In a historically weak contracting environment the cruise sector has seen a strong level of newbuild ordering and investment in the year to date. Cruise lines have continued to expand their fleets, with new markets such as China in their sights. While a number of yards have benefitted from this firm level of newbuilding activity, they have all been European and the region remains dominant in the cruise sector.
A Good Time For Cruising
In the first seven months of 2016, 17 cruise ships of a total 45,420 passenger berths have been reported contracted, already surpassing the 11 ships (33,788 berths) ordered in full year 2015. Cruise ship ordering can be cyclical in nature as shipbuilding capacity is limited and owners tend to contract cruise ships in series, restricting slot availability. Following low levels of ordering in 2008 and 2009, cruise investment has increased and an estimated $10.4bn of orders have been reported in 2016 so far. With newbuilding activity in the major volume sectors limited in the year to date, the cruise sector accounts for 49% of global estimated contract investment.
No Holiday For Shipyards
Generally, owners have been ordering larger cruise ships in recent years and over half of the vessels ordered in 2016 so far have a capacity of between 3,000 and 5,000 berths. Compared to ships contracted between 1996 and 2000, the average berth capacity of cruise newbuilds ordered since the start of 2014 has nearly doubled to c.3,000 berths. However, there has also been increased interest in smaller cruise ships of 1,000 berths or fewer and seven of these vessels have been reported ordered in 2016 so far.
A relatively small number of shipbuilders are active in the cruise sector and the market is dominated by European yards. Of the 15 shipbuilders currently with a cruise vessel on order, only Japan’s Mitsubishi HI and US yard Nichols Bros are not European. In terms of capacity, European yards account for 98% of the global cruise orderbook (54 ships of a combined 143,722 berths). Three German yards’, Italy’s Fincantieri Group’s and STX France’s shares of the orderbook total 35%, 31% and 19% respectively in passenger berth terms. However, the recent joint venture between Fincantieri, China State Shipbuilding Corporation and US group Carnival may see Chinese shipyards take a share of future orders.
Cruising USA (And China)
Five US companies account for half of estimated cruise ship investment in the year to date, largely due to orders placed by the Carnival Group. A number of owners have been targeting the growing Chinese cruise market and two 5,000 berth ships ordered by Genting Hong Kong earlier this year are reported to be among the first designed for Chinese tastes. Meanwhile, European owners MSC, Hurtigruten and Saga Cruises have ordered a total of five ships in 2016 so far.
Year to date ordering in the cruise sector is already nearing full year records. Cruise lines have been investing heavily, many seeking to expand their operations in the Chinese market. In an otherwise challenging shipbuilding market, this has provided some good news for a number of European cruise shipbuilders.