Will Shipyards Run Out of Orders in 2013 – 2014

Shipyards’ order cover continues to decline as more tonnage is being delivered than contracted. In 2012, the global order cover fell by 20% to 19 months.

According to the Danmarks Skibskredit A/S latest market review, only 30% of global yard capacity has been in demand during 2012 as 13 million cgt was contracted. Capacity has started to adjust. Skibskredit estimates that 4% of the global yard capacity will close or at least become inactive in 2012.

The remaining yards delivered on average 75% of the orders as scheduled during the period. While large yards delivered 96% of their orders, small and medium-sized yards struggled to meet their delivery schedules.

In 2013 and 2014, many yards will be running out of orders. Small and medium-sized Chinese yards appear to be at the epicenter of the capacity adjustment process. Global yard capacity, by the end of 2014, could be back at the 2008-level.

The impact on newbuilding prices could be profound. If capacity rather than marginal construction costs is to determine newbuilding prices, a return to the 2002-lows is a possibility.

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Source: skibskredit,October 16, 2012