The China Association of the National Shipbuilding Industry (CANSI) expects the global shipbuilding sector to slightly recover this year and that order volumes of new vessels globally will increase to 75-90 million dead weight tonnes (dwt), mainly thanks to the predicted uptick the world economy, the easing of trade friction and the implementation of new rules on sulfur emissions for ships.
According to the association’s latest release on January 22, the delivery volume of new vessels is expected to hit 100 million dwt for 2020, and the backlog of new orders would amount to 170 million dwt.
In 2019, new vessel orders won by shipbuilders worldwide totalled 65.3 million dwt, while shipyards delivered some 99 million dwt of new vessels, other CANSI statistics show. As of end-December, shipbuilders still held a backlog of 187.6 million dwt.
“Growth in the global economy still stay low, but as the trade friction has been mitigated, we can expect to see some recovery,” CANSI said in the report, quoting data from International Monetary Fund that world economic growth should witness an increase of 3.6% on year, as against the 3% rise seen in 2019.
“China and the US have concluded their ‘phase one’ trade agreement, which will boost imports of agricultural, energy and industrial products from US, further driving demand for the major types of ships,” it stated.
The prolonged trade tension between China and the US has shown signs of easing as the two countries signed their Phase One economic and trade agreement on January 15 (Washington time) after nearly two years of argument and rancour over trade, as reported.
Referring to another factor which may encourage sales of new ships, CANSI said that if new rules regarding sulfur emission levels in marine engines take effect smoothly, ship owners’ hesitation about procuring might diminish and result in new orders to shipbuilders.
In April 2018, the International Maritime Organization announced new rules for sulfur emissions, changing the maximum limit on sulfur content in bunker fuel from 3.5% to 0.5%, as Mysteel Global reported. To comply, ship owners can choose to install waste gas scrubbing equipment in exiting vessels or use low-sulfur fuel, both of which are very expensive, or order new ships with the technology already installed. The new regulation took effect on January 1 this year.
On the other hand, after coping with depressed business conditions for as many as ten years, the global shipbuilding industry is facing integration, and shipbuilders are seeking new means to survive.
In China, the merger of China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Corporation (CSSC), two wholly state-owned Chinese shipbuilders, helped enhanced the concentration of domestic shipbuilding industry. Nationwide by 2019, the first 20 shipbuilders had won 90.8% of total new vessel orders, Mysteel Global learned from the release.
The same wave of integration might also occur in South Korea, given the planned merger between two of the country’s biggest shipbuilding companies, Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering. Their merger might further enhance Korean shipbuilders’ competitiveness in producing high value-added liquified natural gas (LNG) carrier ships, CANSI said.
Among the five major ship types comprising bulk carriers, tankers, container vessels, LNG carriers and passenger ships, LNG ships accounted for the most of the total of new vessel orders in 2019 at 22.5%, with bulk carriers accounting for 20.7%, the association noted. New ship prices of the former are higher than the latter but most of new vessel orders that China’s shipbuilders received last year were bulk carriers, tankers and container vessels, it said.
The new vessel orders China’s shipbuilders received last year totalled 29.1 million dwt, down by a substantial 21% on year.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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