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       Air, Land and Maritime Transport 04/01/2010
Shipbuilding sector faces sharp decline after 2007 peak

After the prolonged shipbuilding boom from 2002 to 2008, the sector has to hold out against declining orders from cautious ship-owners.


Shipbuilders worldwide are facing difficult times, burdened with significant costs supporting manufacturing capacity that grew rapidly during the shipping industry’s boom between 2002 and 2008. In absence of new orders, smaller and weaker yards are struggling to finance the completion work on ships already under construction. However, shipbuilders are obliged under most contracts to complete the ships within a set period or return the money from deposits to the ship-owner.


“There is considerable concern that excess shipbuilding capacity, which was already looming as a problem despite the full order books, may now become significantly more serious”, according to Harald Neple, chairman of the Organisation for Economic Co-operation and Development’s shipbuilding committee.


Marc Odebrecht, the Germany-based Wismar yard’s bankruptcy administrator, says the outlook is bleak for other shipyards. “The system is sick. No builder in any other kind of business has to take so many risks.”

According to Charles Morrison, a director of London-based Braemer Shipping, some yards and ship-owners have jointly agreed to delay delivery of orders not under construction. Apparently, Korean yards have been particularly prone to agreeing such delays.


The International Shipping Federation, which represents international ship-owners’ associations, however called for yards to be more prepared to accept cancellations. The two sides have potential to do considerable damage to each others’ business, but hopefully compromise agreements will predominate.


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