Wednesday, April 08, 2009
Six-month gap in new building orders to limit tonnage supply in the long-term
Wednesday, 08 April 2009
The lack of new building orders worldwide has now reached more than six months, as shipowners have cut down their investments, while order cancellations keep on coming, even at the risk of painful lawsuits following. During the first quarter of 2009, with banks stepping away from shipping and focusing in their own problems, no new orders were submitted, following the trend established from October of 2008 onwards. As a result it no news that Greek shipowners didn't place any new orders during March, according to the latest montly report by shipbroker George Moundreas & Co., what interests ship owners isn't new investments, rather than managing current investment programmes, which render them exposed to the prolongued crisis of the shipping industry.
This development leaves the freight market with some rather interesting facts for the future. For instance, from the beginning of 2012 and for at least six months, there will be almost no new deliveries of 2012-built vessels. This of course, unless some of the scheduled for 2011 deliveries are delayed into 2012. Should the current economic crisis be resolved by 2010 and the world economy – and consequently trade – begin rebounding, things will be looking better for the shipping industry, from a tonnage supply point of view.
For the time being though, ship owners are doing their best to help allieviate things in terms of coping with the massive orderbook pending. Every week news of cancelled contracts and delays in deliveries are coming in, mainly in the dry bulk and the container segments of the market. Nasdaq-listed StealthGas, owned by Harry Vafias was the latest to add its name to the newbuildings which are about to be delivered at a later stage. The company reached an agreement with Japanese shipyards Karneij Zosen to accept later deliveries for five vessels without any additional cost. It is a token of some yards' willingness to accept terms, which under other conditions they wouldn't.
Of course one of the main questions to be resolved is how much of the orderbook is going to be shed, i.e. how many cancellations will there be? In its latest weekly S&P report, Clarksons mentioned that numerous forecasts are being circulated, with very little supporting evidence. “There have certainly been a reduction in the number of ships on order, but 'order cancellation' remains an ambiguous term, with very few orders simply being cancelled following a buyers request. There have yards continue to hold a very strong line with regards to their policy and in most cases will put buyers in default following any non-performance from the buyers side. There have been instances of mutual cancellation, but in general this has only been when the yards have their own problems and the cancellation has allowed them to alleviate these issues. There are certainly no standard cancellation precedents being set and with restructuring discussions being dealt with on a case by case basis, the outcome if any, is dictated by the situation of the individual buyer and respective yard involved» said Clarksons.
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