Newbuilding orders waning as ship owners wonder about shipping’s prospects

With the beginning of 2011 proving to be rather challenging for ship owners in the dry bulk industry, it seems only reasonable that most ship owners have scaled back their investment programme, delaying or postponing deals, in order to evaluate the current state of the market.

At the start of this new week, the industry’s benchmark, the Baltic Dry Index (BDI) lost further ground, ending the session down by 1.82% to 1,345 points. It was the Panamaxes that took most “beating” yesterday, retreating by 3,45% according to the Baltic Exchange. As for the Capesize market, losses were marginal, in an indication that perhaps the market has found the bottom.
As was expected, the Hellenic presence has lost its strength in the secondhand and newbuilding market. According to shipbrokers Golden Destiny, last week ended with just one overaged capesize vessel reported to have been purchased by Greek investors equalling a total invested capital region $14.55 million while in the newbuilding the orders reported in the supramax segment by Helikon Shipping can not be considered fresh orders are there are exercised options from on order placed a couple of months ago.

On a similar note, in the new building market, the week ended with “12 vessels reported on order, equalling a total invested capital around $838 million, posting an 80% negative change from previous week’s newbuilding activity. After two weeks of robust activity in January, the newbuilding business has eased of significantly with only 3 orders reported in the bulk carrier sector for smaller size vessels, handysize and supramax, while two of them are not fresh but just exercised options by Greek-owned Helikon Shipping Enterprises. Helikon boss Michael Papaioannou confirms that the deal to take up two more vessels was, in fact, sealed a couple of months ago but has only now come to light. The company last August had two firm orders for 57,300-dwt bulkers at STX as well as one optional vessel. Helikon negotiated a second additional ship on the basis of small price reduction. The original orders were understood to be costing about $32m each but it is now thought that the two latest ships have been inked for around $31m each. Hull numbers 2015 and 2019 at STX’s Dalian facility are slated for delivery in April and June 2013, Papaioannou says. The first pair is due out of the yard in November 2012 and February 2013. Greek investors have not yet rebound their business in the newbuilding industry while Chinese seem to be more active in their domestic yards. The continue slide of the dry sector raises questions about the future newbuilding trends. Will kamsarmaxes appear the same popular in 2011 as 2010 for ordering? At a similar week in 2010, newbuilding activity was standing at similar levels with 11 vessels reported on order, 3 units in the bulk carrier sector, as everyone was sceptical for the future of the market even though the signals of the BDI were positive. Now that the index is far below the 1,500 mark, it is uncertain whether the flurry of newbuilding activity from the previous second half of 2010 will remain stable” concluded Golden Destiny.
In a separate report, released yesterday, Clarksons said that with the early lunar holidays this year, this week has been rather a quiet one so far with a limited amount of fresh enquiry and Yards starting to look forward to the upcoming holidays. “It is typical of this time of year that marketing strategy is also fairly high up on the senior managers holiday thinking and how they should fill their orderbooks and meet their targets over the months to come.
This Year however they are facing the added pressure of currency pressures and uncertainty over the costings of steel plate going forward. It has been highly publicised in the press in recent weeks that the RMB has been strengthening against the Dollar and with the pressure on Beijing from Washington and other World Governments, the appreciation continues. The Yards in China are now having to factor this into their costings going forward and it will be interesting to see how this will affect pricing going forward, especially when considered alongside increasing Iron Ore pricing and thus steel plate. Of course the Chinese yards are not alone in facing these problems of currency appreciation and rising steel prices and it will be interesting to see how both the Korean and Japanese yards tackle these twin problems in the months after there return from the Lunar holidays” said Clarksons.