Volume 3, issue #9 - 19-03-1998

Feb. 4, 1998 Ship newbuilding prices will peak in five years and then slip back to existing levels by the end of the next decade, according to UK-based Ocean Shipping Consultants.
In its latest report, World Shipbuilding to 2010, the Company says the overall profile of price development is one of Asia-inspired weakness in the short-term followed by price expansion up to the early years of the next decade.
Thereafter, with newbuilding orders declining markedly, prices are likely to weaken considerably. This development profile relates directly to the forecast pattern of vessel newbuilding, subject to developments in world shipyard capacity, the report states.
OSC says that shipbuilding capacity will rise from 31 mm gt in 1997 to 33.5 mm gt in 2000. Thereafter capacity is thought unlikely to expand much more.
In terms of VLCCs, Ocean Shipping Consultants predicts that the average newbuilding price will rise from $ 80 mm this year to $ 92 mm-$ 93 mm in 2003. By 2009-2010, VLCC prices will have returned to their 1998 level.
For panamax bulk carriers, OSC predicts prices will continue to average around $ 26 mm-$ 29 mm during the late 1990s, before reaching almost $ 32 mm in the early years of the next decade.
Between 1998 and 2000, overall newbuilding demand is expected to total 76.6 mm gt, with a further 135 mm gt projected for 2001-05, and 126.5 mm gt for 2006-10. On an annual basis, this equates to around 25.5 mm gt for the rest of the 1990s, 27 mm gt for the following 5 years and 25.3 mm gt thereafter.
These forecasts compare with the actual 1996 total of 25.9 mm gt and the 19.1 mm gt annual average of the first half of the 1990s.
According to the calculations, tankers will account for by far the largest volume of newbuilding activity in the near term and in the first half of the next decade.
Between 1997-2005, tanker construction comes to more than 80 mm gt, representing 34 % of all newbuilding activity. At present prices, the total cost of tanker newbuildings in this period is estimated at $ 69.8 bn, which includes the existing order book of $ 15.6 bn. Net new tanker orders up to 2005 will total $ 54.1 bn, with $ 20.2 bn forecast for 2006-10.
Combining potential demand for tankers, bulk carriers, containerships, general cargo vessels and gas carriers, OSC says newbuilding deliveries worth around $ 241 bn will be required in the period to 2005. A further $ 136 bn of newbuildings will be needed in the following five years.
With the current order book approximating $ 53 bn in value for these vessel types, this means that an extra $ 188 bn of newbuilding orders are likely before 2005, with the total approximating $ 325 bn for the whole study period to 2010.