Macquarie Group Limited said that shipbuilders will likely see new orders decline by 40% in 2008 as buyers can't get credit and slowing commodities demand reduces the need for investment in new vessels. It added that orders in the global shipbuilding industry will fall by a further 16% a year in 2009 and 2010. Shipbuilders are also paying more for steel plates.
The Baltic Dry Index, a measure of commodity shipping prices, has dropped by 22% as global economic growth slows. Daewoo Shipbuilding & Marine Engineering Co and Hyundai Mipo Dockyard Co reported order cancellations this month.
Mr ES Kwak an analyst said that "We expect to see massive downward revisions on shipbuilders' earnings over the next 12 month period, driven by recent sharp increases in plate prices and other key raw material prices. Companies are now guiding for margin declines until 2009-10.''
He said that steel plate prices have jumped more than 50 percent and gains in the dollar this year have caused shipyards to lose value on contract settlement after they'd hedged against declines. Newer shipbuilders will suffer the worst impact.
The Baltic Dry Index, a measure of commodity shipping prices, has dropped by 22% as global economic growth slows. Daewoo Shipbuilding & Marine Engineering Co and Hyundai Mipo Dockyard Co reported order cancellations this month.
Mr ES Kwak an analyst said that "We expect to see massive downward revisions on shipbuilders' earnings over the next 12 month period, driven by recent sharp increases in plate prices and other key raw material prices. Companies are now guiding for margin declines until 2009-10.''
He said that steel plate prices have jumped more than 50 percent and gains in the dollar this year have caused shipyards to lose value on contract settlement after they'd hedged against declines. Newer shipbuilders will suffer the worst impact.