There is an evergreen demand for new ships, even in markets suffering from weak returns such as container vessels. Valuation premiums for some Chinese yards have improved substantially over the past several years as they have cemented their reputation and established a more robust network of equipment suppliers.
Newbuild prices have been rising along with new materials amid tightening space at yards.
SPECULATION around the orderbook in 2019 continues to swirl as shipyards attempt to estimate their workload over the next several years.
Yards have been recovering from a turbulent period, and newbuild prices have been rising along with the cost of new materials, and the tightening number of spaces at yards.
There are some fundamental shifts occurring in the geographical preference of construction locations.
Much has been made about the surge in liquefied natural gas orders seen over the past several months. These certainly represent a substantial value to yards given the high cost of each unit, but owners have been active in many other markets as well.
Bulker and container owners have been quietly accumulating commitments for new vessels without the sparkle of six figure returns per day that liquefied natural gas carrier owners enjoyed.
This may be cold comfort for some yards that had been fighting for survival recently, but it is a reminder that there is an evergreen demand for new ships, even in markets suffering from weak returns such as container vessels.
Geographic preference is starting to shift in some markets.
Chinese yards are now well established in the bulker space. Valuation premiums for some Chinese yards have improved substantially over the past several years as they have cemented their reputation and established a more robust network of equipment suppliers.
LNG remains in the wheelhouse of South Korean yards, renowned for their attention to detail and reliable high-specification work.
Japanese yards continue to attract business and have the strongest reputation in terms of quality and reliability of proven designs. Orders at Japanese yards have held steady.
A look at the historic fleet compared with the live fleet on the water of the top three builders shows us the shift in construction trends.
The value of ships on order in Chinese domestic yards now tops that from South Korean yards.
Another subtle but important shift is occurring as well. The amount of domestic business that Chinese yards are dependent on has slipped downwards, indicating foreign buyers are increasingly comfortable with the value offered by these builders.
South Korean builders are becoming more intertwined with domestic companies, while Japanese yards are maintaining just above a 40% share.
Court Smith is a trade analyst at VesselsValue, an online data provider. Charts courtesy of VesselsValue.