Shipbuilding In 2017: Any Signs Of Improvement?
Despite an uptick in ordering, 2017 was another difficult year for the shipbuilding industry, with contracting remaining well below trend and most shipyards continuing to feel the pressure. Some sectors saw improved contracting activity, while deliveries remained relatively firm, but shipbuilders will be looking to see more positive changes before predicting a return to better times.
Feeling The Heat
Although contracting began to pick up last year from record lows in 2016, when only 604 vessels were ordered, shipbuilders continued to face difficult conditions in 2017. Just 902 orders of 72.8m dwt were reported globally, only the third year in the past twenty in which less than 1,000 new orders were reported. Of the major sectors, bulkcarrier orders saw the biggest uptick, with 286 vessels contracted last year, although this remained subdued compared to historical levels. Driven by large crude units, tanker contracting increased to 271 vessels, but fell well below the level of ordering in 2015. Meanwhile, the boxship newbuilding market showed fewer signs of improvement and just 108 units were ordered. Gas carrier and ‘ship-shaped’ offshore ordering was also limited, with just 39 and 37 contracts reported respectively in 2017.
Fighting For The Spoils
Chinese builders won the largest share of orders last year, picking up the majority of bulker orders and taking 9.2m CGT in total. Ordering at Korean yards improved on record low 2016 levels, but remained limited at 6.4m CGT, while reported contracting reached 2.0m CGT at Japanese yards. The strength of cruise newbuilding continued to benefit European shipbuilders, which accounted for 38% of global estimated contract investment in 2017 in value terms, though many yards operating outside of the cruise sector struggled.
Orderbook On The Slide
While it began to stabilise towards the end of 2017, the size of the orderbook declined 13% in dwt terms in the full year, to reach 3,158 units of 196.9m dwt. This is the first time the orderbook has fallen below 200m dwt since 2004, accompanied by a decline in the number of ‘active’ yards (those with at least one vessel of 1,000+ GT on order) from 440 at the start of 2017 to 360 as of start 2018.
World Fleet Still On The Up
Although contracting remained limited in 2017, shipbuilders continued to deliver a steady volume of tonnage. Total shipyard output reached 97.0m dwt, although ‘non-delivery’ of the scheduled start year orderbook was still significant at 30% in dwt terms. However, given the smaller orderbook, deliveries are currently projected to decline by around 20% in tonnage terms in 2018. After a strong start to the year, total demolition activity in 2017 declined by 21% in tonnage terms to total 35.2m dwt. This left overall fleet growth relatively steady at 3.3%, slightly faster than the previous year but well below pre-2015 levels. The total world fleet stood at 1,924.0m dwt at the end of the year, with fleet growth remaining firm in the gas carrier and tanker sectors.
Hope On The Horizon?
With output set to decline following multiple years of weak contracting, shipbuilders will be hoping that the moderate upward trend in orders last year accelerates in 2018. Capacity reductions remain ongoing, but many shipyards are still hungry for new orders. Although contracting activity has picked up slightly, conditions remain difficult, and shipbuilders will be hoping for further signs of market improvement in the coming year.