ECONOMY

Ship orders show steep rise

The recent rise in freight rates has particularly boosted shipyards in the Far East with an increase in orders for delivery up to the year 2010. This increase has been noted over the last six months. In early March 2006, orders came to 229.9 million deadweight tons (dwt), which covers 25.1 percent of the global fleet. In early October this came to 283.7 million dwt and 30 percent of the world’s fleet, which is worrying international analysts. The increase in orders began four years ago and is directly linked to the rise in freight rates. The year’s first three quarters indicate that the trend will follow the same path as in 2003 and 2004. The shortage of launching cradles for deliveries before 2010 hampers new orders, as they can only be completed in four years’ time. Orders this year represent some 8 percent of the global dry-bulk capacity. Comparing this with the 6 percent annual increase in dry-bulk shipments makes the rise in orders seem anything but unrealistic. Nevertheless, the average rise since 1990 comes to 3.5 percent annually, which is mainly parallel with the Chinese growth. However, over the last six months ship orders have changed significantly. The total number of orders has grown by 23 percent, from 230 million dwt to 284 million dwt, which is a very substantial increase in a relatively small period of time. The biggest portion of that is attributed to tankers with a capacity under 100,000 dwt, whose increase comes to 42 percent. This is directly associated with the new regulations on crude oil shipping to be applied as of 2008. In very large crude carriers (VLCCs) and Suezmax tankers, the percentage of increase reached 35 percent over the last few months, while the almost-forgotten multipurpose type of vessels also showed a steep rise in orders, coming to 41 percent, that is 3.8 million dwt. Certainly this positioning of capital has not been made haphazardly. This is a market that had particularly suffered after the growth of container ships, and which is now rebounding, benefiting from the world’s appreciation of the advantages of tankers, such as easy access to ports with restrictions, and their simpler use. Liquefied petroleum gas (LPG) vessels have also shown an important increase in orders, with the expectation that, owing to the considerable investment in natural gas in the Middle East, shipments of LPG from that region should grow. The orders for new dry-bulk carrier ships cover about 17 percent of the global fleet, or 74.6 million tons, while orders for liquefied natural gas (LNG) carriers represent an 18 percent rise. In contrast, orders for ships of multiple uses, refrigerating ships (reefers) and vehicle carriers, show very little interest. Shipowners appear to be particularly keen on investing in new ships and they have expectations for quick and significant returns on their capital in an exceptionally inflationary market. The lion’s share of shipbuilding contracts goes to Far Eastern countries. South Korea has orders amounting to 36.1 million tons from the first nine months of this year, with China following with orders of 30.5 million tons and Japan having orders of 15.7 million tons. After a good 2005, European contracts are down by 42 percent, although the recent rise of the Chinese and Japanese currencies could change this particular trend in the last quarter of the year.