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The evolution of the shipbuilding industry since the previous SMM - Clarksons Research

Logistic News - Published on Tue, 04 Sep 2018

Image Source: PortWays
Clarksons Research announced that next month over 50,000 will gather for the biennial SMM fair in Hamburg. Since the last fair (coinciding with the lowest ever ClarkSea Index!) there have been major developments, not least in environmental regulation. Despite an eroding newbuild orderbook, a modest uptick in ordering and recent enthusiasm for scrubbers are set to combine with plenty of positive discussion around technology and digitalisation!

Backlog Eroding
Since the last SMM, the ordering drought in 2016 (just 655 orders*) has helped run down the total orderbook value to USD 221 billion (SMM 2016: $278 billion) and to a low of 10% of the fleet. Meanwhile, ship-yard output continues to edge down and we are projecting that 2018 deliveries will fall 11% to 30m CGT (see graph) with a further drop in 2019. While the newbuild market backdrop invariably sets the mood for the many suppliers at SMM, this time round there are other opportunities that will create a positive “buzz”

Cruising To Success!
With shipping markets looking like they may have “bottomed out”, a modest or-dering pick up in 2017 to 26.7m CGT (2016: 13.6m CGT) has provided some welcome relief for yards and suppliers (although 1H 2018 has been a bit flatter with 13.2m CGT in the first half, in part due to higher newbuild prices). In the cruise sector ordering has continued to boom though. Having focussed “up mar-ket” when faced with Asian competition, European yards now have a 98% share of the USD 53 billion cruise orderbook!

Regulation Upside
As we have been tracking on World Fleet Register, since SMM 2016 the regulatory timetable has continued to “accelerate” producing a range of market challenges and opportunities. Ratification of the Bal-last Water Management Convention (Sep-2016) was followed by IMO agreement on the 2020 SOx cap (Oct-2016), and CO2 reduction targets (Apr-2018). Unlike the single hull phase out in the 1990s “timing and technology” decisions for owners seem less clear. After adopting a “wait and see” approach to 2020/SOx, 2018 has seen enthusiasm for scrubbers grow and now over 25% of the orderbook by tonnage is confirmed with a scrubber (but still under 3% of the fleet). Our cur-rent scrubber list is north of 1,000 vessels but this probably underplays the latest position. Adoption of LNG as a fuel has been more cautious so far (11% of the orderbook by capacity, less than 3% of the fleet excluding “LNG ready”). More broadly, with oil prices at $75/bbl (SMM 2016: $48/bbl) and up to 90% of capacity likely to use more expensive compliant fuel at start 2020, fuel economics are very much “back in play” providing opporunities for suppliers and yards targeting a global fleet 64% bigger than at the fi-nancial crisis. Evolving practical solutions to the ambitious CO2 targets will also be a hot topic at SMM for years to come!

Technology, Technology
“Buzzwords” around Technology, Digitali-sation, Smart Shipping, Big Data, Cyber, De-carbonisation and Autonomy will also all be out in force at SMM. Perhaps in the past commercial shipping managers might have skipped the “nuts and bolts” on offer at SMM but with the current agenda that might prove an oversight. Have a nice day, and visit us at SMM!

Shipbuilding Output & Orders 1996-2019
The graph shows total deliveries (bars), by major builder country, and orders (dotted line) in Com-pensated Gross Tonnes (CGT), a measure of work content of build-ing ships. Additional data availa-ble on World Fleet Register. The World Fleet Register focusses on Fleet, Technology, Regulation and Markets, including the latest list of vessels fitted with scrub-bers and alternative fuel capabili-ties. Further forecasts available in the Shipbuilding & Shipping Forecast To 2030.

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Posted By : Joykumar Irom on Tue, 04 Sep 2018
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