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VesselsValue: Newbuild Report 2021

2021 was a record-breaking year for the maritime industry. The spread of three major Covid-19 variants had substantial repercussions for shipping: labour shortages, port congestion and volatile oil demand, to name but a few.

Responding to the fast-changing nature of global trade, the new building orders of 2021 have reflected a world littered with restrictions on movement, geopolitical uncertainty and an increasingly prominent Green agenda. Whilst lockdown consumerism has led to unprecedented container demand, crude products have taken a backseat. An ongoing energy crisis is driving the addition of essential gas carriers to the order book, the full impact of which will only materialise in the coming years.

Cargo

The cargo vessels covered in this report are containers, bulkers, small dry, tankers and gas.

According to the valuation and data provider Vesselsvalue, 1,286 vessels were added to the order book in 2021, which is a 32.7% increase from the 969 vessels ordered in 2020.

This is paired with extraordinary growth in price for certain vessels. 2020’s total order book was worth US$42.83 billion, compared to 2021’s US$ 91.61 billion, a staggering 114% increase.

As expected, the large majority of vessels ordered in 2021 are to be constructed at yards in China, South Korea and Japan. The number of vessels confirmed in these three countries totals 1,217. 682 in China, 391 in South Korea and 144 in Japan. Other notable builder countries are Vietnam and India, with 21 and 12 vessels respectively.

Containers

The biggest story of 2021 was the vast number of container vessels ordered. By the end of 2020, governments worldwide began to open their economies following the first wave of Covid-19. With this came the release of extraordinary pent up consumer demand for products shipped in containers.

A primary implication of this increase in demand was port congestion on both sides of the Pacific. Poor weather and Covid-19 restrictions at Asian terminals exacerbated the effects of hefty queues in Los Angeles and Long Beach, California. This shortened vessel availability, contributing to record high freight rates and vessel earnings. Consequently, values for Containers rocketed. After years of dwindling earnings for these assets, owner investment in new building was seen as a sensible use of increased revenue.

561 container vessels were ordered in 2021 compared to 114 in 2020 and 107 in 2019 (Figure 2). 2021’s boxship orders amounted to US$43.39 billion, 47.4% of the year’s total and surpassing the entire Cargo fleet order book value of 2020. Asia accounted for the majority of 2021 Containership orders, with Taiwan, China, Singapore, South Korea, and Japan ordering 314 vessels between them, 65.8% of the global total.

The biggest spenders on containers came from Taiwan. 2021 saw 131 orders for a total of US$8.38 billion. Their 2019 and 2020 additions to the Container order book only totalled 58 vessels.

As owners competed for their slice of the earnings boom, builder capacity tightened with the explosion in container orders, inflating newbuild prices. In September 2020, a 4,250 TEU Panamax container order cost US$23.6 million. By September 2021, this same order cost US$65.5 million, a staggering 177.7% increase.

Headline Orders

  • 25 March 2021, 20 New Panamax containers (15,000 TEU, 2024/2025, Samsung), ordered by Evergreen Marine for US$2.48 billion.
  • 20 April 2021, four Ultra Large Container Vessels (ULCV) (24,100 TEU, 2023, Jiangnan Shanghai Changxing HI), ordered by MSC for US$600 million.
  • 28 June 2021, 12 Panamax containers (3,055 TEU, 2023, Nihon Shipyard), ordered by Wan Hai Lines for US$585.6 million.
  • 22 September 2021, 10 Post Panamax containers (7,000 TEU, 2024, Shanghai Waigaoqiao Shipbuilding), ordered by Seaspan Corporation for US$860 million.

Bulkers

The Bulker market had a successful end in 2021, with the 54-TCA (Capesize spot earnings) hitting 86,953 US$/day in October, heights not seen since 2009. However, this late surge, partially caused by the Asian port congestion and increased coal trade, did not translate into newbuild activity like that seen in the container sector.

