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South Korea Forecasts Declines in Global Shipbuilding Orders in 2022

South Korea predicts decline in shipbuilding orders in 2022
(file photo)

Published Oct 29, 2021 2:10 PM by The Maritime Executive

South Korea is forecasting that shipbuilding orders will decrease from the strong levels experienced in 2021. A new report from the Export-Import Bank of Korea cites this year’s strong growth in containership orders and LPG carriers, forecasting that the levels of orders will not be sustained in the year ahead. The forecast projects as much as a 15 to 23 percent decline in the volume of new orders in 2022.

The report issued by the Overseas Economic Research Institute of the bank looks at the trends in play in the market. They cite a three to four times increase in shipping rates as a key factor contributing to the strong increase in shipbuilding orders in 2021 as well as the ongoing demand from shippers to transport cargoes. They also note that while the market for containership and gas carrier construction was strong other segments of shipbuilding have continued to lag. They believe that the pending IMO environmental regulations will also weigh on the shipbuilding market.

Looking at the current global market, they predict that orders will exceed 41 million tons in 2021, which would represent an 80 percent increase versus 2020. At the end of nine months, the UK firm Clarkson Research reported orders were running more than three times ahead of 2020 at 37.5 million tons ordered between January and September 2021. The Korean report places the forecast at a total of $96.5 billion in orders for the whole of 2021.

The expected slowing of orders is projected to result in a 15 percent decline in order volumes to 35 million tons globally in 2022. The report estimates that the value of shipbuilding orders in 2022 will be down 10 percent to $86 billion.

Korea’s three largest shipbuilders have all reported exceeding their full-year forecasts at the end of the first nine months of 2021 and many of the mid-sized shipyards have also benefitted recording order increases. Korea Shipbuilding & Offshore Engineering reported the strongest gain surpassing its annual target by more than a third, while both Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries reported that they have exceeded targets by more than 10 percent.

Vying with China for the largest share of the global orderbook, the report forecasts that South Korea’s shipbuilders will finish 2021 with orders totaling 17 million tons. They value this year’s orders at the South Korean yards at $42 billion. 

In the year ahead, shipbuilder orders in South Korea are forecast to decline 23.5 percent to a total of 13 million tons. The report estimates the value of the order placed in 2022 at $34 billion, which would represent a decline of 19 percent.

The strong demand for containerships fueled much of the growth reported worldwide in 2021. Clarkson recently reported that containership orders have reached their highest level since 2007. They calculated that a total of 5.6 million TEU capacity is currently on order with the majority being for larger vessels at more than 12,000 TEU capacity. 

The longer-term outlook for shipbuilding however remains positive. Among the trends that are expected to drive future orders as the need to meet new environmental regulations and the drive to decarbonization. New technologies and specifically automation are also expected to drive future orders.