Shipyard unknowns

 Republished by kind permission of: A&A Thorpe, 131a Furtherwick Canvey Island, Essex SS8 7AT Tel: +44 (0) 1268 511300 Fax: +44 (0) 1268 510467 shipaat@aol.com

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As global shipping plunged from unprecedented super-profits to widespread losses, a fight for survival and, for some, complete collapse, one of the most frightening uncertainties of the future is still the real size of the world orderbook and when it will deliver. Even the best shipping statisticians face an unenviable task – they are expected to analyse shipyard returns, monitor local and regional reports and contact shipbuilders directly to assess the volume of ships on order, delays, cancellations and yard failures. 

In reality, no-one really knows the precise picture, but Clarkson has been monitoring the position carefully. In recent analysis, the analysts pointed out that in 2008, prior to the credit crisis, ambitious shipbuilding expansion plans and so-called “greenfield sites” were a focal point for the shipping industry. It was, of course, inevitable that leading shipbuilders in South Korea, Japan and established yards in China would be turning out new vessels as fast as they could; but these were transparent and easy to track. What was far more difficult to assess was the myriad of new shipbuilding facilities, often with substantial orderbooks of their own, but with no completed production as yet. 

Since the onset of the crisis, Clarkson notes that the volume of tonnage on order at greenfield shipyards has fallen sharply. In fact, it will come as a relief to many that, according to Clarkson statistics, tonnage on order at greenfield sites of 83.5m dwt in August 2008 – equivalent to around 14% of the total orderbook – has fallen to just 31.5m dwt – around 6% of ships on order – as of November 1st this year. And the number of actual greenfield yards as fallen by almost a third. 

Not for those involved in shipyard projects themselves, of course, but for everyone else, it is a very good thing that many of these new shipyards have failed to materialise. According to Clarkson’s figures, there were 522 active shipyards and 140 planned greenfield sites as of August 1st, 2008. By the beginning of November this year, the number of greenfield sites had fallen to 98 and the failures, Clarkson notes, had included some high-profile cases. These include Qingdao Jimo Mastek shipyard and Jiangsu Jialong Heavy Industries.
   

However, these figures do not tell the whole story. A relatively small number of greenfield shipyards have actually failed – only 14% of the proposed greenfield sites in September 2009 no longer exist, according to Clarkson. Others have graduated into Newly Established yards on account of delivering their first newbuildings. No fewer than 56 of the 140 proposed greenfield sites of September 2008 now have “newly established” status and, in percentage terms, the volume of tonnage on order at such yards, as a percentage of the world total, has risen from 12% in September 2008 to 19% at the beginning of November. 
   

However what is really worrying is that over this period, Clarkson notes that no fewer than 34 new greenfield sites have been established. This is yet another demonstration of the scale of the challenge of tracking these newcomers – as some close or fail, others are continuing to open for business. However, Clarkson points out that just because greenfield yards have graduated to newly established status, this does not mean they are immune from the effects of the downturn.
   

In fact, they are probably more vulnerable now than ever before. Other sources point out that they may well have achieved newly established status on the back of contracts signed originally to underpin their establishment in the first place. Who will want to place contracts at those shipbuilding facilities over the next 24 months when there is space available at mainstream builders and new ship prices are already falling? Such facilities are likely to find signing new contracts even tougher than their well-established competitors. Twelve months on from now, the global shipbuilding establishment could look very different.