Foreboding of a crisis
The global shipbuilding industry could be hit in the next few years by another crisis. Shipbuilding capacities that increased to meet the growing demand may face a problem of oversupply on the market (there has been an overstock of some types of ships). Shipowners will also have to prepare for hard times.
In full sail
According to expert estimates, overseas shipping in the world could grow 2.2% by the end of 2010 from the last year’s figure. At the same time, today the volume of newbuilding orders have reached 39% of the existing fleet tonnage. This means that in the coming years, the maritime industry will face a sharp increase in supply, which will not be in demand.
According to executive director of CMS Shipping Eugene Dolgikh, container ships are now operating at rates on the level of operating expenses, although the situation is somewhat better in the segment of dry bulk vessels. However, according to Insurance manager of FESCO Transport Group Anna Strelnikova dry bulk fleet might experience the same problem.
"Even with the high level of global economic growth we are going see several years of low charter market," Eugene Dolgikh said during EURABEX bunker conference in St. Petersburg.
Robin Mitch, managing director of Marine and Energy Consulting says the world is facing the excess of bunker fleet.
The tendency to reduce the charter cost is proved by the trend of Baltic Dry index, which dropped by about 1.000 points or more than 30% this year.
Actually, the situation is not new, as the crises in shipbuilding industry caused by overproduction occur quite frequently. The recover will depend on the dynamics of world economic growth, the main driver of which is the Asia-Pacific region, primarily China and India.
In full sail
According to expert estimates, overseas shipping in the world could grow 2.2% by the end of 2010 from the last year’s figure. At the same time, today the volume of newbuilding orders have reached 39% of the existing fleet tonnage. This means that in the coming years, the maritime industry will face a sharp increase in supply, which will not be in demand.
According to executive director of CMS Shipping Eugene Dolgikh, container ships are now operating at rates on the level of operating expenses, although the situation is somewhat better in the segment of dry bulk vessels. However, according to Insurance manager of FESCO Transport Group Anna Strelnikova dry bulk fleet might experience the same problem.
"Even with the high level of global economic growth we are going see several years of low charter market," Eugene Dolgikh said during EURABEX bunker conference in St. Petersburg.
Robin Mitch, managing director of Marine and Energy Consulting says the world is facing the excess of bunker fleet.
The tendency to reduce the charter cost is proved by the trend of Baltic Dry index, which dropped by about 1.000 points or more than 30% this year.
Actually, the situation is not new, as the crises in shipbuilding industry caused by overproduction occur quite frequently. The recover will depend on the dynamics of world economic growth, the main driver of which is the Asia-Pacific region, primarily China and India.
Most likely, the next shipbuilding boom will be associated with the construction of the new generation vessels, designed to use alternative fuels due to changes in the structure of the bunker market caused by tough environmental requirements for sulfur content in marine fuel. In particular, the new vessels may use liquefied natural gas (LNG), scrubbers, the power of wind (back to sail times) and the Sun. Of course, the vessels will continue to use distillates with low-sulfur content and fuel oil will gradually disappear from the arena. As for LNG as one of the most promising alternative marine fuels, according to Robin Mitch, it will be used by new, small vessels, whose number will grow as the aging old vessels are decommissioned.
The biofuels utilization is also possible, however, it is necessary to build special vessels as well as storage facilities, since biofuels can not be kept in tanks which have previously been used for conventional fuels.
The expert thinks that one of the most promising trends is the use of scrubbers, which will become standard equipment of newbuildings.
It is unlikely that we will see the construction of vessels larger than the present supertankers with a deadweight of up to 400,000 tons. Because of low draft further increases of deadweight is impractical because such giants could not be accommodated in most ports of the world. Although there has been some increase in the size of container ships (up to Suezmax size).
The biofuels utilization is also possible, however, it is necessary to build special vessels as well as storage facilities, since biofuels can not be kept in tanks which have previously been used for conventional fuels.
The expert thinks that one of the most promising trends is the use of scrubbers, which will become standard equipment of newbuildings.
It is unlikely that we will see the construction of vessels larger than the present supertankers with a deadweight of up to 400,000 tons. Because of low draft further increases of deadweight is impractical because such giants could not be accommodated in most ports of the world. Although there has been some increase in the size of container ships (up to Suezmax size).
