Newbuilding prices of Tankers

Recent media headlines on the cancellation of new building contracts indicate the uncertain times in the shipbuilding industry.

This arises due to the lack of financing powers, delays in deliveries from Chinese shipyards, never ending increase in the prices of raw materials, Japanese shipyard’s confrontation with steel mills and delayed engine availability. The next few years in the shipbuilding industry will be characterized by “uneasy calm” as the industry adjusts to new equilibrium for material and labor supply and product demand. The main reason is fully utilized capacity of major shipyards until most of 2010 providing steady cash flow and, at current asset price significant revenue. Major world shipbuilding yards in South Korea and Japan have well established contracts for supply of raw materials from major world producers. The smaller yards are however exposed to smaller volume contracts and more exposed to price volatility. For the major shipyards, at least there will be some profit margin to burn through before hitting breakeven.
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