With the summer break moving closer and closer, ship owners appear to be finalizing negotiated deals in the newbuilding market, as evidenced by the surge of ordering activity noted this past week. In its latest weekly report, Clarksons Hellas mentioned that "the newbuilding market has seen some further activity this week with orders reportedly placed in both the dry and container/ro-ro sectors. Enquiry has continued to remain relatively subdued however and we do not anticipate this changing over the coming weeks, especially with the summer shipyard holidays in Korea on the near horizon.
This latest ordering has followed the trend of the year so far, with these orders being placed at the yards for their recently developed fuel efficient designs. This efficiency continues to give the yards a key selling feature when working with potential buyers and whilst it is true that financial liquidity remains limited in the market - there do remain some buyers with the capacity to order, as highlighted by these latest contracts.
With demand continuing to remain limited across the conventional sectors, it is of little surprise that the yards continue to try and broaden their product ranges. For the first time on record, investment into the offshore sector is understood to have outpaced that of investment in the conventional shipping sectors, during the first half of 2012. Fortunately for many of the shipyards, not only just in Korea, but in China and Japan too, this broadening of their traditional product ranges into offshore, has helped alleviate some of the pressures in the current market and will be a story to follow as to whether this continues on throughout the second half of the year" concluded Clarksons Hellas.
In a separate report, shipbroker Golden Destiny mentioned that the week ended with 32 orders in total, amounting to $647 million, thus representing an increase of 88% against the previous week, despite the fact that for 18.75% of the orders, the contract price wasn't revealed. According to Golden Destiny, "the increased activity of the week is a result of the 20 coastal ethanol tankers that have been ordered from Transpetro in Brazil, at Rio Tete shipyard, a shipyard which is scheduled to open in a months’ time. Contrary to previous weeks, in the special project sector it has been recorded limited activity with just one Platform supply vessel to be reported, while the demand in the car carrier sector appears strong with Eukor Car Carriers of Korea to have exercised their options for two more. The original order of Eukor was reported in May for two 6,600vehicles capacity vessels, while these options have been upgraded and will have a carrying capacity of 7400 vehicles.
Additionally, to the reported orders there are investors that are searching their options on where to invest by putting the yards into strong competition or are just in the original stage of LOIS. Hyundai HI has been awarded to build the “world’s largest” spar platform hull in a deal worth usd $ 700mil but for now the shipyard has been awarded the letter of intent. The deal is expected to been firmed up by Statoil SA early September. The construction will be with Technip and the delivery is said to be by 2015. BG Group is in talks to proceed with its LNG newbuilding project and is in discussions with Chinese yards, in order to evaluate the best option. The project refers to two 170,000cbm LNG carriers, and the company is said to be flexible in delivery dates, therefore not in a rush to order. Furthermore, Petrobras might soon proceed with ordering semi-submersibles and drill ships from Keppel and Sembcorp Marine, since Petrobras has approved the construction of six semi-submersibles for its oil rig provider Sete Brasil.
Overall, the shipbuilding market is facing difficult times with many shipyards experiencing a loss in their records. CSSC Jiangnan has reported that its profits are on a freefall, with the expected first half profit is calculated to fall 80%, comparing to the similar period of last year. Their reported profit however is said to be just enough to make the shipyard have a profit. Similarly, COSCO Shipping has reported that despite the difficult market has maintained to perform with profits for the first half of 0.7m yuan ($0.1m). On the other hand, there are yards as Onomichi in Japan that claim to has filled in their orderbook until 2016, taking advantage of its specialisation in product tankers and the mini boom that was recorded in the sector" Golden Destiny concluded.