BIMCO: Shipbuilding Orders Fall Off Due to Market Uncertainty
Shipowners' association BIMCO reports that orders for new ships have plummeted due to the coronavirus outbreak. With trade activity expected to contract in many sectors this year, the demand outlook is weak and ordering activity has fallen accordingly.
As the outbreak spread in the first three months of 2020, new orders for bulkers, tankers and boxships fell by more than 50 percent relative to the same period last year. Bulkers accounted for the most significant decline, falling more than 75 percent year-on-year.
“With little clarity as to when the rest of the world will be able to follow China into the next phase [of economic recovery], the full effects of the virus on shipping remain to be seen,” said Peter Sand, BIMCO’s head shipping analyst. “Uncertainty about future environmental regulations, as well as lower demand growth outlook in the coming years, already had many think twice before ordering a new ship. The very sharp decrease in market sentiment and global shipping demand has only lowered contracting activity further."
At the same time, demolition sales rose markedly, up by more than 60 percent relative to last year. Bulkers also led the way with rising demolitions, and Capesizes alone accounted for about two-thirds of all tonnage recycled in the first quarter. This acceleration in scrapping proceeded in spite of falling prices for scrap steel in South Asian markets.
Restrictions on industrial activity due to the COVID-19 outbreak may limit the availability of demolition capacity going forward, BIMCO warned: all of the main South Asian shipbreaking centers are currently closed.
Boxships anchor up
Only a handful of container ships were ordered in the first quarter, and that may reflect the sharp drop-off in demand and deep uncertainty facing the ocean freight market. According to Alphaliner, over 250 sailings were canceled in the second quarter, and more than three million TEU of boxship capacity is now idled - an all-time high. About one million TEU of the idle fleet is in shipyard for scrubber retrofitting, making a productive use of time during the downturn.
The cuts are widely distributed. In addition to well-publicized reductions on the core Asia-Europe and Asia-North America routes, ocean carriers have blanked sailings in every market, including South America, the Middle East, the subcontinent, Africa and Oceania, Alphaliner said in its weekly newsletter. “While the larger ships will be cascaded to replace smaller units on the remaining strings, carriers will be forced to idle a large part of their operated tonnage. This will affect all size segments in the coming weeks," the consultancy wrote.