An article from the Shipbuilding Outlook ReportThe data in this article has been drawn from the Lloyd’s List Intelligence Shipbuilding Outlook Report, a monthly service offering subscribers the industry’s most comprehensive forecast of shipbuilding output over the coming 5 to 10 years.

Shipbuilding outlookFewer ships will be ordered this year than at any point since the 1970s, according to Lloyd’s List Intelligence.

Some 1,400 vessels will be ordered, 1,000 fewer than in 2009. Measured in dwt, forecasted ordering this year is the lowest this millennium.

A fleet average 30-year replacement cycle needs 3,800 new ships per year to replace one-to-one. This is not the case, and the replacement need is growing despite the spectre of overcapacity casting a long shadow over most sectors.

Lloyd’s List Intelligence says the pace of ordering will pick up in the second half of the year, even in the dry bulk sector.

That may sound counter-intuitive, but remember the dry bulk orderbook-to-fleet ratio has fallen from 76% in 2008 to 13% today and Lloyd’s List Intelligence analysts expect it to fall further, to 10%, which is the level it was in the late-1980s and 1990s. Then, new ship orders averaged 180 per year. Now the fleet is three times larger (in tonnage terms) and the book-to-fleet ratio is falling, justifying expectations of replacement orders.

If the Chinese economy does not implode and at least half of India’s development plans come to fruition, then we are looking at future that is growing rather than shrinking.

The total new ship ordering activity is what you see here.

A fair share of these orders consist of tugs, fishing vessels, bunker tankers, small passengerships and small general cargo carriers, all of which require replacements. But even if you take away the smallest ships, the Lloyd’s List Intelligence forecast predicts just below 1,000 ship orders this year – the lowest since their records began in the 1970s.

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Num

ber o

f ves

sels

1985 1990 1995 2000 2005 2010 2015 2020

Number of contracts to pick up in 2017-2018 The fleet will grow by 3.5% over the next five years

Tanker

Container and ro-ro

Passenger

Offshore and service

Miscellaneous

Bulker and general cargo

1985 1990 1995 2000 2005 2010 2015 2020

200m

600m

1,000m

1,400m

1,800m

2,200m

Vess

els

dwt

The current Lloyd’s List Intelligence outlook for new ship ordering, new ship deliveries, cancellation of orders and ship removals points at global fleet growth of 3.5% per year compound annual growth rate over the next five years. On this aggregated level, the pace of growth is pretty much in line with anticipated growth in demand. However, many markets are oversupplied today, so this development is not as positive as you first might think. The current total orderbook adds up to 267m dwt – a fair part of it tankers and bulkers. Dwt is not an ideal measure for passenger or some of the offshore vessels, but in comparison they are not all that many. In money terms, the 600-plus passengerships would be more visible, though. China holds 43% or 115m dwt of the orderbook, South Korea 63m dwt, Japan 50m dwt and Europe 7m dwt.

Tanker

Container and ro-ro

Passenger

Offshore and service

Miscellaneous

Bulker and general cargo

Given higher deliveries than new orders, the orderbook will contract to 10% Scrapping will not affect the supply-demand balanceVe

ssel

s dw

t

Ord

erbo

ok, fl

eet %

DWT

Orderbook, fleet %

50m

100m

150m

200m

250m

300m

10

19

29

38

48

58

1985 1990 1995 2000 2005 2010 2015 2020 1985 1990 1995 2000 2005 2010 2015 2020

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Num

ber o

f ves

sels

scr

appe

d

According to Lloyd’s List Intelligence’s forecast, the orderbook will continue to fall for another three years to touch bottom in 2018. By then, the orderbook-to-fleet ratio will be at 10%, a level not seen since 2002. The pace and success of the transition of the Chinese economy is the key factor to look out for here.

The Lloyd’s List Intelligence forecast model is based on a relatively optimistic view. A 6%-plus GDP growth rate will generate some 160m tonnes of more trade in and out of China. So, if we expect trade only to grow in line with GDP in the near future, the orderbook should not be lower than this, if we are to have a fleet that matches the growth in demand.

Despite eye-catching headlines in the mainstream press suggesting record numbers of increasingly young ships are being sent for demolition this year, more sober analysis of the figures suggests that scrapping is not going to significantly affect the supply-demand balance, at least not this year. So far this year, we have seen 641 vessels (30.2m dwt) registered as scrapped (this includes lost vessels, but excludes ships that have been converted to another ship type). The average age of the 641 ships was 27 years. To put that into context, in 2015, 1,025 ships were scrapped, with an average age of 28.9 years.

Tanker

Container and ro-ro

Passenger

Offshore and service

MiscellaneousBulker and general cargo

Contact usFor more information on the Shipbuilding Outlook Reports, or any other Lloyd’s List Intelligence service, please contact Rory Proud on +44 (0)207 551 9920 or email Rory.Proud@informa.com

In addition to Shipbuilding Outlook reports, Lloyd’s List Intelligence also offers the following specialist services:

OnlineuSeasearcher vessel trackinguCredit ReportsuInsuranceuLNGuTankersuLaw & RegulationuSanctionsuContainer ShippinguDry BulkuLloyd’s List News

Contact us now for your free demonstration of our services.

Direct ServicesuCasualty ReportinguShipbuilding and Fleet ForecastinguAnalysis of Petroleum Exports (APEX)

Bespoke ServicesuGovernment ServicesuMade-to-measure datauConsultancy

Lloyd’s is the registered trademark of the Society incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s