Newbuild contracting fell to a 30 year low in 2016, but when looking at it in estimated investment value terms, the fall was slightly less sharp. This trend has continued, with contracting in 2017 so far up by significantly more in investment value terms than in numerical terms. This month’s Shipbuilding Focus investigates which sectors are attracting investment and which yards are benefitting from it.
Though still depressed in historical terms, the value of newbuild contracting investment, which declined by 59% in 2016, stands at $33.8bn in the year to date, up 58% year-on-year on an annualised basis. This has been driven by investment in high value vessel types such as cruise ships, which experienced record ordering levels last year and accounted for 43% of total investment. Firm cruise ship ordering has continued in 2017 so far, and the 20 cruise ships contracted have an estimated newbuild value of $12.6bn, up 36% year-on-year on an annualised basis and accounting for 37% of year to date investment. Similarly to in 2016, US owners account for the largest share of year to date cruise investment (82%).
Signs Of A Comeback
Most sectors suffered from a depressed contracting environment in 2016, but in 2017 so far some have shown early signs of improvement and estimated investment in tanker and gas carrier units is up by an annualised 133% and 176% respectively year-on-year. Tankers and gas carriers account for 23% and 10% of year to date investment respectively, and the increase in investment has been driven by firmer ordering of larger units such as VLCCs and large LNG carriers. Norwegian owners account for 49% of year to date gas carrier investment, while Greek owners account for 22% of year to date investment in the tanker sector.
Still Seeming Sluggish
Containership contracting has remained muted, with only 20 units of an estimated $0.5bn ordered in 2017 so far, an annualised year-on-year investment decrease of 71%. In contrast, boxships accounted for 22% of 2015 investment, compared to 1% in 2017 so far. Estimated bulkcarrier investment in the year to date is up 15% year-on-year on an annualised basis, but bulkers only account for 7% of estimated 2017 investment compared to 42% in 2010, even if with an improved freight rate environment, ordering could pick up.
Which Builders Benefit?
The benefits of higher investment levels have not necessarily reached all yards. While cruise ordering is booming, this is only benefitting a small number of yards, with European yards accounting for 96% of year to date cruise orders in investment terms. Similarly, in the VLCC sector, only eight yards have won orders in 2017 so far, mostly in China and Korea.
So, investment is up this year, with high value orders even more prominent than in 2016. The cruise sector has continued to boom and in the tanker and gas carrier sectors contracting is improving, but other sectors are still struggling. However, while ordering of high value units can have an impact, a recovery is needed across more of the major sectors for investment to return to healthier levels.