23-01-2017

2016 Contracting: Hard To Find Our Bearings

Clarkson

Contracting activity in 2016 fell to its lowest level in over 30 years in numerical and tonnage terms. Low levels of newbuild demand have continued to limit ordering across the majority of vessel sectors, and the majority of shipyards have struggled to win orders. However, record ordering activity in the cruise and passenger ferry sectors did at least provide a degree of positivity for European yards in 2016.

Contracting Going South

The 480 vessels reported ordered in 2016 represent the lowest level of newbuild contracting in over 20 years. While ordering in the containership and tanker sectors declined, the 48 and 46 vessels that were contracted in the bulker and offshore sectors respectively in 2016 represented record lows. The orders that were placed in 2016 were also ‘smaller’ when compared to 2015, with owners contracting vessels as single units or in pairs. There were only 10 contracts placed for 5 vessels or more in 2016, compared to 63 contracts in 2015. The number of yards reported to have taken an order for at least one vessel (1,000+ GT) in 2016 fell to just 126, down 47% from last year’s total of 238 yards.

All Quiet On The Eastern Front

A total of 44 Chinese yards were reported to have secured 212 orders of a combined 40.0m CGT in 2016, the largest volume of orders by builder country. This is a 66% y-o-y decrease in contracting volumes in CGT terms. Orders for 30 Valemax bulkers at four yards made up 36% of CGT ordered at Chinese yards in 2016. 11 South Korean yards were reported to have taken orders for 59 ships of 17.8m CGT in 2016, down 83% y-o-y in CGT terms. The tanker and gas carrier sectors accounted for 97% of contracts in terms of CGT, with no boxship orders reported at Korean yards last year. 19 Japanese yards reportedly took 64 orders in 2016, and contracting levels declined 89% y-o-y to 1.3m CGT. Domestic ordering remained important with Japanese owners accounting for 67% of CGT ordered at Japanese yards last year.

Sun Rising In The West?

Meanwhile European shipyards secured a reported 93 orders of a combined 3.4m CGT in 2016. This is the second largest volume of orders in terms of CGT in 2016 and placed European yards ahead of their South Korean and Japanese counterparts for the first time since 1999. Ordering at European yards in 2016 decreased 29% in numerical terms from 2015 levels, however in terms of CGT contracting increased by 33% y-o-y. This was greatly assisted by record newbuild interest in the cruise and passenger ferry sectors in 2016 and these vessel types account for 83% of the total CGT ordered at European yards in 2016. 15 orders for large cruise ships (100,000+ GT) accounted for 61% of orders in CGT terms. However of the 35 European yards reported to have taken an order in 2016, only seven won a contract in this sector.

Overall, 2016 was a very weak year for newbuild ordering and this has been felt across most vessel sectors and by most shipbuilders. The big Asian nations all experienced downturns in contracting, though strong cruise ordering supported some European yards, allowing them to ascend the builder rankings. As we begin 2017, yards in most parts of the world will be hoping for a brighter year.

Source: Clarksons

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