Drewry: Market Improves as Orderbook Shrinks

Drewry’s latest Chemical Forecaster report highlights a significant change in the orderbook. Persistent fleet expansion far in excess of trade growth has persistently eroded utilisation rates, checked only by scrapping. The only good news is that current market conditions are making it harder to get credit for newbuild orders, which has led to a shrinking of the orderbook. With a lot of publicly listed companies under duress as earnings decline, they are forced to cut costs and cut back their investment in newbuilds.

A strong decline in new orders has seen the chemical tanker orderbook drop to its lowest in 10 years. From a high of 39% in 2006, the orderbook remained above 30% through to 2008 as boom conditions prevailed. After the global economic fallout in 2008, when the orderbook stood at 33%, it declined rapidly to 19% in 2010 to the current low of 7.6%.

The fallout of this has been disastrous for shipyards, with many reportedly closing down in China. South Korean yards accounted for over half of the orderbook, with Chinese shipyards accounting for just under 30%. Japanese and Turkish shipyards took the remainder, but both had shares in single figures.

The emergence of Chinese shipyards is significant. Eleven years ago, only 34 chemical tankers with a total of 642,000 dwt had been delivered from just ten different Chinese shipyards. During the next ten years, over a 100 different Chinese shipyards delivered 627 ships with a total dwt of 10.6 million dwt.

Eighty of the total 151 ships on the orderbook were delivered in 2012, all coming from yards in China, including several that were thought to have been cancelled. Of these 80 ships, 68 are below 20,000 dwt and most are in the 5,000 to 10,000 dwt class, with many now trading Palm Oil. Korean yards delivered 28 ships; all but one being above 37,000 dwt. Japanese yards delivered 24 ships in sizes ranging from 1,231 dwt to over 50,000 dwt.

The average dwt of the ships on order is now 32,015 tonnes against 23,934 tonnes a year ago. New ordering activity of late is gravitating towards larger sizes of 38,000 dwt or above for deliveries spread into 2016. The move towards MRs and Handysize tankers has been prompted by better fuel efficiency and more environmentally friendly engines. The larger ships are mainly IMO 2, which are mostly for the petroleum product trades with chemicals or vegetable oils as opportunistic cargoes. The overtonnaging in the smaller ship sizes has restricted ordering and it is doubtful if many will be ordered speculatively for a few years to come.

Drewry, February 21, 2013