Nobody knows where the phrase the whole nine yards came from. In 1942 Admiral Land used it to refer to the nine US shipyards which produced Liberty ships. Also nine cubic yards was the load of a US concrete mixer (I'll take the whole nine yards). Then there's the Bruce Willis film of that title (who else?). But whatever the origin, today it means the whole lot. Round 1, Stand & Deliver Today's shipbuilders have a whole lot more than nine yards to feed. In fact, they have 491 yards pushing out ships at a rate that will make 2012 another record year. Output is forecast to climb to 169m dwt, leaving the doubters, who thought the orderbook would get cancelled and the shipyards collapse, wondering where they went wrong. So, round one in this recession has gone to the shipbuilders who have proved once again that they are survivors.
Round 2, Trading Offshore
But this is only the beginning. Shipyards need to cover capacity for at least two years ahead. In 2010 there was very strong ordering (including an astonishing 102m dwt of bulkers), but when the bulk and container markets dried up in 2011 the yards had to diversify. This worked surprisingly well; a radical change of product mix saw $101 billion of orders booked in 2011 and $55 billion in the first nine months of 2012. Bulk and container ships accounted for only 21% of these sales, and other merchant ships for a further 19%. But offshore has been responsible for an amazing c.60% (see graph), mirroring the 1980s recession when empty yards also filled up with off-shore orders. This sounds great, but in tonnage terms orders are well down at only 31m dwt, compared to 125m dwt of deliveries over the same period. And offshore structures are not always easy to build in merchant shipyards.
Round 3, Home Help
Diversification is fine, but realistically it is a short-term solution. Today's throbbing shipyards need feeding with steel and there are two places they can get it; speculators and domestic orders. Speculators have been very quiet over the last two years, as they wait for lower prices and new technology for the next generation of "eco-ships". But domestic ordering looks interesting. China, the world's biggest shipbuilder, and also the biggest importer, is getting started. An order for 50 VLCCs backed by the Chinese oil companies, has been in prospect for the last 18 months, and some of these vessels are now at an advanced stage of negotiation. As for the speculators, that's still a matter of price and time.
A Few Yards Too Far
So there you have it. Builders are determined to go the whole nine yards and so far diversification has helped. But there's still a long way to go and even the yards may not believe that they can maintain the pace. A more realistic target today is probably closer to the whole six yards. Unless, of course, they send for Bruce Willis. Have a nice day.