ECONOMY

New vessel order bubble persists despite worries

Global shipping industry growth has continued into the summer, as observers wonder whether it will slow down gradually or crumble the way it did 30 years ago. The phenomenon of continuous growth in recent years requires a closer look at the orders for each vessel type. In the past, analysts would worry when orders exceeded only 20 percent of the existing fleet. Nowadays, this is just a distant memory, as orders grow rapidly. Recent reports on Capesize orders take the total capacity of new vessels to 62.2 million deadweight tons (dwt), which represents up to 50.3 percent of the Capesize fleet. Analysts suggest that unlike the tanker market, where the withdrawal of single-hull vessels continues, the increase in orders for dry-bulker carriers is also dependent on a rise in demand from China and other markets. Capesize freight rate levels should decline even before older ships start being withdrawn. The case of Capesize vessels is not unique. New Handymax orders represent 36 percent of the existing fleet. Shipyards are less interested in building smaller vessels, with orders for Handies reaching 12.7 percent of the fleet. The picture in the tanker segment is very similar, with orders for ships with capacities from 10,000 to 60,000 dwt reaching a total of 35.5 million dwt, equivalent to 46 percent of the fleet. Very large crude carrier (VLCC) orders represent 38 percent of the respective fleet, although there is a possibility that even relatively younger vessels will be withdrawn due to more stringent environmental regulations. There is also significant growth in liquefied natural gas (LNG) ships. Owing to new trade routes too, the total figure for orders of ships exceeding 100,000 cubic meters represents 91.7 percent of the existing fleet, while if the new generation of container ships is added, then this figure rises to 147 percent of the existing fleet. Most shipping circles now understand that orders might have to be curtailed, since the ever-greedy shipyards are reluctant to turn away new orders, as they invest their profits in further expansion. The growth of construction units is enormous, with orders for 170 Handymax ships in the last five months, on top of numerous Capesize orders. This does not even include the «mini-Capes» and «post-Panamax» vessels of 87/93,000 dwt and 114,000 dwt respectively, which Chinese shipyards build with great success. It is no secret that many ship orders have been placed with shipyards that do not even exist yet. It is certain, though, that these shipyards, now called «green fields,» will soon be constructed and manned accordingly.