Between 2006 and 2008, 12,584 vessels were contracted, of which 10,909 were scheduled to be delivered before the end of 2011. However, only 76% of those 10,909 vessels have actually been delivered as of today. The majority of these undelivered vessels remain on the orderbook. This month’s Shipbuilding Focus investigates the extent to which pre-recession contracting is still impacting upon today’s orderbook.
Back to the Future
As shown by the Graph of the Month, 45% of the current orderbook scheduled for 2012 delivery was contracted prior the recession in 2009, and focusing even further ahead this figure is 21% for 2013. This increases to 24% in 2014, although the orderbook for delivery in this year is much smaller. This difference is in part due to just 13% of contracts placed in the year to date having delivery scheduled for 2014, against 51% for 2013.
Slippage Still Showing’
Part of the reason for the large number of pre-recession contracts remaining on the orderbook is slippage in from previous years. In 2009, 35% of expected deliveries in that year did not take place on schedule, and this figure increased to 36% in 2010. Of these, 7% of 2009 and 13% of 2010 non-delivered vessels were cancelled, but the majority slipped. Many of these are still amongst the 2,245 vessels listed for delivery in the remainder of this year, a figure 19% larger than total deliveries in the first three quarters of 2011 combined. It is likely that a significant proportion of these vessels will not be delivered on time, and will slip back to later delivery dates.
Furthermore, contracting levels between 2009 and today were 66% lower than 2006-08. This means that slipped vessels contribute a relatively larger proportion of today’s orderbook than was the case in 2009.
Back to the Past
Nevertheless, it is also important to note that the scale of pre-recession contracting caused the time between when orders were placed and when they were scheduled for delivery (lead-time) to increase. Somewhere between one third and half of the orderbook contracted before 2009 was originally scheduled for points which are still in the future, assuming that initially reported delivery dates were correct. This is especially true in Japan, where contracts placed immediately before the downturn had lead-times averaging four years. This partly explains why Japan has by far the largest pre-2009 contract percentage on its orderbook of the major builder countries, with 78% of all scheduled 2012 deliveries signed before 2009.
Time for a Sequel
In summary, although a significant number of vessels have been contracted since the recession, pre-2009 orders still account for 48% of the current orderbook. A relatively large volume of these are vessels ordered towards the end of the boom, where owners had to accept very long lead-times. However, many of the remaining pre-2009 orders are non-delivered vessels originally scheduled for prior years, emphasising why slippage and cancellation are still extremely important factors in understanding new vessel supply growth.