Recently, newbuilding prices have plummeted to the level seen in 1980’s and there have been more shipowners who place orders for advanced vessels with eco-friendly and high-efficient features to take advantage of low ship prices. With this background, global newbuilding orders are prospected to reach almost $250bn for the next four years from 2013 to 2016.
“Ship finance is currently contracted, however, thanks to the ship prices which are historically low, total amount of newbuildings to be ordered from this year to 2016 are expected to reach up to around $250bn,” said Nicolai Hansteen, chief economist from Pareto Shipping, at Informa Scandinavian Ship Finance Conference held in Copenhagen.
Hansteen pointed out that Chinese shipbuilders are suggesting about $85m for a newbuilding of very large crude oil carrier (VLCC) however, with this price, it is hard to cover an increasing construction cost; thus, making a profit is almost impossible.
Moreover, the industry states that Japanese shipbuilders have recently become capable of winning orders for a relatively low price in US dollars thanks to a weaker yen, which is anticipated to be an unfavorable factor to a profitability of global shipbuilding industry looking forward to a ship price increase.
Taking inflation into account, newbuilding prices are reported to have plunged to the level of 1986’s and broker industry suggests that most shipyards in Asia have been in the red in margin from new order projects since last year. It is also calculated that most Chinese shipbuilders have seen 6-8% of loss in bulker segment while Japanese had 16-18% of loss before a fall in the exchange rate of the yen.