I Saw Three Shipyards Come Sailing In

A favourite English Carol goes "I saw three ships come sailing in, on Christmas Day, on Christmas Day" Then it goes on to ask what the ships were carrying. Unfortunately todays Christmas container cargo is a bit too diverse to fit into a carol - maybe 1.9 million Christmas decorations; 11,500 televisions; 1,548 frozen chickens; 9,430 decorative candles; 4,000 pairs of women's knickers (sexy) etc.etc.
What's in the Shipyard, Sailor?
Anyway today it's not three ships we are concerned with, but three groups of shipyards (see graph). Leading the convoy are the Mega-yards each with an orderbook of over 1m compensated gross tons (CGT). Following at a respectful distance are the Big yards, with orderbooks of 0.5m to 1m CGT. And in their wake are the Small yards, with orderbooks of under 0.5m CGT. The course of this imposing fleet since 2008 is plotted in our chart, showing quarterly deliveries.
On Course for a Record?
Despite the economic storms, the shipbuilding armada has made astonishing progress. Somehow during the first 11 months of 2011 2,259 ships got delivered (and, presumably, financed) and scheduled deliveries in the last quarter are 80% higher than three years ago.
However, the course the shipyards will sail in the coming year looks very different. Output from the Mega-yards peaks in Q1 2012, and then falls to 64% of that by Q1 2013 and to 31% by 2014. The Big yards decline to 82% in Q4 2012 then down to 22% by January 2014.
Unless there is a surge of new orders in the very near future, they are sailing into a storm. And at the same time they have a very big cargo for delivery next year - 37m dwt of tankers; 88m dwt of bulkers; 16m dwt of containerships and a mix of other vessel types.
What's in the Shipyards?
All of which leaves the shipyards, their customers and bankers with plenty to think about over the Christmas break. Firstly the possibility that credit finally dries up, causing problems getting delivery finance for the orderbook. Secondly the diminishing orderbook over the next year means pressure to book new orders (ideally 15 months before start-ing work). Thirdly the shipyards do not know what ship types their customers will be looking for, nor in most cases do investors. Bulkers seem unlikely, but the tanker demand story is gloomy and its hard to get excited about containerships.
Sailing Into the Future
So there you have it. The shipyards are at full speed, and over the Christmas holidays they can celebrate their exciting voyage over the last three years. They will also, no doubt, think hard about setting a new course for the coming three years. Shipbuilding sales volumes may be slim and prices are likely to be under increasing pressure. But as the tough men of that industry know very well, shipbuilders have to take the rough with the smooth. Have a nice day.