Shipping and Shipbuilding Markets 2 0 0 7 Shipping and Shipbuilding Markets in 2006 THE BRS ANNUAL REVIEW OF WORLD SHIPPING AND SHIPBUILDING DEVELOPMENTS IN 2006 AND PROSPECTS FOR THE COMING MONTHS… 1 Foreword 3 The shipbuilding market in 2006 23 The cruise market in 2006 29 The tanker market in 2006 45 The offshore and specialised ships markets in 2006 51 The chemical carrier market in 2006 57 The liquefied petroleum gas shipping market in 2006 67 The liquefied natural gas shipping market in 2006 73 The dry bulk market in 2006 81 The containership market in 2006 97 The ro-ro market in 2006 101 The marine insurance markets in 2006 107 French shipyards deliveries and orderbook in 2006 110 French orders to foreign shipyards in 2006 Crystal Ball AFTER FOUR YEARS OF BUOYANT the world’s population, originating from SHIPPING MARKETS, GIVING STATIS- a group of countries known as B.R.I.C. TICS NEVER SEEN BEFORE, THERE (Brazil, Russia, India, China), in the global ARE A NUMBER OF DISQUIETING VOI- economy. CES BEING HEARD PREDICTING A However, recent forecasts published by SEVERE CORRECTION OF THE MARK- the World Bank over the next 25 years ETS OR EVEN A NEW CRISIS RECALL- lead us to believe that a collapse in the ING THE SAD DAYS OF THE 80’S. markets, following the historic increases, It is true that we are in a cyclical industry is neither a necessity nor a compulsory and that the current swelling of the passage. Certainly growth is seldom orderbooks, which equates to an average linear and we should prepare ourselves of 25 % of the existing fleet, and even for market corrections, linked to tempor- close to 50 % in some sectors, gives ary imbalances between supply and cause for concern even to the most demand, especially in the tanker and serene spirits. containership sectors. However, today’s freight rates can endure a correction Financial analysts are asking themselves without necessarily causing panic, since exactly the same questions about the the current opulence is not a written evolution of the stock markets after four rule, and there is plenty of space for years of increases. This seems to suggest some belt-tightening. that the shipping world and the financial The shipping markets can fall back to world are increasingly correlated, wher- levels of returns comparable to shore- eas up till now they were taking totally based industry norms without necessar- different paths. ily going into recession. Is it economically Fundamentally, this rise in the shipping healthy to be able to payback a ship in market is linked to growth in world trade, three years or even less, or to purchase which has been stimulated by the amaz- a five-year old ship at 30 % over its ing development of more than a third of construction cost? Foreword - BRS 1 The World Bank predicts an average etc. can easily upset the most rational growth for developing countries of over plans and forecasts. In practice, who 6 % (twice as much as developed coun- dared predict that crude oil prices would tries) and a tripling of world trade over be at $50/bbl by the end of 2006, having the next 25 years. The middle classes, reached $70/bbl during the course of the avid consumers of goods and energy, year, with everyone seeming at that time should then number 1.2 billion individuals to agree that we would reach the magi- (15 % of the world population), compared cal $100/bbl mark? Who also could have to 400 million today, whilst they only predicted such a surge in newbuilding increased by a small percentage over the orders this year? We should remain cau- past 25 years. tious and ask ourselves if the informa- tion, which inundates our screens, is Facing such an evolution, we are inclined always sufficiently reliable to allow us to to believe in a “soft landing” scenario, make clear and definitive assumptions permitting the temporary surplus of ton- on what the future will be; the hard rea- nage to be absorbed. In the longer term lity always imposes certain modesty. the world fleet must be able to adapt to this totally unexpected global change, In the redistribution game played on the indeed bringing growth but also ecologi- global scene, it is comforting to note that cal headaches of an unprecedented com- the owners in our “old Europe” are plexity. wishing to keep control of shipping busi- ness by massively investing in the growth In a world which overloads us with infor- of their fleets. We are grateful that ship- mation, we sometimes forget that ele- owning does not seem ready yet to enti- ments over which we have little control, rely expatriate itself. ■ such as the weather, individual or group psychology, currency