Subprime loan problem slowing down newbuilding talks

Newbuilding talks in Japan are now at a standstill due primarily to the difficulty some owners are facing in the procurement of funds.

This occured because of the subprime problem, which involved the provision of loans to individuals with low creditworthiness, since the fall in 2007. Coupled with the sluggish dry market at the turn of 2008, shipowners are increasingly losing interest in placing orders for newbuildings. As for shipbuilders, they remain unable to figure out cost estimates for newbuildings until negotiations for steel prices in/after April 2008 are wrapped up. Amid the standoff between the two parties, there is a high probability that the newbuilding talks will be deferred to in/after March 2008 at the earliest. Japanese shipyards have been saying that, 'The tides have changed,' since around November 2007. The slowdown in newbuilding talks lingered well into the turn of 2008. One of the main reasons behind the decline is the subprime loan problem. Domestic and overseas owners, who used to actively engage in newbuilding deals, have manifested weakening interest in newbuilding talks due to the difficulty in securing necessary funds for the vessels.

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