Newbuilding Demand Down Everywhere?

Newbuilding activity fell to historically low levels in 2015 and just 77 orders have been reported in the first quarter of 2016. Compared to average annual contract volumes over the last decade, owners in many major shipping countries placed orders for significantly less tonnage last year. However, in one or two of the key owner nations investors did manage to buck the global trend…

Appetite For Newbuildings

Newbuild activity provides one indication of an owner country’s likely future fleet growth, though secondhand sale and purchase and demolition activity will also influence the size of an owner country’s fleet. Over the last decade, shipowners’ fleet expansion plans have generally been fairly positive, and an annual average of 91.8m GT was ordered between 2005 and 2014. However, contracting slowed in 2015 with 70.2m GT contracted and newbuild demand has been extremely limited in 2016 so far with only 1.6m GT reported ordered. In numerical terms the decline has been even more stark, as interest in the larger ship types supported the tonnage ordering total last year.

European Ordering Down

Greek owners accounted for the largest volume of orders placed 2005-14 with an average 14.0m GT ordered. In 2015, Greek owners pulled back from the newbuild market, and with limited bulker contracting, Greek order volumes fell to 7.8m GT, 44% below the historical average 2005-14. Meanwhile, German owners ordered 68% less tonnage in 2015, 2.4m GT, compared to an average of 7.6m GT p.a. 2005-14, reflecting the overall decline in German ordering since the collapse of the KG finance system. Norwegian and Italian owners also accounted for relatively fewer newbuild orders in GT terms and in 2015 ordering levels fell 30% and 50% below their 2005-14 averages with 2.8m GT and 1.6m GT contracted respectively. A depressed offshore market reduced Norwegian newbuilding activity while Italian ordering fell from volumes seen in recent years.

Asian Demand Still Firm?

However, one major shipowning country did see ordering volumes increase in 2015. Japanese owners signed a reported 14.1m GT of orders compared to an average 12.8m GT contracted p.a. between 2005 and 2014. The majority of this tonnage (85%) was reportedly contracted domestically. Furthermore, Chinese owners saw a relatively limited 11% decline in ordering last year compared to the 2005-14 average (12.3m GT) with 11.0m GT placed. Ordering was largely state-backed and 51% of orders in GT terms were placed at state building groups CSSC and CSIC last year. Elsewhere, the volume of contracts placed by South Korean and Singaporean owners declined by 30% and 45% respectively in 2015 compared to the average 3.3m GT and 1.7m GT contracted p.a. 2005-14.

Exceptions To The Rule

Nonetheless, although Japanese owners were relatively active last year, owners from most other major countries still saw ordering volumes decline. With reported contracting levels so weak in 2016 so far, and activity expected to remain limited, shipbuilders will be crying out for investors from more than one country to prove exceptions to the rule this year.
Source: Clarksons