Profits earmarked for newbuildings
Great investments in fleets.
Demand for shipping space has long reached the large shipyards in South Korea and China. Even a calming of the market is unlikely to change the current price trend much.
According to statistics furnished by Clarksons Research, prices in the shipbuilding sector are continuing to move upwards. From an absolute low recorded in November 2020, they’ve now risen by up to 25% by today. This is the highest price increase since 2005, the London-based company said.
You have to go back to the days before the financial crisis in 2009 to find any higher prices for ships. Moreover, the inflation in the commodity and energy sectors does not suggest that the market will cool down quickly.
Surging prices could accelerate even further
Containerships are at the cusp of the ongoing price wave. Today, a 15,500 teu ship costs 50% more than at the beginning of 2021. The popular LNG tankers haven’t been too strongly affected by this trend, with premiums for such units coming to about 18%. Other tankers under construction are up to a third more expensive.
The price of steel is one factor driving up costs. Chinese steel recently cost more than USD 800 / t, a price increase of USD 250 over the last 24 months. Clarksons expects lower order volumes this year, on account of higher prices, longer delivery times and uncertainty over the types of fuels that will be preferred in the future; it nevertheless expects inflationary pressures on shipyard costs to push prices up even higher, the company’s analysts say.
Many shipyards are already booking slots in 2025 to build new units. Only the owners of LNG carriers are already seeking contracts for as soon as 2026. Clarksons estimates shipyard utilisation to stand at around 2.9 years today, down from about 2.4 years in November 2019.
Over and above the aforementioned trends there’s no doubt that tomorrow’s ships will be more expensive than their predecessors, however, even without today’s inflationary tendencies, due to the use of energy-saving technologies.