By Tan Song

Growth in order in the first half of the year cannot remove

By Tan Song

T he new shipbuilding market was active in the fi rst half of 2017and the volume of newbuildings increased signif i cantly compared with the same period last year. The cumulative transaction of the first half of 2017 amounted to 378 ships, 25.72 million DWT and 9.656 million CGT, increased respectively by 24.3%, 37.5% and 37.4% compared with the first half of 2016 and increased by 40.5%, 116% and 72.3% compared with the second half of 2016. In 2016, the world's transaction of newbuildings was 30.6 million DWT which was the lowest in 33 years. The shipping market gradually became active in the first quarter of 2017 and the volume of transaction of the second quarter was gradually enlarged, partly due to the Ballast Water Convention which is going to be in force in September 2017. However, since the number of transactions of all types of ships in 2016 was too low, though the rate of growth of newbuilding transactions in 2017 has greatly surprised the industry, the absolute trading volume is still very low.

The price of new vessels in US dollars rebounded slightly. The price of new ships is the result of the game balance between ship owner’s demand and ship yards’ supply. Since May 2014, the new ship price index of Clarkson has fallen from all-time high of this round, 139.7 point to 121.3 points in March 2017, declined successively for 34 months. In June 2017, the index of newbuilding price rebounded to 122.9 points.

Hand-held orders of shipyards in the world fell significantly. Up to the end of June 2017, hand-held orders amounted to 186 million DWT, reduced by 31% compared with last year. Despite the slight recovery of the new shipbuilding market, there is still surplus in the production capacity of the global shipyards.

shipbuilding in China, Japan and South Korea is still in an extremely sluggish range with the number of active shipyards decreased. At the end of June 2017, the number of active shipyards in the world had dropped to 293, and the number of active shipyards at the end of 2016 was 372 compared with 931t in 2008. The number of activeshipyards is def i ned as having hand-held order of at least one ship of more than 1000 GT. This means that some of the shipyards have to be dormant or even go bankruptcy.

Substantially there has been a decline of new ship when priced in the currency of the shipbuilding country, and the rise of steel price has compressed the living space of shipyards

At present, considering the weak global economic recovery, economic transformation in China and the rise of trade protectionism, the growth speed of global maritime trade demand may once again be slower than that of the global economy; at the same time, the global fl eet is still growing and the inf l ation of oil tanker fl eet suppresses the freight, the surplus of shipping capacity is still the main problem. Despite the rebound of the price of new ships in terms of dollar, considering RMB appreciation, new ship price is still at low level. The world's major economies will surely raise interest rates and China's capital costs will be higher. The price of steel rises sharply and has entered high consolidation period, and the low level ship price is a test of the survival capacity of shipyards. The future of the shipbuilding market is bleak and the survivors of the competition must be those with advantages or special characteristics, so we believe that shipyards are still in the diff i cult period.