New vessels order plunges, hits $10 billion in H1 2018

Global build orders for new ships have been estimated at about $10billion in the first half (H1) of 2018, the lowest in the last two years.

A new report released by Vessels Value, an international shipping consultancy firm, showed that the orders are on a downward trend from $13billion in the fourth quarter (Q4) 2017 to $10billion in Q1 2018, and further to $3billion by Q2 end.

Associate Director, Vessel Value, Claudia Norrgren, in the report made available to The Guardian, said enthusiasm for new build orders across most shipping markets have started to wane after over $10billion were committed in Q1 2018.

The report showed that total commitment 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. 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.

“Rising asking prices from shipyards are partially to blame in 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,” it stated.

According to Vessels Value, the slowdown in new builds is an encouraging sign that over-ordering may not be a significant issue. Although it noted that, “some of the market segments have a large outstanding order book, but most of these are offset by an equal number of ships on the water, which are equal to their recycling value.”

It however noted that if orders remained at the $4-$8billion level through the rest of the year, it should support the asset values of younger ships as well.

“The headwinds to global trade may give some owners pause in fleet renewal plans, especially in the container and dry bulk markets, which would be directly impacted by the higher prices for consumer goods which would result from tariffs.

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