Ahead of SMM 2024 in Hamburg, Clarksons Research have produced a review comparing the improved shipbuilding and marine equipment markets today against the context of the previous cycles. Over 40,000 industry participants will soon gather in Hamburg for the biannual SMM trade fair, a key event for yards and suppliers. In this week’s Analysis, we chart market developments since the last SMM and at key points over the long term market cycle. Alongside a strong flow of newbuild orders and good retrofit demand, “managing disruption” and “going green” remaining key themes today. Reviewing the data points (see below and attached), Steve Gordon, Managing Director of Clarksons Research commented:
- Strong day rates across all major shipping sectors including tankers, gas, bulkers, container and offshore with the ClarkSea Index averaging $25,600/day in 2024, 43% above the ten year trend
- Global seaborne trade reaches 12.6bn tonnes but with geo-political disruption increasing average distances significantly
- Global newbuild orderbook backlog has reached 248m GT, a 12 year high, with an aggregate contract value of $433.7bn
- Strong flow of newbuild orders, with significant activity in tankers and gas ships and now a further containership activity
- Return of activity in cruise newbuilding as this market recovers to 35 million passengers in 2024
- Despite some reactivation of Asian yard capacity, lead times remain at historically high levels
- Clarksons newbuild price index up 16.5% since the last SMM and now sits only 1% below the all-time 2008 high (although this is 40% lower on an inflationary adjusted basis)
- Green technology investments continue with over 50% of orderbook tonnage now alternative fuel capable, up from 40% two years ago
- Strong retrofit demand for Energy Saving Technologies, now fitted on over one third of global tonnage, as emissions regulation accelerates
- Underlying fleet renewal requirements as fleet ages and decarbonisation strategies executed
- Back at SMM 2008, weeks from the Leh-man crisis, shipping rates (ClarkSea $36,000/day, see Table), were riding high with strong order flow (46m CGT in Jan-Jul 2008, a record 94m CGT in 2007). Although actual shipyard output was still to peak (2010: 54.2m CGT), the ship-building market was about to enter a period of depressed demand, declining output and surplus capacity (albeit periods of stronger ordering e.g. 2013). Ordering reached a low in 2016 (8.9m CGT in Jan-Jul, 14.3m CGT for full year), although again yard output would not “bottom out” till 2020 (29.7m CGT).
- Two years ago, we profiled both the “green shoots” observed at 2018 SMM (an active cruise newbuild market, an accelerating SOx scrubber program) followed by the Covid-19 “bounce” in 2022, including an all time high containership order run (7.3m TEU across 21-22). And the green agenda was sharply in focus (IMO soon to agree “net zero”).
- This year’s SMM will kick off with robust cross market charter strength (Clarksea ~$25,105/day vs ~$7,000 in 2016), with geo-political lead disruption, improving volumes and some supply side constraints all supportive. There has been a strong flow of newbuild orders ($114.5bn / 35.6m CGT in Jan-Jul) with tanker and gas orders prominent and now a further wave of containership ordering. Prices are elevated, with our newbuild index up 16.5% since the last SMM and now sitting less than 1% off the all time 2008 high (although this is 40% lower on an inflationary adjusted basis). The shipbuilding market remains “tight” with typical leads times of 3-4 years despite some increases in capacity (in China we are tracking a range of reactivation and expansion, albeit no “greenfield”). Global output this year is expected to increase to 41m CGT.
2024-2050: Driving Transition
- Alongside the healthy order flow, “green” investments remain crucial (energy security has risen up the agen-da since last SMM). Over 50% of global tonnage on the orderbook is now alter-native fuel capable (SMM 2022: 40%), with the share of orders LNG duel fuel increasing this year relative to methanol (7.1m vs 2.1m CGT through August, excl. LNG carriers). Investments at ports con-tinue to lag: there are now 192 ports with LNG bunkering facilities (+82 being developed) and 208 ports with shore power connection. There will be fantastic innovation on show at this SMM and we are tracking significant Energy Sav-ing Technologies (ESTs) now on ~34% of world tonnage (NB: we will publish more detail in our monthly “Green Technology Tracker” during SMM). Despite the progress, there is still a huge way to go with our projections suggesting strong long term fleet renewal requirements ($5.3 trillion of newbuild orders through 2050) driven by ageing fleets (fleet av. age up to 13.9 yrs) and decarbonisation (shipping is ~2% of global emissions / 1bn tonnes of CO2e). So a busy SMM!
- You can find Clarksons Research at SMM - Stand B1.OG.304, Hall B1 where they can demonstrate World Fleet Register and Shipping Intelligence Network
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