After the shipbuilding industry entered a new boom period, the global new shipbuilding market ushered in a boom in orders, however, the surge in orders may lead to shipbuilders after 2027 capacity problems. The reason for this is that the number of shipyards and labor force during the shipbuilding recession has decreased significantly. Currently, some shipbuilders are postponing the delivery of new ships.
Norwegian shipbroker Fearnleys report shows that, in terms of compensated gross tonnage (CGT) as a basis, South Korean shipbuilders are expected to hold orders significantly higher than the last five years of shipbuilding capacity.At present, South Korean shipbuilders have accumulated the construction volume for the next three to four years, but according to the existing production capacity, it may take more than four years of construction cycle before the actual delivery of the ship.Fearnleys said, “Due to the huge amount of construction in the shipyard, the delivery period may be delayed, and may even affect the availability of the docks in 2028.”
According to Korean media reports, a number of South Korean shipbuilders have now reached agreements with shipowners to delay deliveries.
The South Korea Financial Supervisory Service’s (FSS) electronic information disclosure system shows that Hanwha Ocean has postponed the delivery of seven new ships, and HD Hyundai Mipo and Samsung Heavy Industries have also postponed the delivery of four and one new ship, respectively. It is worth mentioning that, if a shipbuilder fails to deliver a ship on schedule, it needs to pay compensation to the shipowner according to the terms of the contract.
The Fearnleys report shows that the global shipbuilding industry’s expected total hand-held order book for 2024 is about 120 million CGTs, which would be about 40% higher than the average hand-held order book for the previous five years (2018-2023).
Clarkson data in early June showed that the total global new ship orders from January to May 2024 amounted to 20.12 million CGTs (726 ships), an increase of 6% compared with the same period last year; based on the end of May, the global hand-held new ship orders amounted to 133.12 million CGTs, an increase of 2.25 million CGTs compared with the previous year.
Fearnleys related personnel analyzed that the recovery of the shipbuilding industry in recent years has brought a large number of new ship orders, but the number of shipyards around the world has shrunk dramatically during the industry recession, which is an important reason for the tight capacity of shipyards. In addition, “both China and South Korea’s shipbuilding industries are facing labor shortages, and if shipbuilding capacity is not effectively increased, capacity shortages may occur after 2027.”
As of March 2024, the number of employees in Korea’s shipbuilding industry will be about 113,000, up from the number of employees at the end of 2022 (about 96,000), but down at least about 50% from 203,441 (2014) at the peak of the shipbuilding industry.
The Korean industry said that shipbuilders are currently addressing labor shortages by recruiting foreign workers, but foreign workers are only engaged in simple tasks and key talents such as skilled workers are still lacking. The long-term labor shortage may weaken the competitiveness of the Korean shipbuilding industry.
Regarding shipbuilding capacity, Clarkson previously analyzed that “with rising ship prices (up around 40% since 2020, despite significant increases in shipyard costs), a strong forward order book, and good cross-industry order demand, shipbuilding capacity has become a limiting factor for new ship deliveries.”
The total number of active shipyards worldwide has fallen by two-thirds since 2010, Clarkson said. Global shipbuilding capacity is gradually beginning to pick up slightly after a decade-long decline, according to the research institute’s May data. in the first quarter of 2024, global newbuilding deliveries amounted to 10.1 million CGTs, a seven-year quarterly high.
Clarkson expects full-year shipbuilding capacity to grow by 15% to 40.6 million CGTs in 2024, with the main factor in the increase in global shipbuilding capacity in the first quarter of this year being the restart of a number of “new” shipyards in China, including Hengli Heavy Industry, New Jiangzhou Shipbuilding Heavy Industry, Quanzhou Shipyard, and Dalian Shipbuilding & Offshore (DSOC), etc.