Over the past few years, there has been a dramatic shift in the importance shipping investors place on newbuilding orders, leading to a divergence in order intake. Some equally dramatic changes are expected in the coming years.
The collective preference for new capacity in the world's freight merchant fleet, comprising bulk carriers, tankers, containerships, gas carriers and other vessel types, reflects a number of influencing factors. A common and enduring feature is the uncertainty surrounding many aspects of future events that will determine the value of all investments.
Despite the challenges facing investors, patterns have emerged. This has resulted in a global order book for new ships for bulk carriers and tankers that is currently about one-tenth of the available deadweight tonnage of their fleets. By contrast, the order book for container ships is one-fifth of the current global fleet, and almost half for gas carriers.
Order flow A more detailed look at order patterns over the past few years clearly shows two of the most significant changes in investor attitudes in the container ship and gas carrier segments.
In 2021, the order book for containerships surges to 51 million DWT (in deadweight tonnes for comparison purposes). The average annual order book for the previous three years was 11 million DWT. then the order book declined, but remained relatively high in 2022 and 2023 at 31 million DWT and 18 million DWT respectively. so far this year the market has been relatively subdued.
Newbuilding contracts for gas carriers (LNG and LPG) averaged 7 million DWT in the three years leading up to 2020, before continuing to rise to 11 million DWT in 2021, 19 million DWT in 2022 and 11 million DWT last year. orders have increased further in the early months of 2024 and have already exceeded two-thirds of last year's full-year total .
Tanker orders have seen a strong recovery in 2023, with 38 million DWT contracted. this amount is almost four times the previous year's low of 10 million DWT (the lowest level since 1996). Between 2018 and 2021, the average annual order book for tankers is 25 million DWT.
The bulk carrier order market was relatively buoyant in 2023, totalling 49 million DWT compared to 37 million DWT in the previous year.This followed an order book of 52 million DWT in 2021, double that of the previous 12 months, and an average annual order book of 34 million DWT over the 2018 to 2020 period.
As can be seen from the above data, the newbuilding market has fluctuated dramatically over the past few years. the trend of large increases in container ship orders from 2021 to 2022 has abated. the large increase in gas carrier orders from 2022 to 2023 has continued into this year. the increase in tanker orders from 2023 has also continued into this year. the increase in tanker orders from 2021 to 2022 has also continued into this year. the increase in tanker orders from 2022 to 2023 has continued into this year.
What has led to these changes? Differences in incentives and motivations of investors across sectors explain much of the change in order patterns. More specifically, the changing perceptions of market participants regarding the balance between supply and demand for tonnage in each category, and how this balance compares to other ship categories, are crucial aspects. The impact of the market on freight rates and values of existing vessels, both currently and in the coming years, is also an important factor.
In the container ship sector, the changing environment during and after the new coronavirus infection outbreak - when changes in consumer demand for manufactured goods, combined with disruptions in the global supply chain and issues such as port delays were prominent - was a positive change. Tight markets and a prolonged period of sharp increases in containerised freight rates boosted profits and stimulated large-scale investment in new vessels by shipowners.
A solid freight market and expectations of future expansion in world trade have contributed to an increase in orders for LNG carriers, most of which are related to new export projects scheduled to begin, requiring additional cargo capacity. In the LPG carrier segment, positive market sentiment was also a key driver of newbuilding orders.
In the tanker segment, newbuilding orders fell to a lower level at the end of 2022, leading to low deliveries last year, resulting in a tight market and higher freight rates. This change, together with the prospect of a more balanced market in the future, fuelled the increase in newbuilding orders over the past 18 months. For bulk carriers, the trend in order reductions reflects patterns in the freight market, uncertainty about the future advancement of alternatives, and the prospects for long-term commodity trade growth.
One reason for the change in order intake for the lingering dilemma is increased complexity. According to many shipowners and other stakeholders in the global industry, how to economically reduce or eliminate carbon emissions has been a major factor in recent years and is likely to continue for some time. Decarbonisation has become an imperative for the maritime industry. However, while some progress has been made in this area, viable alternative fuels and technologies have yet to be identified for the long term.
Some shipowners have already decided to use LNG, methanol or ammonia on newbuildings. But for many potential orders, the choice of alternative fuels is not obvious. This dilemma reflects the operational and cost issues that are likely to arise from the future use of most alternative fuels, as well as the uncertainty of what the impact of these regulations will be as international and regional regulations tighten and stakeholder pressure increases.
Approximately 7 per cent of the existing global merchant fleet is capable of using alternative fuels or propulsion units, and this percentage is increasing. Alternative fuels account for an even larger proportion of all newbuilding orders, at around half. According to Clarksons Research, more than two-thirds of these orders will use liquefied natural gas (LNG), 9 per cent will use methanol, and a smaller proportion will use LPG, ammonia, ethane, biofuels and other energy sources. This breakdown and other indications point to a diversification of marine fuel usage in the future, but the unpredictable proportions remain to be clarified.
Other factors affecting order intake also stand out. Rapidly rising newbuilding prices, tight availability of space in some shipyards and increased financing costs due to rising interest rates have all had an impact.
Clearly, the complications that have arisen over the choice of fuel and technology to be used in newbuilding have had a dampening effect on at least some, and possibly many, investment decisions. As a result, it has become apparent over the past few years that plans to replace tonnage have been delayed in a number of areas, resulting in an ageing world merchant fleet.
https://www.cnss.com.cn/html/sdbd/20240604/353595.html
|
Back:
Next:
