The present near
capitulation of ship prices - by far the industry's main assets- is almost
unparalleled, industry experts say. Players are feeling the devastating storm
across the board. For example, as many as half of all Chinese shipyards are on
the verge of financial collapse.
HSBC Shipping
Services Ltd published a report recently, which said starkly, “This astonishing
loss of value is, as far as we are aware, without precedent in shipping
history. The bubble became so inflated that its bursting has caused untold
damage to all market players, from ship owners and charterers to shipbuilders
and banks.” The bubble referred to is, of course, the asset bubble caused by
overtonnaging in the boom years, what with players rushing in to order vessels
at unsustainable prices.
Foundering global growth has exposed this
folly today. Clarkson Research says that the value of five-year-old Capesizes has
fallen 79 percent since 2008- when new build orders were at a peak- and values
for large tankers have collapsed by 61 percent in the same period. The extent
of the problem can be gauged by Clarkson's parallel figures for earnings- in 2008;
rates for Capesizes were 118 times what they are today. Similarly, daily rates
for VLCC's were at nearly $300,000 a day in December 2007; they are around 1,363
today - a massive 99 percent drop. The bellwether Baltic Dry Index was around 933
end July this year; it was at nearly 11,800 in mid 2008.
The fallout of
this perfect storm has hit Chinese shipyards hard. New vessel prices are at eight-year
lows, orders have plunged to half and a huge number of yards are on the verge
of bankruptcy. China has a staggering 1,536 shipyards all of which have been
hit particularly hard because of the collapse in dry bulk vessel orders- their
main market. Although the larger shipyards will survive- or be bailed out by
the government- analysts expect scores of smaller yards to shut shop.
Even large shipyards are suffering from a drying up of business; for example, China Rongsheng does not have even one new building contract this year, Guangzhou Shipyard profits are down 50 percent and Zhejiang Jingang Shipbuilding has filed for bankruptcy. State owned China State Shipbuilding Corporation expects about half of Chinese shipbuilders to close down within three years.
Even large shipyards are suffering from a drying up of business; for example, China Rongsheng does not have even one new building contract this year, Guangzhou Shipyard profits are down 50 percent and Zhejiang Jingang Shipbuilding has filed for bankruptcy. State owned China State Shipbuilding Corporation expects about half of Chinese shipbuilders to close down within three years.
“It is a pretty
depressing environment,” analyst Ajay Mirchandani of JPMorgan Chase & Co. told
Bloomberg. “You just have too many yards and too few orders, which is hurting
pricing and profitability.”
Experts say it
will take more than a couple of years for things to get better. The industry is
hoping that the bloodbath at Chinese shipyards will end up flushing out
capacity, reducing supply and stabilising or improving asset prices, especially
if some return to scrapping ships. However, many analysts feel that there is
still more pain to be borne before that happens.
.
.
No comments:
Post a Comment