Bharat Book

Report on Shipbuilding Industry

Press Release   •   Oct 22, 2012 14:08 IST

Report on Shipbuilding Industry

The Shipbuilding Industry - Riding the Economic Wave
The global economy recovering from the aftermaths of economic crisis grew at 5.1% on y-o-y basis during CY10 leading to a marginal increase in seaborne trading volumes. This provided an impetus to the new-build ordering volumes during CY10 aggregating 71.1 mn GT. Conversely, the orderbook continued to decline aggregating 287.8 mn GT as on December 31, 2010 owing to the continuous flow of deliveries by the shipyards. However with the global economy slowing down in the latter half of H1CY11 on account of fiscal imbalances in the developed nations, the seaborne trading volumes deteriorated, adding to the woes of the already over-existent vessel capacity. Nonetheless, the momentum in the new-build ordering continued through H1CY11 aggregating 31 mn GT increasing by 19.2% on y-o-y basis. The orderbook however declined to 269.9 mn GT as on June 30, 2011 on account of higher deliveries aggregating 47.7 mn GT during H1CY11.

Even the surge in scrapping volumes particularly in the dry bulk vessel segment and y-o-y decline in vessel prices in the range of 2-9% during H1CY11 provided no respite to the dwindling global shipbuilding orderbook, especially in case of major shipbuilding nations such as S. Korea, China and Japan thereby requiring their respective governments to take corrective monetary and non-monetary incentives to boost the industry’s prospects. However, the Asian shipbuilders continue to dominate the global orderbook accounting for 95.4% of the total orderbook as on June 30, 2011. Of the same, in continuation of the trend during CY10, the market share of the Chinese shipbuilders in the global orderbook remained the highest at 39.7% followed by S. Korean and Japanese shipbuilders with 35.3% & 14.4% respectively. Shipbuilding Industry

The Indian shipbuilders occupied 6th rank globally accounting for 1.3% of the global orderbook aggregating 3.82 mn CGT with 187 vessels on order as on June 30, 2011. In view of the ageing fleet of offshore vessels globally with approximately 40% of the offshore vessels above 20 years of age, the specialisation of Indian shipbuilders in the construction of offshore vessels augurs well for the Indian yards. Also, the Indian navy’s announcement with regards to placing new-build orders with both the country’s public as well as private shipyards under the policy - ‘Buy and Make Indian’ has been a welcome move for the Indian shipyards.

CARE Research expects the over-capacity of vessels globally at 13-16% of the existing fleet during H2CY11 - CY13. Notably, with the global shipyards still accepting orders scheduled for delivery during CY14, the estimated excess capacity stands relatively lower at 8.42% during CY14. CARE Research expects minimal chances of order cancellations. However, in continuation of the trend during the economic recession, the global yards are expected to be faced with re-scheduling of vessel deliveries in the event of continuation of fragile global economic conditions together with the liquidity crunch from the shipowners point of view.

Executive Summary


The Global Shipbuilding Industry’s Prospects

• Existing overcapacities- leading to demand crisis
• New orders- lacking pace
• Deliveries- the only parameter remaining steady
• Scrapping – focus on reducing the excess
• Order cancellations- damage in control
• New-build v/s Second-hand vessel
• Government incentives to propel industry’s growth
• S. Korean and Chinese shipyards – global dominance to continue

Outlook - Based On Vessel Segment
• Outlook on the Wet Bulk segment
• Outlook on the Dry Bulk segment
• Outlook on the Containership segment

The Indian Shipbuilding Industry’s Prospects

Envisaging Growth
• Expansion of Indian shipyards
• Focus on offshore & defence segment
• Indian yards focusing on foreign tie-ups
• Growing JVs between private & public Indian yards
• Promotion of Maritime Clusters
• Lesser risk of order cancellations

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