Global Holding Orders Fell to the Lowest Level in 15 Years

Global holding orders continued to shrink in 2019 to their lowest level in the past 15 years as the quantity of the new ship orders fell and the quantity of the shipyard deliveries rose. At the same time, with the continuous consolidation of the shipbuilding industry and the promotion of the shipping industry to reduce emissions, the continuous reduction of the number of shipyards and the significant increase of LNG ship orders, the global shipbuilding industry would face great opportunities and challenges in the future.

Recently, Clarkson released its Shipbuilding Market Review 2019. Deliveries from global shipyards increased in 2019, following a sustained decline in production over the past three years, according to the report. However, orders for new ships started to fall, which has continued to pick up since 2016.

Clarkson noted that the global shipbuilder deliveries rose by 6% from the previous year to 32.8 million CGT in 2019 (it rose by 22% from the last year in deadweight tonnes) due to lower delays and strong growth from Korean shipbuilders. However, such delivery levels were still about 40% below the peak number in 2010 and Mr. Clarkson now expected that the global shipyard deliveries would fall back again in 2020 to a level similar to 2018.

In contrast to deliveries, global orders for new ships fell by about 30% in 2019. Orders for bulk carriers and container ships fell by about 50 percent. The order volume of LNG ships remained stable, with 61 LNG ships in total and a total value of around 10.7 billion US dollars, and a large number of LNG ship orders were expected in 2020. Orders for cruise ships (18.8 billion dollars), LPG ships (57 vessels, 3.4 billion dollars) and the order volume of the floating production storage and offloading vessels (FPSO) increased from last year.

Affected by that, global holding orders in early 2020 fell to 188 million deadweight tons, to the lowest level since 2004, and decreased by 17 percent from the same period last year and 65 percent from the beginning of 2010. At present, global holding order now accounts for about 9 percent of the existing fleet. In general, such a low proportion of hand orders combined with an improved revenue environment would lead to an increase in order volume. However, Clarkson also noted that environmental technology uncertainties, the choices of the fuel and risks for early adopters would continue to hold back the growth of the order volume.

In 2019, Chinese shipbuilders continued to lead the world in deliveries, accounting for 34% of the total, followed by South Korea (29%) and Japan (25%). For two consecutive years, the shipping companies in South Korea ranked first in the number of orders, and the annual order volume reached 9.4 million CGT, 22.3 billion US dollars, which led a dominant position in the LNG carriers and crude oil ships market. Chinese shipping companies had narrowed the gap with their South Korean counterparts by gaining market share in large container ships and the continuous leading role of bulk carriers. European shipping companies had increased their orders and deliveries, which further consolidated their position in the cruise industry, accounting for more than 90% of the global cruise market.

Consolidation in the global shipbuilding industry continued over the past year, with 70 shipyards receiving orders for vessels above 20,000 deadweight tonnes, which was lower than the 85 shipyards in 2018. The merger of China State Shipbuilding Corporation and China Shipbuilding Industry Corporation created what was now the world's largest shipbuilding group——The holding order of China State Shipbuilding Corporation accounted for 15 percent of global orders (calculated by CGT).

The price indices for most ship types are basically flat or showed a downward trend except for LNG ships and VLCC. It is worth mentioning that more and more ship owners chose to order LNG - powered ships. In 2019, about 30% of orders for new ships would be LNG powered, and the proportion was about 17 percent excluding LNG ship orders, while a 25 percent increase shown in orders for new ships in December alone. In the past year, VLCC (Ofunagroup), Suezmax tanker (Guangzhou Shipyard International), Capesize bulk carriers (Hyundai heavy industries co.) and Newcastlemax bulk carriers(Shanghai Waigaoqiao Shipbuilding Co. LTD) had all received their first orders for LNG-powered dual fuel ships.

Mr. Clarkson predicted that the choices of the fuel and the accelerated environmental agenda's focus on low carbon emissions and related technologies were likely to dominate many new shipbuilding negotiations in 2020. In the condition that the shipping industry committed to decarbonization, shipyards would face great challenges and opportunities in the next 10 years.