August 2022 World New Shipbuilding Market Review

Recently, the discussion about the economic "chill" has caused a heated discussion on the Internet. In the latest forecast, several international institutions lowered their forecast for economic growth for almost about the same time. The United Nations' World Economic Situation and Outlook for 2022 cut global growth by 0.9 percentage points to 3.1%, the World Bank by 1.2 percentage points to 2.9%, and the International Monetary Fund (IMF) by 0.4 percentage points to 3.2%. Most institutions believe that the economic development is also under pressure next year and two, with growth expected to hover around 3%. Market confidence in the short-term economic recovery is obviously insufficient, and the development faces the risk of "stagflation". In the face of the macro environment of "Winter is coming (winter is coming)", the new shipbuilding market, which has been performing well, also needs to be "vigilant in times of peace" and pay close attention to the development of its upstream and downstream markets.

Overall performance of the world's new shipbuilding market- -New orders and completed deliveries fell more year-on-year, and handheld orders continued to grow rapidly

From January to August 2022, the world new shipbuilding market traded 55.45 million deadweight tons (DWT) (28.59 million revised gross ton (CGT), down 41.5% and 19.7% respectively; 52.67 million DWT and 17.89 million CGT, down 10.9% and 17.2% year on year; By the end of August, hand orders reached 214 million DWT and 101 million CGT, up 8.6% and 17.4% respectively. In terms of CGT, the decline in market transactions and completed deliveries increased by 5.2 percentage points and 2.7 percentage points, respectively, from the second quarter. However, it should be noted that new ship transactions, although declining, are still 74% higher than the average for the same period in 2016-2020. The decline in completion and delivery is also closely related to external factors such as the epidemic, strikes and high temperature.

Upstream raw material market performance- -the international iron ore prices fell sharply, the average price of domestic Marine steel plate continued to fall, the future of steel prices may continue to be under pressure.

Since this year, international commodities have shown a high correction trend, among which the main commodity represented by iron ore is the most obvious. At the end of August, the China Iron ore Price Index (CIOPI) fell 188.51 points, or 33.82%, to 368.8 points, and was down 52.6% from its peak of 777.9 in July last year. In terms of price, at the end of August, CIOPI domestic iron concentrate price was 796.51 yuan / ton, down 353.05 yuan / ton, down 30.7%; CIOPI ore was $99.95 / ton, down $52.55 / ton, down 34.5%. Looking at the average price trend of Marine steel plate, the price of 6mm and 20mm Marine steel plate has dropped from 6803 yuan / ton and 6423 yuan / ton in October last year to 5087 yuan / ton and 4692 yuan / ton in early September this year, respectively, down by 25.2% and 26.9%. The bulk commodities of iron ore have both commodity and financial attributes. The price performance is not only affected by the market supply and demand relationship, but also related to the changes in the financial environment such as monetary policy. The mainstream view of the market is that, with the high inflation in overseas markets, international liquidity gradually tightening, domestic and foreign steel demand is sluggish, the short-term financial environment and supply and demand relationship is difficult to change, steel prices are expected to continue to be under pressure.

Downstream shipping market performance-the overall market has entered the adjustment period, the ship type differentiation is serious, "uneven cold and hot"

The decline in world sea freight rates has widened. Clarkson comprehensive freight prices fell to $38,300 per day in August, down 6% from the previous month, marking the third consecutive month of decline, and the decline continued to widen. Different types of ship differentiation is larger, the liquid cargo and automobile transport market performance is eye-catching, the centralized shipping market has been pulled back, the dry bulk cargo market is "cold".

The liquid cargo shipping market has increased substantially. Since the beginning of the year, the oil market has recovered rapidly, the freight of refined oil vessels is high, and the freight of crude oil vessels has rebounded sharply. In August, the average tanker combined freight rate rose to $45,000 per day, up 20% month-on-month. Crude oil freight rates have rebounded sharply for two consecutive months, with ultra-large crude oil ships (VLCC) shipments climbing sharply to $32,000 per day, up 354% month-on-month. The liquefied natural gas (LNG) shipping market has hit another record high. In August, one-year regular freight rates for large LNG carriers rose to $216,000 per day, up 23.6% month-on-month and 84% year-on-year, hitting a new high. The great changes in the global energy supply and demand pattern combined with the upcoming winter heating demand have favorable supported the stability of the liquid goods market.

