Impact of the Economic Downturn on the Shipbuilding Industry

Transcription

1 Impact of the Economic Downturn on the Shipbuilding Industry The 108 th OECD WP6 Meeting 9-10 July 2009 The Korea Shipbuilders Association

2 Contents 01 Impact on Shipbuilding 02 Responses on Impact 03 Possible Outlook 04 Summary

3 1. Impact on Shipbuilding 01 ; First Response & No Exception Unprecedented Economic Downturn Shock Unexpected Psychological impact Exceptional Impact on all Industries & Countries Financial Market Seaborne Trade Manufacturing(Car) Shipbuilding is no exception and also affected by the leading industry indicators

4 1. Impact on Shipbuilding 02 ; Shipping & Shipbuilding in joint stagnancy BDI Index New Contracting Ship owners/operators suffer from the poor earnings Frozen Ship Financing Market and Actually No New Orders

5 2. Responses on Impact 03 ; Adjustment of the Orderbook Renegotiations on the existing Contract - Deferment of payment - Delay of Delivery, Shiptype Change, Price Reduction - Cancellation Crunch of the Ship Finance - Drop in ship values causes a Loan to Value problem from the ship owners A 30%~50% of U$500 Bill. of orderbook yet Unfinanced Shipyards are struggling to deliver their ships ; Ship owners are struggling to persuade them not to..;

6 2. 2. Response Responses on on Unexpected Impact Impact 04 ; Response of Parties How long will it be continued? Nobody Knows, Cautious Monitor, Focusing on their own job <Shipyards> Stoppage or Withdrawal of New Construction & Expansion Plans Deferment of Installment Payment Delivery Delay (Production Control) Wage Tightness, Investment Suspension, Cost-Down Actions <Shipowners> Down-scaling the fleet utilization (Slow-speeding, Lay-ups, etc.,) Scrapping of old tonnages B/C: 244 ships by June 2009(cf. 124 ships in full year 2008)

7 <Banks> Lending terms for ship owners become more strict and selective regardless of new contracts & existing contracts. <Materials> Higher material prices turn downward and normalized Steel prices drop drastically and enhance the yard s profitability

8 3. Possible Outlook 05 ; Scenario for Cancellation & Delay(Clarkson) Slippage & Cancellation : About 40% of order books (Actual deliveries to be contracted and deferred than scheduled) Completion in 2009 likely to be peak 70 m, CGT

9 3. Possible Outlook 06 ; Restructuring & Downscaling in Capacity Failure to materialize Many plans for New or Expansion Decrease of Actual Capacity : Slower of Actual Output Fade-out of Subprime yards and their Conversion into Repair/fabrication(Shipyard s competitiveness to be seriously test and differentiated)

10 3. Possible Outlook 07 ; Uncertainty & Weak Demand Weak Newbuilding Demand likely to remain for Another Months Existing Orderbook takes time to be digested Demand may grow for the high-valued special purpose ships (LNG ships, LNG-FPSO, LNG-FSRU, Drillships, FPSO) Recovery of Newbuilding demand seems uncertain and Dependant on ; Rebound of the global economy/ Liquidity of ship finance Revival of the Shipping Requirements and Ship-owner s earnings Rearrangement of the existing Orderbook(Slippage & Cancellation) Fleet Supply curtailment(scrapping)

11 Reference, Comparison of Association s Forecast Table 1 Forecasting Time Koshipa 1996 CESA 1996 SAJ 1996 Table 2 Forecasting Time Koshipa 1998 CESA 1998 SAJ 1998 Table 3 Forecasting Time Koshipa 2001 CESA 2001 SAJ 2001 Forecasting Period( , m cgt) Forecast(A) Delivery(B) A/B % % % Forecasting Period( , m cgt) Forecast(A) Delivery(B) A/B % % % Forecasting Period( , m cgt) Forecast(A) Delivery(B) A/B % % % Note : Delivery(B) includes assumption of about 30% of Cancellation & Slippage in of the projected orderbooks.

12 4. Summary Shipbuilding Industry is No Exception to the Impacts from the Global Economic Downturn. Impact : Drops in freight rate, New orders in a pause, Ship finance crunch, Rearrangement of the Orderbook (cancellation & delay) Response : Stoppage or Withdrawal of New Facility & Expansion Plan, Deferment of Delivery, Increased Scrapping, Falling Material Cost Outlook : Weak Newbuilding Demand, Uncertainty of Recovery and Contraction & Delay of Actual Delivery, Restructuring & Down-scaling in shipbuilding capacity Impact seems to be unavoidable on new building demand, while the economic downturn may contribute to alleviating overcapacity concern and more balanced supply & demand in the longer term.