Sharp dip in shipbuilding orders seen to worsen as crisis drags on

Shipbuilding cancellations in November last year reached 154 and similarly dismayed shippers and builders, but the worst is yet to come. “As of April, there are already some 1,000 cancelled new buildings from all around the world and the number of cancellations is expected to increase further this year,” according to the Class NK, or Nippon Kaiji Kyokai, the world’s largest ship classification society.
The Class NK study also said that as of March this year shipyards in South Korea, China, and Vietnam are already reeling from the cancellations for new vessels, and this situation is expected to drag on until 2011.
It added that cancellations now include those deals made even before the contract with the yards were signed, or those that are tentative reservations with the shipyards, or those with letters of intent for a new ship to be built.
Shipyard operators accept financial problems arising from the global economic crisis have led to the cancellations, and note that they themselves suffer from higher costs, substantial construction delays, and reduced refund guarantees by financial institutions, the study said.
Owners said, on the other hand, that cash-flow problems as a result of the global financial crisis and charter defaults as a result of the falling market are the elements that buffeted their financials.
A large number of cancellations were bulk carriers with 281 cancellations followed by general cargo carriers (17), oil tankers (12), container carriers and chemical tankers (6 each), and other types (35).
From the total of 357 ships cancelled, 138 vessels were to be built in Korean shipyards, 130 in China and 44 in Vietnam. 
With the global financial crisis, banks were no longer able to give credit to ship owners, most of whom opted to pay the penalty for the cancellation than to shoulder the entire cost of the new vessels.
In the Philippines, industry sources said that most of the new buildings or those that have been dry docked in Subic Bay’s shipyards have been immediately laid up there as a result of the steep decline in global cargo volumes.