Overall current orderbook levels are low on the whole both for tankers and dry and this is allowing the yards to manage orders efficiently which is one of the reasons why slippage- the amount of ships due to be delivered during a certain period that are shunted over to the next- levels have been on the low side and the performance of shipyards has been remarkably solid considering the pandemic.
Slippage for 2020 and going into 2021 isn’t too dramatic at all with levels down considerably from 2019 and also looking back from a historical perspective these figures are quite low. The yards have of course had to take steps to adapt to the pandemic situation and milestone events such as naming ceremonies and launches are currently taking place online.
There are a few reasons as to why slippage hasn’t affected the market as much as we might have expected. Firstly, on the whole, newbuilding activity for tankers and dry has been lower for both tankers and for dry meaning that there the yards weren’t experiencing a backlog even pre pandemic. Secondly the pandemic appears to have had very little impact on the yards. China was most affected by Covid-19 in Q1 which is traditionally a quiet period due to the lunar new year celebrations so there was not much backlog going in to Q2 and since April, the Chinese yards have been operating at near normal levelsl. Except for some small outbreaks that have been dealt with by immediate lockdowns in the area. Aside from China other yards in the Far East have also been able to operate at near normal levels. Korea and Japan have so far been relatively unscathed by Covid-19, although Korea is now in the process of some emergency prevention measures to limit the spread of the virus, cases have been comparatively low in both countries and therefore there has been very little disruption to newbuilding schedules so far.
On the other hand, new orders have been quite a bit lower this year and this is already having an impact on the yards. Last month Yangzijiang Shipbuilding has posted a 17% decline in profits year-on-year as uncertainty in the shipping industry due to Covid-19 has put pressure on new orders. In a bid to attract investment, some of the larger privately owned shipyards in China are considering alternative finance options and are offering attractive financing packages in order to encourage new orders such as bareboat hire purchase arrangements.
Orderbook levels for both tankers and dry were both down in 2020. New contracts for dry bulk were down considerably by 37.5% from 2019 levels although averages for the last 5-years have been much lower overall due to fleet oversupply. For tankers, new orders were down by 17%. Both the bulk carrier and tanker fleets are ageing, with the number of vessels 15-years and older increasing as vessels ordered off the back of the stronger markets in the early 2000’s are now approaching this age.