Will Newbuilding Market Have a Double Recession?

By Li Shengjiang

In the first half of 2011, the global newbuilding market has experienced a second downturn, with newbuilding turnover and hand-held orders both slumping and ship price maintaining at low level. According to statistics of Clarkson, by the end of June, the turnover of global newbuilding is 38.14m DWT, a decrease of 42% over the same period of last year; hand-held orders reached 429m DWT, a decrease of 10% compared with the beginning of the year, and a decrease of 33% over the highest level.At the same time, the price of each type of ship is at a low level, and the price of tanker and bulk carrier represents a further downward trend.

In terms of contracted ship types, containership has gradually become the main ship type in the market,accounting for 41% of the market in the first half of 2011 as compared with only 6% in 2010. Especially, the containership over 8000 TEU has become ship owner’s favor, accounting for 74% of containership turnover.However, the turnover of bulk carrier and oil tanker has experienced a rapid downturn. At the same time, the turnover of other high-value-added ship types has also experienced sharp increase as compared with 2010.

In terms of the type of contracted ships in the market,adapting to changes of technical requirements is becoming the new characteristic of the limited market, and the main ship types have all the characteristics of adapting to the market development, complying with new rules and standards, being environment-friendly and etc.

According to statistics of Clarkson, by the end of June,the number of the global hand-held orders is 6885, 429m DWT. With the consistent delivery of hand-held orders, the proportion of the delivery of low-value ships ordered after September 2008 is increasing.By the end of June,the low-value ships accounted for 50% of the hand-held orders. With further delivery of orders, the proportion of low price ship to be delivered would exceed high price ship in the latter half of 2012. Due to the long construction period, it means that shipyards have entered into a time of “low price”.Shipyards will face greater production and management pressure, and with the decrease of delivery, shipyards will face cutthroat low price competition.

Under the infl uence of various factors, in the second half of the year, the global newbuilding market will experience the same situation as in the fi rst half of the year. Judging from the current global economic situation, the development of macro-economy is full of dangers and uncertainty. Although it is predicted that Chinese economy will continue to rise in 2011, with the guiding principle of “adjusting structure and promoting development” as well as the slow growth rate of global trade, the development of national economy is beginning to shift to relying on domestic demand.China has been raising bank reserve requirement ratio and interest rates to check high in fl ation. But at the same time that related problems have been abated, it has also brought the problems of high-cost fi nancing for small and medium-sized enterprises, which in turn poses a potential danger for the continuous development of economy.