Monday, December 01, 2008
Chinese shipyards expect owners to re negotiate orders
Monday, 01 December 2008
According to Mr Bao Zhangjing chief researcher of China Shipbuilding Economy Research Center, the shipbuilding market stagnation will continue into next year. He said that “In 2009 the industry will see a buyers’ market that will last for more than three years. This means that shipyards would be willing to take on cheap orders and enter into fierce price competition.” He also forecast that the Clarkson Newbuilding Price Index would fall to 120 in 2010, 35% below its historical peak Mr Bao said he had seen a recent case where a Chinese shipyard accepted a request from a foreign shipowner to switch an existing order for several Handysize bulkers to Handysize tankers. He declined to disclose the name of the shipyard but said the parties did not change the delivery date and the shipyard did not raise the price for the vessels. He said that “Whether the seller and buyer can reach such deals also depends on if the shipyard is capable of building the ship type the ship owner wants.”
Mr Bao said it was hard to predict the number or percentage of defaults but he expects to see increasing numbers of defaults on behalf of buyers. He said some shipyards would accept requests from buyers to re-negotiate ship prices. “This is more about maintaining a long-term relationship with the clients. Shipyards would hope to see more benefit by co-operating with buyers so that both parties survive the difficult times. He added that a yard would rather re-negotiate the price than let the buyers default in most cases, as it would be difficult for the yard to fill up the slots.
Mr Bao said the small- to medium-sized shipyards and yards that hold many bulker orders will be most exposed to the risk of default from buyers. He added that there were more smaller-sized yards in China and that the country held more bulker orders than yards in South Korean and Japan. He also said that the difference in shipbuilding costs between China, South Korea and Japan was no longer that big, and that the only difference is the lower labor cost in China”. Therefore, there would be a sharper fall in ship prices in Japan and South Korea, as their prices were higher before the market collapse.
Mr Bao said more Chinese yards would lower their down-payment requirement and allow ship owners to pay less in the early stage of the shipbuilding process.
As adapted from Steel Guru
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