A third to fail

Credit crunch cancellations could cut the global dry-cargo orderbook by over a third, Torm warns.

In its annual report issued on Friday, the Danish shipowner predicts some 35% of bulker newbuildings will be axed by shipowners or shipyards.

Torm, which tips the transportation of bulk cargoes to retreat by 3% this year, says the vessels will be cancelled due to collapsing freight rates and the global economic downturn.

There are presently 3,405 bulkers, including 833 capesizes and 742 panamaxes, on order, according to figures from Norwegian finance house Pareto Securities.

Torm adds it expects between 10% and 15% of product tanker newbuildings to be chopped for the period to 2011.

Pareto says 513 product tankers are presently on order, equal to 36.5% of the fleet.

“The global economic downturn has made it difficult to finance newbuildings, resulting in shipyards as well as shipping companies cancelling newbuilding orders,” Torm said, adding there is uncertainly about both its cancellation projections.

The shipowner’s estimate is modest compared to what some analysts have predicted.

Last month HSBC warned two thirds of dry-cargo newbuildings penned for delivery next year could be axed or delayed by shipowners. (Click here to read related article.)

Analysts Steve Man and Ankur Sharma said cancellations will accelerate with only 36.8m dwt of the 104.5m dwt in the 2010 dry-cargo orderbook likely to be delivered, a fall of 65%.

“With bulk shipping lines cutting capacity to adjust to lower demand, the massive deliveries for bulkers scheduled for 2009-2011 will need to be deferred. Cosco Singapore’s deferment of 26 bulkers is a case in point and other bulk makers are expected to follow suit,” the pair wrote in a report.

“Orders placed after mid 2007 are most at risk of cancellation since most of these orders are at the initial phase of completion and ship buyers would like to either completely cancel these orders or renegotiate at a lower price with the yard.”

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