exchange, politics, 2 BRS - Shipping and Shipbuilding Markets in 2006 The shipbuilding market in 2006 SINCE 2003 SHIPBUILDING HAS HAD well as numerous options liable to be A SUCCESSION OF EXCEPTIONAL exercised in the year, and yet to abide by YEARS, AND 2006 BROKE FURTHER the preceding regulations. However, this NEW RECORDS: movement carried on beyond April 1st 2006. In large part this explains the 1. Demand literally took off, well beyond strength of demand for tankers and bulk the most optimistic forecasts, with more carriers with respectively more than 85 than 169 million dwt of new orders (2,950 million and 45 million dwt ordered, com- ships) compared to 117 million in 2003, 112 pared to 32 and 27 million dwt in 2005. million in 2004 and 94 million in 2005. Deliveries also progressed and broke the 3. Korea maintained its number one barrier of 75 million dwt (1,550 ships) ranking in the world, with an orderbook against 55 million in 2003, 62 million in rising rapidly to achieve 81.3 million gt 2004 and 72 million in 2005. World against 65.6 million gt the previous year. orderbook is increasing inexorably, going The Japanese portfolio also progressed in twelve months from 178 million gt to with close to 62.3 million tons, compared more than 235 million gt, representing to 54.2 million gt in 2005. But it was 345 million dwt. Shipyards are fully book- China that had the biggest growth with ed for three, four, or five years. an orderbook that shot up to nearly 48.7 million gt against 30.6 million gt the year 2. The year was marked by a new and before. Western and Eastern European important regulation which was enforced builders have maintained their volumes, as from April 1st 2006, the CSR rules, with the overall orderbook going from aiming to considerably reinforce the 22.1 million to 22.5 million gt. With capa- structures of tankers and bulk carriers, cities being totally tied up with the esta- with a non negligible increase in the blished shipyards, this has profited the weight of steel hulls and of the cost of other shipbuilding zones (Vietnam, India, construction as a result. Owners and etc.), who have seen their orderbooks builders concerted to conclude as many increase strongly from 7 million to 10 mil- contracts as possible before this date, as lion gt. The shipbuilding market in 2006 - BRS 3 Stena Primorsk 65,200 dwt and 70,300 cbm, here leaving Stockholm is the third in the Stena P-MAX series of 10 units ordered by Concordia Maritime at Brodosplit in Croatia. As well as on the other Stena Max designs, the P-MAX has independant propulsion systems to achieve maximum redundancy for trading in sensitive waters. 4. This strong demand has pushed The prospects for 2007 and 2008 growth in 2006. Commercial trade newbuilding prices up, with a seem better, but a number of doubts has remained particularly active spread of 10-15 % between the persist as to the evolution of buil- and has grown by nearly 8.9 % lowest and highest levels of the ding costs, due to the extended time compared to 7.4 % in 2005. year. The record prices achieved in frame of their orderbooks. There is Whilst world growth during the 90’s, the middle of 2005 for the three strong pressure on steel prices, and even at the early start of the principal types of ships have been machinery and salary costs. The century, was only in the region of 2 surpassed in the bulk carrier and weakness of the dollar adds to the %, and was reduced to a small num- tanker sectors, and come close for difficulties. Some yards are facing ber of economic players, we have containerships. Massive cash flow supply problems with the supply of now had four years of growth hover- availability and the very good per- main components, which is jeopardi- ing around 5 %, pushed by the deve- formance of freight rates during the sing their planning but also the lopment in the “BRIC” countries year encouraged owners to order continuity of their operations. (Brazil, Russia, India, China). The new ships. Builders were able to get multiplication of economic partners, the best prices due to the healthy the lengthening of voyages and a appetite of the latter for prompt THE ECONOMY AND strong economic growth undoubt- deliveries, made possible by pro- COMMERCIAL TRADE edly are the main reasons for the ductivity increases and the creation The world economy has continued expansion of shipping transport and of new facilities. They were there- to move at full speed with 5.1 % the vigorous investments it calls for. fore able to get premiums on buil- ding prices, which progressively constituted new benchmarks for IMF Forecast (as % of GDP) the next contracts.