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According to MANA, Clarksons recorded a total of 489 vessels with 35.3m dwt contracted during the first eight months of 2017, up 69% on year in terms of deadweight tonnes. However, barring a huge spike in newbuilding orders in the closing months, this year’s total contracting volume will finish far below the 2015 level of 111.7m dwt and still be one of the weakest annual figures in history.

The orderbook figures projected an even bleaker future for shipyards. Global orderbook size amounted to 3,078 vessels totalling 181.7m dwt as of end-August, compared with 3,787 ships with 225.6m dwt at end-2016, with limited newbuilding orders and delays of vessel deliveries.

Faced with emptying slots, many shipbuilders have had to fight for limited newbuilding business. Yard overcapacity persists even as more second-tier yards go out of business. Thus there is little wonder that newbuilding prices remain soft across the main merchant shipping sectors.

With such business environments, coupled with rising steel plate prices, the margins of most shipyards will stay under pressure for several quarters at least. Beijing and Seoul continue to inject liquidity into shipbuilding majors in their respective countries. Those companies will have better chances of survival than their smaller peers.

The total number of active yards, defined as those with at least one ship with over 1,000 gt on order, has fallen from 860 in 2017 to 357 as of early September, according to Clarksons. Only 30% of the active yards have won a newbuilding contract this year, as market shares of the top-tier yards continue to increase.

The trend is likely to continue. With more environmental regulations kicking in over the coming years, ship investors have increasingly required vessels designed with ballast water treatment systems, scrubbers or other low-sulphur fuel solutions such as propulsion systems powered by liquefied natural gas. Often only the yard majors can build those ships at competitive pricing.

There is not completely without a bright spot. Data from Lloyd’s List Intelligence shows ordering of cruiseships remained strong this year, with demand for leisure shipping still rising. A total of 194 cruiseships were on order as of end-September, versus the end-2016 level of 154 vessels.

However, this niche market is dominated by a few European players, and market conditions in the bulker, tanker, and container sectors, which account for over 80% of the world’s newbuilding markets, are challenging. As of September, total order value only reached $16.1bn this year, estimates by NORD/LB showed.

There are more companies willing to invest in bulkers this year, with freight earnings continuing on an upwards trajectory. Total ordering for bulkers amounted to 12.2m dwt in the first eight months of this year, up 31% on year, according to Clarksons. 

The 80,000 dwt-99,999 dwt segment showed the biggest growth in newbuilding ordering this year, backed by private owners. The total ordered reached 5.1m dwt in January-August compared with 200,000 dwt for the whole of 2016.

Still, this year’s ordering is unlikely to match 2015’s 24.2m dwt even as it has a fighting chance to exceed 2016’s 14m dwt. Not to mention 2014’s 63.8m dwt and 2013’s 103.3m dwt.

Putting the matter into context, newbuilding ordering has remained at a relatively low level as freight environments are not yet strong enough, says Jefferies in a note.

The tanker sector has attracted relatively strong newbuilding investments, with the trough in the current down cycle appearing shallow. But a significant up-tick in the level of ordering will likely be quarters away.

Newbuilding ordering for crude and product carriers reached 19.6m dwt, representing a year-on-year increase of 166%, Clarksons data showed. 

As for the liquefied natural gas and petroleum gas shipping sectors, newbuilding demand has slightly strengthened on year but remained weak — which is not surprising, given that the markets are still absorbing the large newbuilding tonnage ordered in 2014-2015.

Total ordering for LNG carriers amounted to 2.3m cu m in January-August, compared with 1.2m cu m for the whole of 2016. Ordering for LPG carriers reached 500,000 cu m in the eight months, matching the total volume in 2016.

The containership newbuilding segment had been almost dead quiet this year until two major carriers came out to order a large number of ultra large container vessels in September.

Mediterranean Shipping Co booked 11 22,000 teu vessels at two South Korean yards, while CMA CGM ordered nine similar-sized ships at China State Shipbuilding Corp. In comparison, only 100,000 teu were ordered in January-August.

This is not yet a sign of strong recovery in containership newbuilding demand. Even with those orders, NORD/LB estimates only $2.6bn newbuilding investments in this sector this year, versus the 2016 total of $2.9bn.

But optimists would see solid reasons behind acquiring new tonnage as signs of strong demand emerge this year. Larger, more modern vessels can lead to higher margins and greater profitability. And the orderbook-to-fleet ratio, according to Alphaliner, is still at an historic low of 12%, suggesting room for growth.