Quiet Harbor
Russia in this situation stands out because of lack of competitiveness on the global level of the country’s shipbuilding industry and, consequently, the isolation from the world market. In this case it is a plus, since it gives opportunity and time to be prepared for the new shipbuilding cycle and to enter the global market with advanced technologies and modern shipyards.
Now the Russian shipbuilding industry is focused mainly on the growing domestic demand. First of all, this is the construction of specialized vessels for operations on hydrocarbon provinces and the Northern Sea Route, as well as tankers and gas carriers for shipment of exported hydrocarbons, which demand is projected to grow.
In addition, Russian shipyards will have enough newbuilding orders from river shipping companies and bunker suppliers. For example, in November 2010 Oka Shipyard launched the Captain Ruzmankin, a river-going ship, which appeared to be the first river vessel built in the last 25 years at a Russian shipyard. The shipbuilder bagged contract for construction of 10 such vessels from UCLH.
Another example, Baltic Shipyard (included in CJSC United Industrial Corporation) won a contract for construction of four oil barges from Kontur, a Russian bunker fuel supplier.
The volume of newbuilding orders at Russian shipyards may further increase when the bill supporting the shipbuilding and shipping industry will be enacted. This will provide a number of preferences to shipbuilders and ship owners and encourage them to order ships at Russian shipyards. "I hope that the bill will pass the State Duma smoothly and will be enacted in the second quarter of 2011," said Deputy Transport Minister of Russia Viktor Olersky in an interview with journalists during a launching ceremony of the Captain Ruzmankin.
Russia in this situation stands out because of lack of competitiveness on the global level of the country’s shipbuilding industry and, consequently, the isolation from the world market. In this case it is a plus, since it gives opportunity and time to be prepared for the new shipbuilding cycle and to enter the global market with advanced technologies and modern shipyards.
Now the Russian shipbuilding industry is focused mainly on the growing domestic demand. First of all, this is the construction of specialized vessels for operations on hydrocarbon provinces and the Northern Sea Route, as well as tankers and gas carriers for shipment of exported hydrocarbons, which demand is projected to grow.
In addition, Russian shipyards will have enough newbuilding orders from river shipping companies and bunker suppliers. For example, in November 2010 Oka Shipyard launched the Captain Ruzmankin, a river-going ship, which appeared to be the first river vessel built in the last 25 years at a Russian shipyard. The shipbuilder bagged contract for construction of 10 such vessels from UCLH.
Another example, Baltic Shipyard (included in CJSC United Industrial Corporation) won a contract for construction of four oil barges from Kontur, a Russian bunker fuel supplier.
The volume of newbuilding orders at Russian shipyards may further increase when the bill supporting the shipbuilding and shipping industry will be enacted. This will provide a number of preferences to shipbuilders and ship owners and encourage them to order ships at Russian shipyards. "I hope that the bill will pass the State Duma smoothly and will be enacted in the second quarter of 2011," said Deputy Transport Minister of Russia Viktor Olersky in an interview with journalists during a launching ceremony of the Captain Ruzmankin.
Russian industry should seize the opportunity to build new and upgrade old shipyards, so that by the time of a new newbuildings boom to be ready to enter the world market with competitive offers. Certainly, the need to adopt experience and technology of the leading shipbuilding countries.
The United Shipbuilding Corporation (USC) has planned a number of major projects involving foreign investors. It is, above all, two yards in the Far East - Russian-S.Korean JV Zvezda-DSME and Russian-Singaporean Vostok-Raffles. In addition, the state Corp. has created a consortium with the French State Shipbuilding Corporation DCNS, assuming technological exchanges and joint participation in tenders for shipbuilding contracts.
However, the United Industrial Corporation (UIC), which currently faces financial pressure, and USC can not agree on the selling price of UIC’s shipbuilding assets, including Baltic Shipyard, Severnaya Verf and Design Bureau Iceberg.
There are some problems as well with the financing of expensive shipbuilding projects. The fact is that the commercial rates for ship leasing are still too high for the business and require government subsidies. "If we talk about the commercial terms of leasing, they are too high in Russia. The loan shall be extended for 8-12 years, for different vessels with different payback period. And when the interest rate is 13-14% per annum, the shipping companies can not stand up,” commented on the situation with the financing of shipbuilding orders the head of financial management of USC Sergei Chenchikov.
There is still hope that the announced projects and initiatives aimed at creating a competitive shipbuilding in Russia will not just die on the vine and will be implemented before the world will come to a new shipbuilding cycle.
Vitaly Chernov