CANSI: China’s 2018 new ship order growth to be modest
China’s new ship orders for the rest of 2018 will continue to grow but at a lower rate, scoring a modest increase from 2017 in the end, according to the interim market report the China Association of the National Shipbuilding Industry (CANSI) released on July 27.
The slower growth in new ship orders is partly due to the possible affection from the escalating US-China trade friction, which will disturb the global trade and freight markets as well as bring uncertainties into the global economic recovery, market sources agreed.
China’s new ship orders grew 97.2% on year to 22.7 million deadweight tonnes (DWT) for the first half of 2018, which was already far lower than then astonishing 456% year-on-year growth for January-February, Mysteel notes.
In 2017, China’s new ship orders grew 60.1% on year.
China’s shipbuilders will be more cautious in receiving new orders amid growing uncertainties, as the Sino-US trade friction is imposing direct affection on the world’s seaborne markets with many commodities such as steel, aluminium, agricultural produce, poultries, and autos and machineries.
At the same time, China’s banking and financing institutions are more cautious in issuing new loans to shipbuilders too because of the uncertainties in the Sino-China trade friction, CANSI said.
However, the demand for new vessels will stay positive for the rest of the year, a Shanghai-based market source pointed out, explaining, “Some existing vessels with high sulphur emission will inevitably be replaced with new and more eco-friendly carriers to meet up related industrial standards.”
Ships in the global freight community including China are requested to upgrade their fuel by lowering the sulphur content to 0.5% by 2020 from the present 2%, which can be achieved by upgrading the engines by adding on filters, replacing the engines, or scrapping the existing ships for new ones, Mysteel understands.
More orders, however, have failed to generate more profits, making Chinese shipbuilders more conscious of their financial situations when they seek new orders, the association added.
In H1, Chinese shipbuilders’ profit fell by 67.8% on year to Yuan 930 million ($136 million) despite the almost doubling in their new ship orders, which was partly attributed to the rises in steel prices, and some high-tech vessel builders have already into lossmaking because of too high material procurement costs, according to the association.
Steel prices account for up to 25% of a bulk carrier building cost, among which, the 20mm shipbuilding plate price went up 26.9% on year to Yuan 4,821/tonne including the 16% VAT as of June 29, according to Mysteel’s data.
For 2018, CANSI expects the vessel delivery to reach about 36 million DWT and the backlog to stay at around 90 million DWT by the end of the year, up 3.2% on year.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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