Ship orders collapse as coronavirus wreaks havoc on maritime trade

The economic fallout from coronavirus restrictions helped reduce shipbuilding investment to its lowest level in 11 years in the first quarter, with work at Asian shipyards nearing a halt and owners withholding orders as demand world of goods was falling.

“Procurement activity was extremely limited in the first quarter of 2020, with the economic impact of the Covid-19 epidemic negatively affecting investor sentiment,” shipping broker Clarkson PLC said in its monthly World report on Monday. Shipyard Monitor.

Clarkson said 100 ships of all types were ordered in the first three months of 2020 at $ 5.5 billion, a 71% drop from the first quarter of last year and the lowest total since the second quarter of 2009. Chinese yards received 55 orders during the quarter and South Korean yards received 13 orders, representing decreases of 50% and 81% respectively.

The company expects orders to continue falling as the global trade slowdown worsens and the total number of orders drops by 26% this year. “The continued escalation of the coronavirus epidemic is likely to have a severe impact on the potential for new construction orders in 2020,” Clarkson said.

Clarkson said maritime trade, which stands at around 12 billion metric tons, will contract by 600 million metric tons this year, the biggest drop in more than 35 years. The company predicts that the overall trade in goods carried on ships will decline by 5.1% in 2020 compared to last year, compared to an annual decline of 4.1% during the financial crisis of 2008-09.

The drop in orders is affecting all types of ships, from container ships that carry the world’s manufactured goods to high-margin natural gas carriers where South Korean and Chinese yards had placed their hopes for growth this year.

Orders for dry bulk carriers and tankers are also drying up, even as China resumes imports of raw materials and energy traders reserve tankers to store oil in the wake of collapsing crude prices.

The trade halt will directly affect Korean and Chinese yards, which control about half of the world’s shipbuilding capacity, according to maritime data provider VesselsValue.

Hyundai Heavy Industries in South Korea Co.

and Daewoo Shipbuilding & Marine Engineering Co.

merge, as does China Shipbuilding Industry Corp. and China State Shipbuilding Corp., business combinations to help streamline operations and reduce costs amid falling orders over the past three years.

Yards made more room to build liquefied natural gas carriers, which cost about $ 180 million each, about three times as much as other types of ships, and generated profit margins at least twice as high as others. ships.

“Then the virus struck and the bottom fell,” said a senior official of the China National Shipbuilding Industry Association, the trade body of China’s state shipyards. “It’s a bad time, so we have to get orders. Depending on the customer and the type of vessel, Chinese yards will offer up to 20% discount on new orders. “

On December 1, 2019, a patient in Wuhan, China started showing symptoms of what doctors determined to be a novel coronavirus. The virus has since spread across the world. Here’s how the virus became a global pandemic. Photo: Alberto Pizzoli / AFP

The LNG market was booming before the coronavirus outbreak, mainly at the behest of China and India, which are turning to gas rather than coal for power generation and heating.

Clarkson said the global first quarter LNG carrier order book was 2,915 ships, the lowest since 2004, when the natural gas market was a fraction of what it is today.

The broker said travel restrictions are also delaying orders, as carrier executives are unable to meet with engineers and shipyard planners for the detailed work needed to plan vessel specifications.

“We have ordered a bulk carrier and a small boxship which is already a month late and we cannot send our people to China to check on the progress of the work,” said an Indonesian owner, who requested anonymity. “How can you buy a ship when you can’t be at the yard to make sure it’s assembled properly?” “

Clarkson said Chinese yards that suspended work in February under Beijing’s coronavirus restrictions mostly resumed production by mid-March. But deliveries can be delayed as critical parts like navigation systems supplied by European suppliers have been delayed, and some shipowners seek to delay payments.

Write to Costas Paris at [email protected]

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