Newbuilding orders on a downslide, demolition activity picks up

In what appears to be good news for the future long-term prospects of the shipping industry, it seems that ship owners’ appetite for newbuilding vessels has abated, while older vessels are finding their way to scrapyards in Asia on a faster pace. This means

that in the future the current tonnage oversupply problems could be alleviated, should demand keep picking up across the world.
According to the latest weekly report from shipbroker Golden Destiny, “in the newbuilding market, the week closed with limited fresh activity posting a 72% week-on-week decline as only 20 units reported to have been placed, after last week’s record activity of 72 new transactions. After almost three weeks, no contracting activity has been witnessed again in the bulk carrier segment that seems comforting for the industry, taken into consideration the ongoing scheduled deliveries till the end of 2012. The total invested capital estimated to be around $4.4 bn, 4 newbuilding transactions reported with no revealed contract price, with offshore segment grasping 75% of the investment value. The floating storage booked by Shell for delivery within 2016 is the world’s largest floating gas production and storage vessel and one of the highest capital intensive investments. Thus, in terms of invested capital, the most overweight sector appears to be the offshore, while containers have won the largest share (45%) of this week’s newbuilding activity. At a similar week in 2010, the newbuilding activity was up by 55% than current levels with 31 new contracts to had been reported worldwide and bulk carriers winning 80% share of the total volume of reported contracts” said the report.
According to data compiled from the shipbroker, in the tanker market, the MR ordering trend continues with India’s Great Eastern Shipping placing two units of 51,000dwt in the South Korean yard “SHINAsb” at a price of $36 mil each. In the container segment, the ordering spree for the mega containerships seems limitless with Seaspan placing a firm contract of $700 mil to build seven 10,000 TEU boxships in China’s Yangzijiang Shipbuilding. Seaspan signed letters of intent with the yard on February to build 22 identical units.
In the offshore segment, the buoyed sentiment is still there with some new fresh orders expecting in the coming days. Petrobras’ board of directors have officially sent into motion a tender for the construction of 21 drilling rigs, ultra deepwater drillships, to be built in Brazil.
Meanwhile, in the demolition market, “the keen interest for scrapping tonnage is still high with prices remaining at the same levels during the last days and bulk carriers remaining on the top of scrapping appetite. Bangladesh and India offering the highest levels by paying close to $500/ldt for dry and excess $500/ldt for wet cargo, while China is still far below the best levels offered in the Indian subcontinent region. With the monsoon period and the upcoming closure of Bangladesh on the beginning of July, there is more hope for a bounce back of China within summer period. Pakistan is quite inactive during the last days as the result of its budget announcement is being filtered by the local buyers. There has been a kind of softness in the activity, but there are still deals concluded at very appealing levels for the owners.
The week ended with 10 vessels reported to have been headed to the scrap yards of total deadweight 578,408 tons. In terms of the reported number of transactions, the demolition activity has been marked with a 44% week-on-week decline and 62% in terms of total deadweight sent for scrap. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker sector by India for a MR tanker of 43,644 dwt “OVERSEAS NEW ORLEANS” at 525/ldt and by Bangladesh for a capesize of 201,227 dwt “BRAZIL STAR” at the same price. India along with Bangladesh has attracted 80% of the total demolition activity. At a similar week in 2010, demolition activity was down by 30% than the current levels, in terms of the reported number of transactions, 7 vessels had been reported for scrap of total deadweight 123 mil tons with only two bulk carriers scrapped and India offering the highest levels $350/ldt for dry and $380/ldt for wet cargo” concluded Golden Destiny, adding that shipowners from Hellas were absent from this week’s activity both in the second hand, as well as in the newbuilding markets.
Nikos Roussanoglou, Hellenic Shipping News Worldwide