Page 64: of Maritime Reporter Magazine (June 1995)

Shipbuilding Demand:

Fleet Obsolescence, Safety Concerns To Drive Newbuild

Activity Through 2010

Despite the fact that the vol-ume of international trade by sea quadrupled between 1960 and 1990, and continues to grow in overall terms, freight rates have remained at a low level, and in 1994 had declined in real terms taken over the previous 12 years.

The situation has been brought about by the indiscriminate entry of new tonnage into the markets and failure to scrap less economical ships (between 1950 and 1980 the global merchant fleet grew by more than 400 percent in deadweight terms).

Nevertheless, the advancing age of ships, with accompanying growing maintenance expenses, higher run- ning costs, increased safety concern and impending obsolescence, must inevitably lead to fleet replacements.

On top of this, future needs must be catered to in changing markets — in addition to changes in established trades, new markets are emerging.

These issues have important impli- cations for shipowners, shipbuild- ers and others involved in newbuilding projects.

With the forecast of global cost of newbuildings amounting to $28 bil- lion in 1995, rising to $38 billion by the turn of the century, both ship- owners and shipbuilders are faced with daunting problems. The ship- owner must make critical invest- ment decisions in risky circum- stances, while the shipbuilder, de- spite the prospects of a growing demand for ships, is faced with fierce competition due to global overca- pacity and uncertainty as to the future role of government subsi- dies. Drewry's new report,The Ship- building Market: Analysis and

Forecast of World Shipbuilding

Demand, 1995-2010, addresses the underlying factors influencing newbuilding orders and explains the most likely projected effects on the shipping and shipbuilding in- dustries.

For the shipowner trading a new ship on inadequate returns, high capital recovery costs must often be covered in competition with ok ships having smaller capit overheads. On the other hand, m< ginal improvements in market cc ditions may lead to a new ship suitable design out-performing old ships and proving itself a valuafc asset.

Decisions as to the timing of t order for a new ship, or wheth there is an acceptable alternate which may be resorted to, are, ther fore, of critical importance and ca only be judged by an analysis of tfc particular market in which the shi is employed.

A forecast of how a shipping mai ket will perform within the globs economic cycle must be take int account structural changes whicl are at work in the composition of th world economy as a whole and whicl arise from new manufacturing anc commercial practices. Examples o such changes are to be found in the trading patterns in the Pacific Rin countries, in the continuing devel- opment of container trades and in the supply of basic commodities to changing steel and power generat- ing industries.

Prospects for shipbuilding in over- all volume terms are seen as good, with shipping acquiring a slice of growing world trade likely to be a

Figure 1

FORECAST REVENUE OF GLOBAL NEWBUILDING ACTIVITY 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Million gt Million US$ (left axis) (right axis)

Source: Drewry Shipping Consultants.

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