In fact, the number of bulker newbuild orders placed dropped from 322 in 2020 to 250, resulting in a total 2021 Bulker order book worth US$9.7 billion. Chinese buyers accounted for 77 of these Bulker orders, 30.8% of the total, followed distantly by Japanese buyers with 28 orders (Figure 3).

This is in stark contrast to 2019 when the Japanese surpassed Chinese orders by 18 vessels, representing a significant reduction of Japanese investment in the bulker newbuild market.

Compared to previous years’ bulker newbuild activity, there has been a distinct drop in demand for new vessels in 2021. The revitalised container market diverted interest away from larger bulk carriers, slowing the addition of tonnage to the live fleet. This cap on supply could bode well for higher freight rates in the near future.

Headline Orders

  • 16 April 2021, 10 Panamax bulkers (82,000 DWT, 2022/2023, Jiangsu Hantong Ship Heavy Industry), ordered by Nisshin Shipping for US$280 million.
  • 14 June 2021, 12 Capesize bulkers (209,800 DWT, 2023/2024, New Times Shipbuilding), ordered by Himalaya Shipping for US$804 million.
  • 14 October 2021, eight Ultramax bulkers (63,600 DWT, 2023, COSCO Shipping Heavy Industry Shanghai), ordered by Bank of Communications Financial Leasing for US$256 million.

Small Dry

The Small Dry sector was negatively affected by Covid-19, with huge numbers of orders postponed or cancelled. This resulted in a sharp drop off compared to previous years. 2021 made up 43 of the 370 total vessels ordered over the last 3 years, just 11.6%. Pandemic stricken 2020 and 2021 saw 125 small dry vessels ordered for a combined US$1.38 billion, compared to 245 ordered vessels in 2019 alone, worth US$2.49 billion.

Headline Order

  • 21 September 2021, six general cargo vessels (5,400 DWT, 2023/2024, Chowgule), ordered by Atobatc for US$81.6 million.

Tankers

If the container sector was 2021’s winner, then the tanker sector was its loser. The global response to Covid-19 drove crude product demand into the ground, creating an oversupply of tonnage that kept vessel earnings at low levels.

The TD3C-TCE (VLCC spot earnings) tumbled to -6,779 US$/Day in March 2021 as China’s oil demand dropped annually for the first time in two decades. Owners and operators struggled to break even for much of the year.

The response to this earnings slump was a huge drop off in new-build orders. 2021 saw 181 tanker orders worth US$8.68 billion. This placed the Tanker sector behind containers, LNG and bulkers in terms of total 2021 order book value (Figure 4).

As seen above, this is in stark contrast to previous years. 2019 saw 422 tankers orders, representing a steep 57.1% drop over the three year period. With these 2019 ordered vessels set to launch in the near future, the dramatic shortening of new building activity in 2021 is understandable as rates struggle to recover from the pandemic.

Despite the poor outlook, Greek investment in the tanker sector has not substantially decreased. 2021 saw the Greeks order 49 vessels, 27.1% of the total, with only a small decrease from their 60 tankers added to the order book in 2020. Of the 49 vessels, 18 were in the Aframax and LR2 sector. The number of Greek very large crude carriers (VLCC) orders grew, with a purchase from Maran Tankers outlined below.

While Chinese buyers ordered 34.7% fewer tankers than the Greeks, 32 compared to 49, the difference in value for the 2021 tanker order book was down 64.3%. Greek orders totalled US$2.77 billion and Chinese orders totalled US$991 million. This highlights a disparity in priorities: the Chinese focused on Small Tankers and MRs, whilst the Greeks kept up interest in larger crude and product carriers.

Headline Orders

  • 4 February 2021, four VLCCs (300,000 DWT, 2023, Samsung), ordered by Maran Tankers for US$417.2 million.
  • 29 April 2021, four Handy Chemical tankers (33,000 DWT, 2023/2024, Dae Sun), ordered by ACE Tankers for US$188 million.
  • 15 June 2021, 10 MR2 tankers (50,000 DWT, 2022/2023/2024, New Times Shipbuilding), ordered by China Development Bank for US$383.8 million.
  • 15 October 2021, seven Aframax Shuttle tankers (120,000 DWT, 2023-2027, Samsung), ordered by Rosnefteflot for US$1.72 billion.

