Global Shipyards Are Sinking Amid Oversupply

Thursday, 29 Nov 2012 02:29 PM

By John Morgan

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Nearly half of global shipyards will run out of orders to work on by the end of 2012, as oversupply, lower freight rates and other unfavorable factors mount, The National reported.

The dismal outlook means more consolidation in shipbuilding looms, according to Deutsche Bank research cited by the Abu Dhabi-based newspaper.

Global shipbuilding has been in a downturn for four years, the Deutche Bank analysts concluded. “For the small shipyards, the painful industry restructuring that started in 2010 is expected to continue as shipyards struggle with lack of orders and tight financing,” said Sanjeev Rana, a Deutsche Bank analyst.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

Rana predicted already-low ship prices will fall further and estimated 45 percent of shipyards worldwide have no building projects post-2012.

“This means the finances of small shipyards are likely to deteriorate further and banks might be unwilling to issue refund guarantees to them, starting a negative feedback cycle,” Rana said.

Clarksons, a London-based ship broker, said the number of active yards has shrunk by 44 percent since 2008 and predicted further consolidation is ahead before a ship building recovery takes hold, The National reported.

Clarksons estimated ship prices have slipped about 35 percent from the peak. It cited weakness in freight rates, financial markets and expectations of fuel-efficiency advancements as factors keeping customers on the sidelines.

One bright spot is continued healthy demand for liquefied natural gas carriers and other offshore orders related to energy, Deutche Bank’s Rana said.

Hellenic Shipping News lamented the global shipping overcapacity.

“With shipping line profitability a cruel joke and such economic uncertainty gripping the world you would expect the brakes to be placed on orders. Except ships have to be ordered at least three years in advance, and once under construction their delivery can be slowed but not halted,” the trade publication said.

Hellenic Shipping News reported that in the next three years, 120 vessels with more than 10,000 20-foot cargo container capacity will be delivered, injecting an “ incredible” 1.62 million 20-foot equivalent unites into the global fleet.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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