Global shipyards are expected to continue low-price order intake for a while as they seek to survive and maintain their current capacity.
China’s penchant for controlling both demand and supply of ships could prove devastating for ordinary shipowners, keeping rates and asset values low while driving the country’s gross domestic product growth, the Connecticut Maritime Association conference has heard. 
A panel of experts told the conference that while shifts in fundamentals such as tonne-miles and refinery closures could benefit “pockets” of the industry during one-off phases of recovery, China has moved from being the “driver” of markets to being the “controller”.
ICAP Shipping head of tanker research Simon Newman said that China’s sprawling shipbuilding industry “needs to keep people employed”, by continuing to build more ships. This, in turn, will ensure that the delivered cost of raw materials to the country remains low. “That is a potential worry for the shipping industry,” Mr Newman said.
His comments echoed similar remarks from BIMCO president Yudhisthir Khatau to the conference’s opening session on Monday. Mr Khatau said shipyards around the world “do not see the current crisis the same way as owners”.
While owners may be curbing their risk appetite, yards with surplus capacity will go to their national export-import banks and “cry politically hoarse” about how their work contributes to growing GDP and how “families live off that work”, Mr Khatau said. “In contrast with SOS, this is SYS – save yourself.”
The growing phenomenon of yards becoming owners, building ships for their own account and hoping to sell for a profit at an unknown future date, is a by-product of this mentality and of exim agencies’ willingness to help, Mr Khatau said.
Arlie Sterling, president of consulting firm Marsoft, said yards have three options to survive: shut down, maintain capacity and reduce prices, or become owners.
The first of these choices is the least likely, but the option of becoming owners is catching on. However, the overwhelming reaction among yards is to cut prices to maintain capacity, Dr Sterling said. If the price of steel declines further, he believes that yards may cut ship prices yet more.