Gas

Gas carriers had a more than healthy 2021 in terms of new building activity. 93 liquefied petroleum gas (LPG) and 93 LNG vessels were ordered, up from 54 and 46 respectively in 2020.

The growth in demand for LPG vessels matches expected US production increases in the coming years, and the reversal in oil production cuts by the Organization of the Petroleum Exporting Countries (OPEC) is likely to be a key driver of Middle Eastern production.

LNG vessels saw a 207% increase in orders, totalling US$16.98 billion, the most valuable addition to the cargo order book in 2021 outside the container sector. Soaring demand for LNG vessels is being fuelled by a global push towards green energy alternatives. With LNG having a smaller carbon footprint compared to traditional hydrocarbons, it is seen as a viable transition fuel.

Similarly, geopolitical uncertainty is influencing demand for gas carrying vessels. The ongoing energy crisis and the construction of Nord Stream 2 have raised concerns over Europe’s dependence on Russian gas. Future volumes imported from regions such as the US and the Middle East offer opportunity for reduced pipeline dependence, driving orders for LNG vessels.

Like the tanker market, the Greeks are leading the way in terms of 2021 Gas sector investment. They take the lead for LNG orders, totalling 18 vessels worth US$3.63 billion  (Table 1) and are only behind South Korea’s 16 LPG orders with 14. This is a vast increase in gas expenditure for the Greeks, compared to the 1 LNG and 4 LPG vessels ordered in 2020.

Headline Orders

  • 20 January 2021, two VLGC LPG (90,000 CBM, 2022/2023, Hyundai Heavy Ind.), ordered by undisclosed buyers for US$151.8 million.
  • 15 April 2021, three Large LNG (174,000 CBM, 2024, Hyundai Heavy Ind.), ordered by Hyundai LNG Shipping Co. for US$568.5 million
  • 22 October 2021, four Large LNG (174,000 CBM, 2024/2025, Samsung), ordered by Global Meridian Holdings for US$826.1 million.
  • 7 December 2021, three Large LNG (174,000 CBM, 2024/2025, Hudong Zhonghua), ordered by United Liquefied Gas Shipping for US$555 million.

Offshore

The Offshore market remains heavily over supplied due to the high number of units built between the booming market of 2010 and 2014. There is little interest from owners, yards or financiers to place newbuild orders as many are still feeling the effects from the market downturn beginning in late 2014 and the more recent Covid-19 market.

Conclusion

In a record-breaking year for the maritime industry, the big winners are the container and gas sectors. 2021’s unprecedented box demand led to owners investing heavily, attempting to plug the supply gap. Similarly, environmental pressures and an ongoing energy crisis in Europe have encouraged investment in Gas carriers to sure up global energy supply chains, with a focus away from traditional, dirtier fuel sources like oil and coal.

This had a negative knock-on effect for wet cargo; Tankers have seen their rates at rock bottom, diverting new build activity away in what was a tough year for the sector. Dry bulk orders were not as negatively impacted, with only marginal drop-offs in ordering activity compared to 2020. The offshore sector, meanwhile, is continuing to feel the effects of oversupply following peak ordering activity a decade ago.

It does remain to be seen how 2021’s vessel ordering activity, whether in the cargo sectors or Offshore, will affect supply and demand balances across the different markets in the coming years.


Author of the article: George Delaney, valuations analyst at VesselsValue

George is a valuations analyst at VesselsValue, specialising in tankers. He works closely with both research and sales teams to ensure the company continues to deliver reliable and accurate intelligence to clients and press alike.

Prior to joining VesselsValue, George graduated from Imperial College London with a BSc in Geophysics, previously working as a performance analyst at Network Rail.





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