Yuan strength handicap for mainland yards

PUBLISHED : Friday, 23 April, 1999, 12:00am
UPDATED : Friday, 23 April, 1999, 12:00am

Restricted by Beijing's refusal to devalue the yuan, mainland shipbuilders have been unable to compete with South Korean counterparts whose business has been boosted by the soft won, shipbroker SSY says.

In its latest report, SSY said there were only 24 bulk carriers and 42 tankers on order at mainland yards at the end of March.

It said Japan and Korea dominated the market for bulk tonnage - Japan holding 47.1 per cent share in deadweight tonnes (dwt) and Korea 37.5 per cent.

Some Japanese builders had been re-evaluating their long-term futures, especially those concentrating on bulk tonnage.

In the mainland, top priority had been given to construction of a shipyard at Waigaoqiao in Shanghai to build VLCCs (very large crude carriers). The yard would have an annual capacity of 1.8 million dwt.

This increase in the world's capacity would add to shipbuilding industry woes, SSY said.

Its report said worldwide bulk tonnage on order fell 8.7 million dwt to 66.9 million dwt in the first quarter. The largest fall was in the tanker sector, from 49.4 million dwt to 43.6 million dwt.

'Dry-bulk tonnage fell by 2.7 million dwt from 25.8 million dwt to 23.1 million dwt, while the combined carrier order book fell by 0.2 million dwt,' the report said.

Shipbuilders increasingly would find it difficult to get new contracts because there was little prospect of improvement in dry-bulk markets and soft conditions for tankers, it said.

The tanker market would see further cuts in global oil output, leading to modest growth in oil demand.

There would be a net increase in tonnage because 18.3 million dwt was awaiting delivery this year, it said. This meant lower freight earnings for tanker owners.

Tanker contracting had fallen during the past two quarters, with only 1.5 million dwt contracted in the first three months this year, compared with 5.2 million dwt in the final quarter of last year.

Meanwhile, Reuters quoted SSY as saying dry-bulk shipping markets were finely balanced despite the recent downturn caused by holiday breaks.

'Events in the next month or so will provide a better indicator of which direction the market is taking,' SSY said.

Sentiment among Panamax shipowners suggested the Atlantic grain market would pick up as more April stems hit the market, the broker said.

Trans-Atlantic round-trip rates had fallen to an average of US$7,033 last month from $8,078 in February, while rates for 52,000-tonne grain cargoes from the US Gulf to Japan had fallen to $15.49 from $16.51 per tonne.

There was greater uncertainty in the Pacific as to whether rates were headed up or down after trans-Pacific round-trip rates fell about $500 a day last month to about $5,693, it said.

Capesize inquiry for May was limited and rates had fallen early this month.

A trend last month for Atlantic Handymax to strengthen appeared to have peaked this month, but despite sluggish demand, a rise in the Pacific basin was likely due to the lack of available modern tonnage.