Global Orderbook Reaches 30-Year Low According to Danish Shipping

shipbuilding orderbook at 30 year low
(file photo)

Published Oct 21, 2020 3:39 PM by The Maritime Executive

The global orderbook for new ships has fallen to a 30-year low, according to a new analysis from Danske Rederier (Danish Shipping). The membership organization, which represents the interest of the Danish maritime industry, reports that not since 1989 have fewer newly built merchant ships been ordered worldwide. 

Attributing the sudden decline in newbuilding orders to market uncertainty and demand disruptions following the coronavirus outbreak, their analysis shows that the orderbook as a percentage of the existing global fleet measured in DWT has fallen to a ratio of seven percent, the lowest since 1989. The global number of newbuilding vessels on order measured in tonnage has fallen 41 percent since 2015. While there are variations by type of vessel, Danish Shipping says that the ratio for sectors including tankers, containerships, and bulk carriers, are all at multi-decade lows.

“The desire to order new container, tanker or dry cargo vessels has become significantly less this year than in previous years,” according to the Danish analysis. In 2020, new orders have been placed for merchant ships with a combined DWT of 26.5 million, which is approaching the level in 2016, which totaled 30 million DWT for the entire year. Globally, the analysis reports the total orderbook for merchant ships has a total size of 150.3 million DWT.

Looking at the longer-term history of shipbuilding, Danish Shipping reports a boom in shipbuilding in the early 2000s, but that the global orderbook peaked in 2009 with orders for new ships corresponding to 52 percent of the then global fleet. The trend has generally been declining since 2009, with a slight upturn in 2014.

Danish shipping companies are reported to be following the same trend having 45 percent fewer ships on order in October this year versus the same time last year. At present, the Danish shipping companies have 51 vessels on order with a total of just 1.5 million DWT.

The reluctance to order new ships, however, provides a better starting point for managing through the corona crisis says Danish Shipping. The empty order books are good news for shipping companies, as a smaller world fleet they believe will help to keep freight rates up.

“Even though we love new ships, it is good news that no more new ships have been ordered than the analysis shows,” says Jacob K. Clasen, Deputy CEO of Danske Rederier. “If too many new ships enter an already pressured market, it forces freight rates down, and we are obviously not interested in that.”

The Danish analysis of the newbuilding market follows similar reports which highlighted the strong decline in orders during 2020. For the first nine months of 2020, the volume of global shipbuilding orders declined by more than half versus 2019 coming in at 9.75 million compensated gross tons (CGT) according to data from the British research firm Clarkson. As a result of the decline in orders, the backlog has also been on a steady decline throughout 2020 falling to just over 68 million CGT. 

The slowdown in orders is reflected in the reports coming from China, which has the world’s largest shipbuilding industry. The volume of new orders reported by the Chinese has declined 14 percent in 2020 totaling 16.75 million DWT. As a result, the toal Chinese orderbook is believed to have declined 12 percent in 2020. 

While certain sectors of shipping have shown continued strength, the data points to an overall long-term downturn in the shipbuilding industry.