Price of New Ships Keeps Falling in Shipbuilding Industry

The shipbuilding industry is wary of a continuous decline in “newbuilding” prices. According to Morgan Stanley, the price is forecast to keep dropping until next year.

The newbuilding price index went up from 126 to 140 between November 2012 and June last year. However, it has declined all the way since then to reach 132 on June 19 this year. Besides, downward movement has accelerated this year. The index fell from 137.5 to 132.9 between January and May.

The trend can be attributed to supply-side factors including the aggressive bidding strategy on the part of Japanese shipbuilders. China’s shipbuilding capacity has been on the decline since 2013, with smaller companies driven out of business, and Korean shipbuilders have refrained from cutthroat competition since last year in the wake of huge losses. Meanwhile, Japan increased its capacity and announced the expansion of facilities last year on the back of the weak yen.

Fortunately for Korea, though, the newbuilding prices of container carriers, oil tankers and the other types of ships that Korean companies are good at are holding up. According to the Clarkson Index, that of a cape-size bulk carrier dropped from US$58 million to US$50 million between May 2014 and the same month of this year, whereas those of 13,000 TEU and 8,800 TEU container carriers edged down from US$117 million to US$116 million, and edged up from US$88 million to US$89 million during the same period, respectively.
Source: Business Korea