Marine Log - December 2007 - (Page 17)

BY CHRIS WIERNICKI SHIPBUILDING WARNING:SHIPBUILDING OVER-SUPPLY BY 2011 t ABS, we don’t look at tea leaves, but we do examine the numbers. Based on our projections, we believe there are some cautionary signals attached to the year 2011. There is a strong possibility that the demand driven shipyard output will reach its peak at that time, with a potential softening thereafter. Demand for shipping services is driven by world trade. Statistics show that there is direct correlation between world Gross Domestic Product (GDP) and the volume of cargo. According to the economic pundits, the most likely scenario is that GDP will expand at a moderate 4.5% per annum over the next 10 years, driven primarily by growth in the Asian economies. This moderate growth, however, will result in a much slower rate of growth in each sector of the shipping industry as compared with the almost frenetic activity seen over the last two or three years. Trade will continue to grow but at a much slower pace. It is likely that the bulk carrier sector will be the strongest performer throughout, with oil related trades exhibiting a weaker profile. A In a recent presentation to shipowners, ABS President and Chief Operating Officer Chris Wiernicki warned of the possibility of a significant imbalance in the supply-demand equation for global shipbuilding in the period after 2011. This article contains extracts from his presentation. Age Profile Existing Fleet YE 2006 - Based on Number of Ships 2006 Year End Source: ABS Bulker - Capesize Bulker - Panamax Bulker - Handymax Bulker - Handy Size Container - Post Panamax Container - Panamax Container - Sub-Pana/Handy Container - Feeder RO-RO PCC Reefer Dry Cargo LPG > 60 kcbm LPG < 60 kcbm LNG Tanker - VLCC Tanker - Suezmax Tanker - Aframax Tanker - Panamax Tanker - Handy Chemical Carrier Fleet % of Similar Type 0-9 yrs 10-19 yrs 20-29 yrs 46% 44% 46% 18% 85% 53% 44% 29% 15% 35% 6% 13% 36% 23% 53% 52% 55% 56% 58% 37% 69% 34% 28% 28% 15% 15% 37% 33% 32% 19% 20% 28% 17% 32% 32% 17% 40% 35% 29% 15% 22% 17% 10% 20% 26% 31% 40% 42% 27% 28% 29% 14% 5% 6% 14% 27% 30% 11% 0% 4% 13% 35% 5% 24% 43% 5% 16% 16% 4% 4% 1% 1% 11% 2% 19% 25% 23% 44% 30+ yrs 1% 3% 3% 22% 40% The second factor to the equation is the age profile of the existing fleet. What is apparent is the relative youth of the principal ship types. That is to be expected in the tanker sector with the 2010 phase-out approaching. It is also expected in the container and LNG sectors because of the huge spate of new orders of the last three years. Only handy-sized bulk carriers are in need of significant short-term investment in order to replace a rapidly aging fleet— as is already occurring. Not surprisingly, this aggressive fleet renewal—which is evident from the packed orderbooks at the principal shipyards— has stimulated, perhaps over-stimulated, the shipbuilding sector. There has been a remarkable surge in deliveries over the last four years. This year will see more deadweight delivered in a single year than at any time in history. The current orderbook means that figure is expected to be repeated in each of the next two years and overall deliveries remain strong for the next four years. The result has been the most ambitious expansion of shipbuilding capacity ever, far outpacing even the period starting in the 1970’s that saw the emergence of the mega-yards in Korea. There is China, where new yards seem to appear on an almost weekly basis and with an announced intention to become the world’s leading shipbuilding nation. There have been continuing productivity gains by both Korean and Japanese yards as they remain determined to retain market share. In addition several new shipyards have opened and more are planned in Korea and previously mothballed Japanese facilities have been reactivated. Vietnam is rapidly expanding its capacity and has set a target of jumping from number 8 to the number 4 position as quickly as possible. New yards are opening in India and the Philippines, the Russians have designated shipbuilding as a strategic industry in which the government will be investing and Turkish shipbuilders are rapidly expanding their facilities to build significantly more and larger ships. Much of the new global shipbuilding capacity is projected to come on stream—or to reach peak productivity levels—at a time when demand for new ships of all types is expected to begin a downward cycle. Three factors can be expected to drive deliveries to an exaggerated record level of over 111 million DECEMBER 2007 MARINE LOG 17 www.marinelog.com http://www.marinelog.com

Table of Contents Feed for the Digital Edition of Marine Log - December 2007

Marine Log - December 2007 Contents Editorial Second Thoughts Update Inside Washington Warning: Shipbuilding Over-Supply by 2011 Steely Resolve: Cutting Injuries What’s on Your Mind? Newsmakers Tech News Contracts Events InfoDirect Website Directory ML Marketplace Last Word

Marine Log - December 2007

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