Newbuilding price trends in the context of constrained shipyard capacity

BRS’s senior tanker analyst discusses some of the most important elements regarding the global shipbuilding outlook with Lloyd's List in the following article: https://www.lloydslist.com/LL1149480/Shipbuilding-Newbuilding-prices-edge-up-but-no-return-to-2000s-style-supercycle Prices still far from those of the 2006-8 supercycle. Despite shipyard consolidation and an increase in orders, prices have not reached the level of the previous supercycle, as contracting activity across shipping segments compared to deliveries is currently much lower compared to between 2006 and 2008, when the shipbuilding boom was dry bulk driven. While tanker contracting over deliveries has surged this year, the emergence of second-tier shipyards might be keeping tanker newbuilding prices from surging further. With most of the new tanker orders are attracted by Chinese yards with a lower cost base, the impact on top tier NB prices could be less pronounced in the medium term, as the former gradually cover the gap to the top tier NB price ceiling.

Shipbuilders’ challenges. Shipbuilding is extremely labour intensive and attracting labour force has been a major challenge along with inflated labour costs. Shipyards in Asia are now experimenting with importing labour from abroad, like Thailand and Philippines. Local currencies depreciation in major shipbuilding nations is another challenge increasing imported inflation in raw materials and pressuring margins.

Crude and product tankers leading new orders in 2024. Tankers have gained share in new contracting in the first half of 2024. Moving into the second half, shipbuilding growth is expected to come from the sectors where the forward earnings signal is high. At this point, this sector seems to be tankers, where period earnings levels are more convincing for the investment, with long term charters also becoming more liquid. However, the lack of top tier newbuilding slots available before 2H28 means earlier slots are marketed at a premium, while shipyards capacity is more flexible to expand in the short term for niche markets, such as in chemical tankers.

The analyst further explores latest tanker contracting and asset value trends in the BRS Monthly Tanker Newsletter of June 2024. See article here: https://www.tradewindsnews.com/tankers/term-charter-strength-keeps-tanker-asset-values-strong-as-owners-hold-on-to-ships/2-1-1669849

For full access to the tanker newsletters please contact research@brsbrokers.com