The global orderbook has continued to decline in the year to date, indicating that there are diminishing levels of activity at many of the world’s shipyards. In the last six months, South Korean yards have seen the largest decline in their orderbooks of the three major shipbuilding nations, reflecting historically weak global ordering, domestic contracting trends elsewhere and varying delivery patterns.
Order Backlogs Retreat
In the year to date, the global orderbook has declined by 12%, in CGT terms, to 100.2m CGT, its lowest level since June 2013 (CGT measures the volume of shipyard work required to build a vessel). At 1st July 2016, South Korea’s orderbook stood at 25.1m CGT, 25% of the global total. This is the smallest that Korea’s orderbook has been, in CGT terms, since January 2004; Korean yards maintained the largest orderbook globally from January 2000 to September 2008. At 1st July 2016, Chinese and Japanese yards’ shares of the orderbook stood at 37% and 22%, respectively, in CGT terms. In the year so far, Korea’s orderbook has fallen by 20% in CGT terms. Meanwhile, the Chinese and Japanese orderbooks have declined by 11% and 14% to 37.7m CGT and 22.1m CGT respectively.
Contracts At A Crawl
Against the backdrop of historically low contracting globally, many Korean yards have seen their orderbooks decline. 224 vessels of 6.3m CGT have reportedly been contracted globally in the year to date, a 66% fall year-on-year in CGT terms. Korean yards have taken contracts for just 27 vessels, totalling 0.8m CGT, or 13% of tonnage contracted globally in 2016 so far. Contracting at Korean yards has been 88% lower over the last six months compared to the first half of 2015, when they received 37% of global orders (6.8m CGT). Additionally, relatively firm deliveries from Korean yards have driven a decline in the orderbook; Korean builders have delivered vessels of 6.5m CGT, which is 35% of global tonnage reportedly delivered in the year to date.
Ordering Closer To Home
So, since January 2016, the Chinese and Japanese orderbooks have declined less severely than the Korean orderbook. Chinese yards have taken more orders, receiving contracts of 2.4m CGT since January 1st, or 38% of global tonnage contracted. This is largely due to state-backed contracts, including 30 ‘Valemax’ bulkers (ordering at independent Chinese yards fell by 61% year-on-year in the first half of 2016, in CGT terms). Meanwhile, the majority of contracts at Japanese yards were placed by domestic owners, compared to domestic contracting contributing a 29% share, in CGT terms, of orders in the last six months at Korean yards. Moreover, Chinese and Japanese yards’ deliveries have been lower, by 2.4m CGT and 0.8m CGT respectively, than Korean deliveries in the year so far, slowing the decline in their orderbooks.
The key driver behind the decline in Korea’s orderbook has been the low contracting environment globally. Additionally, it has fallen relative to that of China and Japan, where yards have received domestic support for contracting, while also delivering less tonnage. Industry observers will be watching closely to see if Korea’s shipyards can make up any lost ground in the second half of 2016.