Photo: Illustration; Image by Offshore Energy

VV: Shipbuilding orders in 2020 down by 41% YoY

Ordering of new ships in 2020 has decreased by 41 percent when compared to the same period in 2019, data from UK-based vessel valuation agency VesselsValue shows.

According to a chart listing this year’s ordering patterns, a total of 532 ships have been ordered so far this year, worth a total of $26.7 billion.

A great chunk of those orders took place during the first quarter of this year before the impact of the COVID-19 pandemic started being felt across the globe, while the remainder of the year was characterized by fairly flat figures.

Graph
Image by VesselsValue

Chinese shipbuilders account for the majority of the contracts secured, having amassed 246 orders from the total, dominated by bulkers (93) and tankers (65), followed by South Korean counterparts in the second place with 137 orders and Japan accounting for 94 orders.

South Korean shipbuilders have been the preferred builders of tankers, according to VV data, having secured orders for 99 tankers until now.

To remind, earlier this week Korean shipbuilding heavyweights, Korea Shipbuilding & Offshore Engineering, and Samsung Heavy Industries, won orders for 13 ships worth over $1.06 billion.

KSOE won orders for ten 300,000 ton very large crude carriers (VLCCs) worth $890 million, while SHI secured contracts for three crude carriers worth $175 million. 

Interest in containerships has been dwindling based on the figures, from 102 ordered in the comparable 11 months of 2019 to only 45 in the same period this year.

Ordering of containerships, especially ultra large ones has been on a major downturn due to the impact of the coronavirus pandemic on the demand in the sector.

However, owners seem to have gotten the best out of the situation, having taken a very disciplined approach to capacity management and staying clear from adding new capacity to the market.

Figures from 2019 indicate that over the same period a total of 906 vessels were ordered, equivalent to a total of $38.7 billion in value.

Image by VesselsValue

The year was also dominated by tankers (288 units) and bulk carriers (196), followed by small dry (156 units) and container vessels (102).

Image by VesselsValue

Aside to the unprecedented level of uncertainty caused by the pandemic, coupled with demand-supply imbalance, and deteriorating market fundamentals, the lower ordering this year has also been attributed to the uncertainty regarding what types of ships to order.

Industry majors agree that it is very risky to order a ship now as the asset might result in being a stranded investment due to the mounting pressure from the regulatory side to cut emissions from ships and decarbonize.

Even though there have been major breakthroughs when it comes to ship design efficiency and fuel consumption technologies, these are still not believed to be sufficient to meet the zero-emission objectives the industry strives to attain.

Therefore, many owners have instead joined forces in research and development initiatives aimed at coming up with zero-emission solutions and fuels and scaling them up in order to be able to switch to a net-zero alternative in the next decade.

What is more, securing financing for new ships is becoming more complex, as shareholders and investors are favoring more environmentally-friendly investments.

Even though there is over a month to go until the end of the year, the sluggish demand is likely to continue in December as well despite lower newbuilding prices to attract deals.

High hopes are put on 2021 recovery for the shipbuilding sector amid positive developments on the COVID-19 vaccine as well as Biden’s presidency in the U.S., which is expected to relax major trade tensions between China and the U.S.

The shipping sector’s recovery will of course depend a great deal on the timing and pace of anticipated demand rebound post-COVID.

That being said, shipowners across the board remain very bearish when it comes to ordering new vessels as they await more clarity on the sector’s decarbonization pathway.

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