BRS: Shipbuilders Can Look Forward to a "Supercycle" Boom
Shipyards have a good run to look forward to over the next few years, according to French shipbroker BRS. A boom in ordering activity for high-end boxships and LNG carriers, along with a new push to build high-efficiency/dual-fuel vessels, may be set to drive shipbuilding into a new "supercycle" - much like the big ordering boom in the mid-2000s. In fact, BRS suggests, the industry may already be in it.
Driven by rising demand of the late-pandemic era, new orders for tonnage rose from 75 million dwt in 2020 to 132 million dwt in 2021, making it the second-busiest year in a decade. Container shipping accounted for more than two thirds of the increase (39 million dwt), reflecting the surging growth in box volume and expectations of a prolonged period of high activity. It was the first time ever that the boxship sector ordered more tonnage in a year than the dry bulk or wet bulk sectors.
The ordering activity was so hot that it became a seller's market, with shipowners competing for future yard slots and accepting higher prices. Sharply rising steel prices contributed to costs, and newbuilding prices rose between 20-30 percent, depending on the vessel.
In a major turning point, 22 percent of the ships ordered last year were dual-fuel vessels, including LNG carriers and LNG bunker vessels, which run on the boil-off gas from their own cargo. The list includes Maersk's new dual-fuel methanol-powered container ships, which are the first of the their kind.
Several factors support continued strong pricing for shipbuilders in the years ahead, according to BRS. First, increasingly strict EEDI/CII guidelines are prompting owners to invest more up-front on efficiency-enhancing improvements, like shaft generators or (as mentioned above) dual-fuel propulsion. These ever-strengthening regulations will be prompting shipowners with older, less efficient tonnage ("non-eco" vessels) to order replacements.
Rapid consolidation in the shipbuilding industry will also help. The number of active shipyards fell from 700 in 2007 to just 300 last year, and there is far less available yard space today. Just nine shipbuilding groups control 75 percent of the world's production, and three nations dominate the industry. These leading yards are rapidly selling out of space through the middle of the decade, giving shipbuilders substantial pricing power for years to come.
"It is almost impossible to order a ship in 2022 for pre-2025 delivery, and even 2025 shipyard slots remain scarce," reported BRS.