenging but still improving on the 2016 lows.

Mind The Unit! (see 1, 2)

Ordering at shipyards in 2018 fell 14% to 77m dwt, higher than 2016 (29m dwt) but still 17% below the average since the financial crisis. Not a terrible result for overall shipping market supply, with the global orderbook steady at just 10% of the fleet. On a more positive note for yards, ordering by CGT was up 2% reflecting increased orders for LNG and large containerships (see below). In value terms, USD 64.7bn of orders were placed (2017: USD 69.2bn, 2016: USD 36.7bn). We also have the breakdown by GT, KW, TEU and CBM if you like your units!

Dash For Gas! (see 1)

The stand out investment sector was LNG, where there was an ordering run of 69 vessels of USD 11.7bn (bunkering and FSRU take the LNG total to 76 (2017: 17). Tanker ordering fell by around a third to 23m dwt, with 39 VLCCs (2017: 56) while bulker order volumes dropped 25% to 31m dwt. LPG ordering increased to 41 vessels (2017: 27) and containership orders increased to 190 (2017: 140). Cruise (24 orders) and ferry (51 orders) remained active.

Regional Orders (see 2, 3, 6)

In CGT terms, South Korean contracting increased by 67%, driven by a 98% share of LNG, to achieve a 44% global share of orders, compared to 32% for China and 13% for Japan. The equivalents by dwt are Korea (43%), China (39%) and Japan (15%). The global orderbook backlog declined marginally to 208m dwt – this orderbook represents 2.6 years at 2018 production levels (although Europe’s cruise position helped it reach > 5 years). The number of active yards also fell again while Greek owners nearly doubled their investment. Generally newbuilding prices increased 10% y-o-y, with our VLCC index increasing 13%, MR 8%, Capesize 14% and Ultramax by 8%. Gas pricing uplift was more modest. Steel prices increased before easing in Q4 and currency movements were mixed.

Regional Output (see 4)

Shipyard output declined by 10% during 2018 to reach 30.2m CGT, with a steeper decline in dwt terms reflecting lower volumes of tanker and bulker tonnage delivered (down 18% y-o-y to 79.7m dwt). Our current forecast for 2019 suggests output at similar, or slightly lower, levels. From a regional perspective, Chinese yards retained their lead position with a 36% market share by CGT, followed by Korea (25%) and Japan (25%). Japanese output in dwt was slightly higher than Korea.

Adding In The Extras…

The accelerating environmental regulatory timetable continued to filter into the newbuilding market. Our current estimates suggests over a third of the orderbook by tonnage has a scrubber ordered, although for the Capesize orderbook this increases to around 50%, for VLCC to over 70%, and for VLGC to 75%. Around 14% of orderbook tonnage is now LNG fuel capable (majority of these are LNG vessels). Have a nice day, especially to our shipyard friends surviving in one of the toughest businesses around!
Source: Clarkson Research Services Limited

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