Newbuilding prices are set for another dramatic increase on the back of inflationary pressures and strong demand for new ships. Shipyard managers in the Far East said they are gearing up to increase ship prices further to cope with a higher material costs, a labour shortage, global inflationary pressures, and limited shipbuilding berths. Yard prices are already at a 13-year high with the Clarksons’ newbuilding price index at its highest level since 2009. Record prices were recently set in the car carrier and containership sectors. The price hike has been driven by cost inflation and a post-pandemic rebound which saw newbuilding contracting recover from 46m gt in 2020 to 93.2m gt in 2021. However, new data from Clarksons Research shows a big fall-off in overall vessel ordering in the first quarter of this year, with 259 newbuildings of 16.8m dwt and 9.2m cgt contracted.

“The cost of shipbuilding materials are rising faster than shipbuilding prices,” said a South Korean shipyard manager. “Many of our clients have been ordering ships with us for many years…We are not trying to make huge profit from them. We are just trying to cover our costs.” South Korean steel mills have declared their intention to increase the price of steel plate, he added. “We are in the midst of discussions with steel mills on the supply of steel plate and they have indicated that price will be increased as material costs such as coal and oil have gone up,” said the yard manager.

TradeWinds understands the cost of shipbuilding steel plate surged from $950 per tonne late last year to the current price of about $1,125 per tonne. “The spike in cost of steel plate will also lead to rise in the price of ship equipment.” The cost of nickel ore has also increased dramatically from $28,000 per tonne today compared to $32,000 per tonne in March. Nickel ore is a key component in stainless steel used for chemical tankers and LNG fuel and cargo containment systems. Its use in shipbuilding has increased in line with the boom in orders for LNG dual-fuel ships and LNG carriers. Another shipyard source said prices in recently signed shipbuilding contracts have not been able to “keep up” with rising material costs. “Once we inked the shipbuilding contract, we saw price of equipment and shipbuilding materials increase,” he said. “What we quoted to shipowners two months ago on the vessels has not kept up with our costs.”

The market has seen recent record-breaking prices for a series of pure car/truck carriers (PCTCs) booked by Ray Car Carriers and 7,900-teu container ship newbuildings ordered by Mediterranean Shipping Co (MSC). Ray ordered two LNG dual-fueled 7,500-ceu PCTCs at Hyundai Samho Heavy Industries for $119m apiece. The pair of newbuildings was believed to be the most expensive PCTCs to have been ordered to date. PCTCs of similar size that were ordered recently at Chinese shipyards were reported to cost less than $90m per ship. MSC signed up for six 7,900-teu container ships at Hyundai Heavy Industries for close to $134m each. The LNG dual-fuel boxships are also set a record high for prices in the sector.

Shipbuilding observers said shipyards could be poised to rake in profits from the higher value newbuildings contracts few years down the road. However, they will first need to brace themselves for huge losses for the current financial year due to soaring material costs. The ships that they are delivering this year were contracted two years ago when prices were much lower.

(Coupled with rising scrap prices, this means that price rises will be across the entire age spectrum of all ships. Asset value appreciation across the board! Khalid)