Shipyard berths for 2024 delivery of large vessels are rapidly filling up, but heady newbuilding prices are deterring buyers from fighting over the remaining slots. Brokers and yard representatives said South Korea’s big three shipbuilders — Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries and Hyundai Heavy Industries Holdings — have now limited 2024 slots to ultra-large containerships, LNG carriers and VLCCs. Newbuilding brokers said they are still working on vessel projects that have handover dates in the first half of 2024. But they described the berths available for other orders as “thin” unless there is particularly strong demand from a multi-vessel tender.
For capesize bulkers, owners will need to look to yards in China and Japan for 2024 berth space, one said. The picture is slightly better for smaller ultramax and kamsarmax bulk tonnage and MR tankers, where slots may be available earlier. Brokers said that while the underlying demand for newbuildings is “absolutely there” — bar tanker tonnage — shipowners are less keen to book berths at current strong prices. Instead, they are turning to what is rapidly developing into a red-hot sale-and-purchase market for modern vessels and resales. Brokers said they are selling bulkers and containerships that one month later are worth 10% more. While a resale may prove pricier, it is likely to be available. “What we see today is that the discount on newbuildings is not big enough to tempt people away from secondhand ships,” one newbuilding broker said.
In past days, all eyes have been on a kamsarmax bulker resale with prompt delivery from Tsuneishi Shipbuilding in Japan. The vessel is expected to fetch between $12m and $14m more than its contract price and a premium to the $36.5m price of a newbuilding today. But those following the sale said the vessel could generate about $7m in profit if it were fixed out for a year in today’s market. Two newbuilding brokers described the situation as “frustrating”. “The market is so exciting, but you can’t get people to take a punt on a ship that comes out in 2024 based on a strong market today. That is the problem,” one broker said.
Yard chiefs indicated a reluctance to book owners into slots for 2025 delivery positions, as pricing is tricky to get right that far in advance. “There is a lot of uncertainty ahead,” one told TradeWinds. Fueling choices are also complicating orders. Recent gas price rises have prompted some owners who were considering LNG dual-fueling to re-examine the structure and pricing of bunkering contracts. One newbuilding broker is concerned that the record prices could undermine the argument for owners to use LNG as a bridging fuel to lower-carbon alternatives. Another said that AP Moller-Maersk’s move on methanol has pushed that fuel further into the spotlight. But he added: “There is no direction. We are still rudderless when it comes to fueling choices.” Other shipbrokers, however, see the fueling choice as a “convenient excuse” by some owners to press pause on their newbuilding plans.
But if shipowners do move on large vessels, can yards find space? In the past, shipbuilders have been quick to expand facilities, repositioning areas as outfitting quays to free up dock space, or even bringing in floating docks. There have been some small signs of creativity. China’s Yangzijiang Shipbuilding has reactivated its Jiangsu Yangzi Changbo Shipyard to build ultramax bulkers. South Korea’s Hanjin Heavy Industries, which has been focused on naval work, confirmed it has taken its first commercial order in seven years. There is also talk that Hyundai Heavy Industries has been looking at reopening its Gunsan yard, although this could prove politically sensitive. But shipyard chiefs point out that they have had their fingers burned in the past on expanding facilities to meet expected demand and will be cautious.
Brokers said they will want to see that current newbuilding interest is sustainable, as profit margins have not been great due to steel price rises. In addition, they said that much of the former capacity, particularly in China, is indebted and not coming back “any time soon“.