Newbuilding purchases 1H 2018 drop to early-2016 levels

The appetite for newbuilding orders across most shipping markets has started to wane after over US$10bn was spent in the first quarter of 2018, shipping analyst VesselsValue stated in a market report.

The total committed to new deliveries is now the lowest since the start of 2016.

Ordering trends in the start of the year were highest in the markets that were seeing the highest returns, the analyst maintains. This includes the dry bulk and LNG carrier markets. But not in the low earnings environment tanker markets where demand was softer.

Rising asking prices from shipyards are partially to blame for the downturn in new orders.

“Higher steel prices, smaller workforces, and less willingness by the yards’ creditors to accept low margins are contributing to lower buyer interest. The slowdown in newbuildings is an encouraging sign that over-ordering may not be a significant issue.

“Some of the market segments have a large outstanding orderbook, but most of these are offset by an equal number of ships on the water which are equal to their recycling value. If orders remain between the US$4-US$8bn dollar level through the rest of the year it should support the asset values of younger ships as well,” the report added.

The adverse sentiment surrounding global trade may put a break on fleet renewal plans, particularly in the container and dry bulk markets which would be directly impacted by the higher prices for consumer goods resulting from tariffs.

“However, most shipping markets appear to be at their trough level or improving, which should encourage more investor interest in newbuildings going forward. The shift in money being committed to the ships is a good reminder that the cyclical nature of the business remains intact,” VesselsValue concluded.


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