2017: A Golden Year for Cruise Shipbuilding

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Last year was another golden year for the cruise shipbuilding sector, ASSONAVE, an association representing the majority of the Italian shipbuilding industry, said.

The cruise sector closed 2017 with a high level of new orders — 23 ships of over 10,000 CGT compared to 25 in 2016, for a total of 71,200 LB versus 45,162 LB in 2016.

Fincantieri, with its subsidiary Vard, acquired twelve ship orders and three units subject to memoranda of agreements.

Fincantieri’s orderbook is at the record level of 80 ships, equal to 225,600 LB, for over 9 million CGT, versus 4.2 million CGT at the end of 2007, the year with the highest number of orders before the financial crisis, ASSONAVE said at its latest meeting held in Rome this week.

A global shipbuilding sector is beginning to show the first signs of recovery after hitting a 20-year low in 2016. However, the recovery seems to have been patchy — the cruise ship industry remains in excellent shape, the naval and nautical sectors are showing an increasingly promising outlook, the standard and High-Tech ship sector is recovering, but the offshore sector is at a standstill.

For these reasons, 2017 could be defined as “the year of selective recovery”, according to ASSONAVE.

As explained, trends in recent years reflect the excess in productive capacity that has been mainly created by shipyards in Asia, where state support has led to a dangerous dumping policy. This has generated “speculative” orders by shipowners that proved to exceed the market’s capacity for absorption, and this led to an excess of supply on the part of shipowners and a drop in leases, all to the advantage of exporting economies since 90% of traffic is by sea. Failure to respect market fundamentals and the resulting over-supply led to a drastic drop in orders in 2016, with shipyard closures, layoffs, and state bailouts in the Asian shipbuilding industry, particularly in Korea. This once again proves that markets cannot be artificially altered for too long, ASSONAVE said.

Yet the Italian shipbuilding sector and its supply chain have managed to stay in the right part of the market, as they have concentrated in the three sectors – cruise, naval, and nautical – where Asian dumping did not take place, since barriers to entry were particularly high in these very high value-added sectors, the association added.

In terms of geographic areas, China remained the global leader for 2017, with its 7.2 million CGT accounting for a share of 33%, followed by Korea, which, after bottoming out in 2016, accounted for 32% with 6.9 million CGT in new orders.

The European shipbuilding sector had orders amounting to 3.6 million CGT, of which 80% were cruise ships.

Finally, Japan’s share amounted to 6%, with orders of just 1.4 million CGT, even less than the already dramatically low 1.5 million CGT in 2016.

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