Global Newbuilding Orders Double Amid Price Surge and Capacity Constraints

Global newbuilding orders have seen a significant increase, more than doubling from a year earlier, according to Hellenic Shipping News Worldwide, citing Business Korea. This surge in demand for new vessels is attributed to geopolitical risks and limited shipyard capacity globally.

Clarksons Research, a UK-based provider of shipbuilding and shipping market data, reported that 2,098 vessels were ordered through the fourth week of August. This figure represents more than double the 938 vessels ordered during the same period last year. In Week 35 alone, 107 vessels were ordered, including 17 oil tankers, 32 chemical and specialised vessels, and 12 containerships.

This increased demand has also pushed newbuilding prices higher. The newbuilding price index rose by 0.09 points from the previous week to 186.34 in Week 35. Specific vessel types also saw price increases; a 91,000-cubic-meter LPG carrier's price rose by $500,000 to $114.5 million, while a 6,500-CEU car carrier increased by the same amount to $93 million. Prices for midsize bulk carriers, such as Panamax and Handymax vessels, also increased.

Strong Secondhand Market Activity

The secondhand vessel market has also remained robust. The cumulative number of secondhand vessel transactions reached 1,555 through the fourth week of August, an increase of over 300 vessels compared to the same period last year. The resale price of petrochemical product carriers, for instance, jumped by $1 million in a week, reaching $59 million, as demand for immediately deployable vessels grew.

Geopolitical tensions in the Middle East are also contributing to demand in the Very Large Crude Carrier (VLCC) market. Clarksons Securities estimated that VLCC spot rates in the Middle East Gulf have surged to approximately $800,000 per day, as crude buyers seek to secure supplies amidst potential disruptions. High freight rates have also reduced the availability of younger vessels in the secondhand market, as owners opt to continue operating their vessels to capitalise on earnings. This has extended demand to older vessels, with tankers aged 16 to 20 years accounting for 43% of secondhand tanker transactions.

Shipyard Capacity and Future Outlook

The current market conditions are favourable for South Korean shipbuilders, which have secured more than three years of orders. Hanwha Ocean has led with orders for 17 VLCCs this year, while Samsung Heavy Industries and HD Korea Shipbuilding & Offshore Engineering have continued to secure tanker orders. With shipyard docks nearing full capacity, Korean shipbuilders have enhanced their bargaining power, securing higher prices through selective contracting focused on high-value vessels.

However, risks are noted for the medium to long term. The VLCC orderbook has grown to over 30% of the existing fleet, leading to concerns that vessel supply could increase rapidly upon delivery. Industry observers suggest that developments in the Middle East, the normalisation of freight rates, and future shifts in supply and demand will be key factors influencing the continuation of newbuilding orders.