The automobile shipping market has repeatedly reached new highs. In August, car carrier shipments hit records once again, with 6,500 vehicles reaching $80,000 per day, and also maintaining 26 consecutive months of positive growth since June 2020. The total transport capacity of cars and ships has changed little in the past decade, the delivery volume of new ships is low, and the supply of cars and ships is tight, which is conducive to support the market freight price.

The container shipping market continued to fall. In August, average shipping rates were $82,000 a day, down 2.3 percent from the previous month. Main ship type 1 year regular freight since February basically flat or slightly adjusted, still maintain high. Spot freight rates fell sharply, with spot freight from the far East to Europe and North America, down 9.6% and 16.3% from August, respectively. The relationship between supply and demand in the container transport market has changed significantly. With the entry of a large number of new fleets, the market may further return to "normal".

Dry bulk cargo market has seen a big decline. In August, the comprehensive bulk carrier freight rates fell sharply to us $16,000 per day, down 25% month-on-month and down 54.4% year-on-year. The BDI fell to 965 points at the end of August, with a monthly average down 32% from the previous month. Cape of Good Hope type, Panama type, Daling convenience type and other types of bulk carrier freight are now reduced, large ship freight decline is more. From this year's market performance, the dry bulk cargo shipping market has seen large fluctuations, showing a high before and after the low "inverted V" word trend. At the beginning of the conflict, Russia and Ukraine and joint recovery, major economies continued since last year to support market stability, but as the outbreak in the second quarter, real estate infrastructure industry demand weakened sharply, as well as the global economic development confidence, lead to iron ore accounted for high main dry goods transport demand shrank significantly. The future trend depends on the global economic situation and energy dry bulk goods demand such as coal.

Future concerns of the new shipbuilding market- -ship structure change, green transformation process, and enterprise delivery speed

Pay attention to the change of transaction type brought about by the "conversion" in the downstream market: since the recovery of the new shipbuilding market in 2021, the main transaction type of the new shipbuilding market has changed, starting from the container ship, which accounts for the absolute main force, and is now changing into a gas ship dominated by LNG carriers. The above two types of ships are in the premise of downstream shipping hot to achieve a large number of new ships transaction. This year, the oil transport market has also ushered in a substantial growth, do not rule out the return of oil tankers. In August, two VLCC ships were traded, the first ever order for this type of ship in more than a year since June 2021. The higher liquid cargo transportation, automobile transportation market, and the active spirit and convenient shipping freight market will bring new vitality to the new shipbuilding market.

Focus on the green process of shipping changes brought about by the implementation of international rules: The initial strategy of greenhouse gas emission reduction led by the IMO has driven the adjustment of the global fleet. The implementation of new rules, such as the existing Ship Energy Efficiency Index (EEXI), the Ship Operating Carbon Capacity Index (CII), implemented next year, and the expected strategic revision will more clearly indicate the intensity and speed of future shipping emission reduction, which will most likely further promote fleet updates.

Focus on the change in the delivery speed brought by shipbuilders going all out: the holding orders of shipyards worldwide have exceeded 100 million CGT, and the delivery of orders of first-line shipyards has been arranged until after 2025. In the environment of high downstream market demand and high new shipbuilding prices, shipbuilding enterprises also have a strong willingness to "deliver ship delivery". To overcome the challenges of external factors such as the epidemic, strike and high temperature, "guaranteed delivery ship and fast delivery ship" has become a priority of global shipbuilding enterprises. The delivery speed not only determines the overall "height" of the new shipbuilding market, but also is related to the "income" of single enterprises.

At present, the global shipbuilding industry is still "in full swing". In the face of the "chill" of the macro environment, always ensuring that the "warm" clothes is the most basic premise of "warm".