VV: Enthusiasm for New Ship Orders Started to Wane

Illustration. Image Courtesy: Pixabay under CC0 Creative Commons license

The enthusiasm for newbuild orders across most shipping markets has started to wane after over USD 10 billion were committed in the first quarter of 2018, according to a report from VesselsValue.

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 recorded the highest returns. This includes the dry bulk and LNG carrier markets, while interest in the low earnings environment tanker markets was softer.

“In one sense this highlights the short-term view that some investors take of the market. It still appears to be easier to secure financing for ships in a strong market as opposed to those that are suffering in the doldrums.”

VesselsValue explained that rising asking prices from shipyards are partially to blame in the downturn in new orders. Higher steel prices, smaller workforces, and less willingness by yard creditors to accept low margins are contributing to lower buyer interest.

“The slowdown in newbuilds 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 USD 4 and 8 billion level through rest of the year it should support the asset values of younger ships as well, VesselsValue said.

The headwinds to global trade may give some owners pause in fleet renewal plans, especially in the container and dry bulk markets, however, most shipping markets appear to be at their trough level or improving.

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