Bulk cull coming

Two thirds of dry-cargo newbuildings penned for delivery next year could be axed or delayed by shipowners, HSBC warns.

Analysts Steve Man and Ankur Sharma say 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.

“Additionally, for orders placed in 2008 construction work would still have to commence, making them more likely to be cancelled.”

Man and Sharma add cancellations and delivery deferments will slice between 30% and 40% from this year's dry-bulk delivery schedule. In 2011, 50% to 60% of bulkers will not arrive.

They said: “In our view, it is in the interest of the yards to defer deliveries. This is because orders have almost dried up since 2H08 and if shipyards continue to deliver vessels as per the current schedule they would effectively have no work left after 2011.

“Therefore, yards would prefer to defer deliveries to adjust to market demand and so that they continue to be in operation post 2011.”

The HSBC pair project peak delivery of bulkers will now occur in 2009 at just over 40m dwt, a year before the scheduled summit of around 105m dwt.

On the tanker side Man and Sharma say the risk of chopped and delayed orders is lower, helped by the phasing out of single hull vessels.

They expect to see a 15% to 25% reduction in the existing orderbook this year and next, with the biggest fall coming in 2011 with between 20% and 30% of the expected vessels axed or pushed back.

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