BIMCO: Shipbuilding orderbook hits 17-year low

The total orderbook for dry bulk, container and tanker ships has reached its lowest point in 17 years as Covid-19 massively slowed contracting (-50%), BIMCO’s data shows.

Illustration; Image by Navingo

However, deliveries of new vessels have proved more resilient (-2%), as shipyards work through lockdowns to meet their delivery schedules and remain busy.

The orderbooks for dry bulk and container ships, in particular, have fallen sharply. At 63.4 million DWT, the dry bulk orderbook is at its lowest level since April 2004 and 34.7% smaller than twelve months ago.

Similarly, the orderbook for container ships has fallen 10.3% in the past 12 months to its lowest level since September 2003.

The fall has left the orderbook to fleet ratio at its lowest level in many years at just 7.7%.

BIMCO insists that low ordering activity is in no way a reason for a flurry of new contracting activity, stressing that even at this ratio there is a significant amount of tonnage especially given the poor outlook.

In the first seven months of the year, contracting for dry bulk vessels decreased by 65.6% from the start of the year and orders for new container ships are down 37.7%.

“Contracting activity has been quick to feel the effects of the pandemic with owners and investors showing little appetite for new ships,” says Peter Sand, BIMCO’s Chief Shipping Analyst.

The tanker shipping industry has also recorded a fall in its orderbooks, though not as sharp as the falls in dry bulk and container shipping books. This is primarily because the tanker orderbook has been at a much lower level than that of dry bulk and containers in the past two decades. The orderbook for crude oil tankers stands at 36.3 million DWT and for the oil product tanker fleet at 12.1 million DWT, down 4.2% and 12% from 12 months ago respectively.

In fact, product tankers is the only segment to have seen higher contracting this year than last, up 2.9% in the first seven months of the year at 3.2 million DWT. Orders for new crude oil tankers have fallen 41.3% in the same period, a drop from 10.1 million DWT last year to 5.9 million DWT this year. Deliveries have fallen by 39.1% for crude oil tankers and 46.1% for oil product tankers while total tanker deliveries so far this year have amounted to 10.1 million DWT compared to 17.2 million for the same period in 2019.

Demolition activity rises as yards re-open

The decline in appetite for new ships comes at a time when many owners are keen to get rid of their existing ships. As major demolition nations around the world have eased their lockdowns and once again opened their yards, June and July saw a strong uptick in demolitions. Total demolition activity in July totalled 1.8 million DWT, up by 1.2 million DWT from July 2019, an almost 400% increase from demolitions in April 2020.

In particular dry bulk and container demolitions have increased, up 80.9% and 26.3% respectively, while 8.8 million DWT of dry bulk capacity and 152,770 TEU of container ships have been sent for demolition since the start of the year.

“The sharp uptick in demolitions following the reopening of yards is entirely expected due to the demand shock from the Covid-19 crisis and expectations of a long road to recovery ahead of us. This is reflected in both the higher demolition numbers, with owners pushed to act on older and substandard ships that they had kept sailing until now, as well as the drop in contracting as the outlook for the next few years has become much gloomier than it was at the start of the year,” says Sand.

Nevertheless, the fleet continues to grow 

Despite the rise in demolitions and decline in deliveries in many sectors, the fleets continue to grow because in volume terms, deliveries are much higher than demolitions.

The dry bulk fleet has exceeded 900 million DWT for the first time (901.67 as of 3 August), with the fleet growing by 2.6% since the start of the year. The crude oil and oil product tanker fleets have experienced the next highest fleet growth of the four, at 2% and 1.7% respectively, with the container shipping fleet bringing up the rear by growing 1.2% since the start of the year.

“The continued increase in the supply of ships, despite higher demolitions and lower contracting, cannot be ignored as the volume of world trade is set for a considerable drop this year, and not forecasted to return to pre-pandemic levels until at least 2022. While the decline in contracting will result in slowing fleet growth in the coming years, balance in the shipping markets may prove elusive for many years to come,” Sand concluded.