A Fleeting Look At The Orderbook

During the first six months of 2011, there have been notable changes in the shape of the global orderbook. This month’s ‘Shipbuilding Focus’ takes a closer look at the reasons underpinning the alterations in the orderbook in the four sectors which have shown

the greatest change.As shown by the Graph of the Month, the largest decline in the orderbook as a percentage of the fleet has been recorded in the Capesize orderbook. This has fallen by 12.7 points over the past six months and now stands at 48.3%. Declining orderbooks have also been recorded for all tanker and bulker vessel types, with the Suezmax orderbook, as a percentage of the fleet, having dropped by 7.1 percentage points since the start of the year.
Do Deliveries Drive Decline?
Much of this can be attributed to a higher level of deliveries. In the Capesize sector, 21.5m dwt of new vessels have been delivered in the ytd, which marks a 16.7% increase compared to the same period in 2010. However, this alone cannot explain the universal declines seen in the tanker and bulker sectors, as shown by the fact that Suezmax deliveries in the ytd were lower than those made in the same period in 2009 and 2010.
Does Over-Capacity?
Instead, over-capacity has begun to have an effect on the shrinking tanker and bulker orderbooks. This has depressed demand for newbuildings, with the result that contracting volumes for Suezmaxes and Capesizes have fallen in the ytd.
A Contracting Boom?
Conversely, higher contracting levels have underpinned the upturn in the size of the LNG and Post-Panamax containership orderbooks as a percentage of the existing fleet. In of 2010, no contracts were placed for 8,000+ TEU containerships compared to 88 placed in 1H 2011. Similarly, 27 contracts have already been placed for new LNG vessels, compared to 5 in the whole of 2010, which equates to a y-o-y rise of 440%. This helps explain the rise of 7.5 points in the size of the orderbook as a percentage of the fleet, although the effect of more contracting has been accentuated by the relatively small size of the start year LNG orderbook. Greater contracting levels are likely to continue as containership trade is projected to grow by 9.0% in 2011 and 8.8% in 2012. Meanwhile, LNG trade growth is projected to reach 7.0% this year, whilst greater demand for LNG from Japan following March’s earthquake has tightened vessel supply, boosting earnings.
The Short Term Impact
Low freight rates are likely to discourage contracting of tankers and bulkers, and their orderbooks as a percentage of fleet are likely to decline further. Meanwhile, the relatively small orderbook in LNG should ensure that deliveries do not impact its orderbook as a percentage of the fleet. However, heavy Post-Panamax boxship deliveries mean that the measure in this sector could go either way. On current delivery forecasts, a rate of contracting below 133,000 TEU per month would result in decline. Fortunately for yards, an average of 176,000 TEU per month was ordered in 1H 2011. For the time being it looks as if contracting could continue to outweigh deliveries in these two currently popular sectors.
Source: Clarksons