Analysis from BIMCO suggests that the total order book for new ships has reached its lowest point in 17 years because of COVID-19.
However, the fleet continues to grow. BIMCO noted that despite this and the rise in demolitions the fleets continue to grow because in volume terms, deliveries are much higher than demolitions.
“The continued increase in the supply of ships, despite higher demolitions and lower contracting, cannot be ignored as the volume of world trade is set for a considerable drop this year, and not forecasted to return to pre-pandemic levels until at least 2022.
“While the decline in contracting will result in slowing fleet growth in the coming years, balance in the shipping markets may prove elusive for many years to come,” said Peter Sand, BIMCO’s Chief Shipping Analyst.
Analysis considers dry bulk, container and tanker ships and shows that the order book has contracted by 50%, deliveries of new vessels have proven more resilient declining just 2%.
The order book for container ships has fallen 10.3% in the past 12 months to its lowest level since September 2003. Container ship deliveries are also down 39.5% from the same period in 2020.
This compared with dry bulk ships which have seen its lowest order book level since April 2004 and 34.7% smaller than 2019. However, deliveries of dry bulk vessels are considerably higher than 2019 at 31.8m DWT in the first seven months of 2020 compared with 22.6m DWT in 2019.
The fall has left the order book to fleet ratio at its lowest level in many years at just 7.7%. This is however not a reason for a flurry of new contracting activity. The larger fleet means that even this lower ratio represents a significant amount of tonnage especially given the poor outlook, BIMCO said in a statement.
“Contracting activity has been quick to feel the effects of the pandemic with owners and investors showing little appetite for new ships,” said Sand.
On the demolition of old vessels BIMCO says that the decline in appetite for new ships coincides with a time where many owners are keen to get rid of old existing vessels.
As major demolition nations around the world have eased their lockdowns and once again opened their yards, June and July saw a strong uptick in demolitions.
Dry bulk and container demolitions have increased, up 80.9% and 26.3% respectively, while 8.8m DWT of dry bulk capacity and 152,770 TEU of container ships have been sent for demolition since the start of the year.