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News Analysis: Asian shipyards poised to enjoy good year ahead amid strong order flow

English.news.cn   2013-12-19 12:27:04            

News Analysis: Asian shipyards poised to enjoy good year ahead amid strong order flow

by Tan Shih Ming

SINGAPORE, Dec. 19 (Xinhua) -- If the last-week announcement made by Singapore's Keppel Corporation underlined the growing confidence of the world's largest offshore rigbuilder upon the outlook of shipbuilding industry, analysts also agree that Asian shipyards will have a busy year ahead amid growing demand.

Keppel said last week its unit, Keppel FELS, is going ahead with the construction of the CAN DO drillship without a contract in hand. It explained it had received positive feedback from customers as the drillship is designed for broader capabilities, including performing development and completion drilling. Its decision to build ahead of a firm order was widely seen by industry watchers to suggest the company's confidence in market demand of its designed ship.

Indeed, it has been a robust year for Keppel. For the first nine month, the conglomerate bagged 5.3 billion Singapore dollars worth of contracts which included 13 jack-up rig orders, which are all based on its proprietary series design. Another Singapore rigbuilder SembCorp Marine also did fairly well, securing new order wins worth 3.9 billion Singapore dollars during the same period, inclusive of 7 jack-up rig orders. The strong order book will provide long-term earnings visibility for both companies.

Phillip Securities Research said "despite fierce competition coming from the Chinese yards, we believe established drillers and shipping operators still prefer established yards liked Keppel and SembCorp Marine for their established rig designs, strong track record, and ability to deliver on-time. This can be seen in Keppel Corporation's recent 1.1 billion U.S. dollars contract win from Transocean for the construction of 5 KFELS Super B Class jack-up rigs, with options for an additional 5 similar rigs."

CIMB Research was also upbeat on the containership building segment, expecting the strong order momentum to continue into 2015 despite the pressures from near-term overcapacity in the container shipping space. It said strong containership orders benefit primarily the Korean shipyards such as Hyundai Heavy Industries, and Daewoo Shipbuilding and Marine Engineering. According to CIMB, the strong containership orders are buoyed by the shipping companies' expectation that the deliveries of containership in the size of thousand twenty-foot equivalent units (teus) to drop significantly in 2016. As there is two- to three- year lead time between placing the order and actual delivery, shipping companies have to place orders in 2014 for fleet renewal or upsizing requirements.

In addition, CIMB expected more orders in the neo-panamax containership category of 8,000 to 9,999 teu to replace the 2.87 million teus of panamax-sized ships in the 4,000 to 4,999 teu category still in the global fleet today, as the latter will gradually lose their competitiveness when the new Panama Canal locks complete their upgrading in April 2015. Other impetus to the business of Asian shipyards also included the increased demand of eco-ships as a result of growing concern about environmental issues such as carbon dioxide emissions, and increased awareness of fuel-cost savings amid rise in oil price.

JP Morgan Research believed that South Korean shipbuilders liked Hyundai Mipo and Daewoo Shipbuilding & Marine Engineering, as well as Japanese shipbuilders such as Mitsui Engineering & Shipbuilding, will benefit much from the demand of eco-ship.

JP Morgan said despite the poor freight rates, eco-ships have started to gain popularity among shipping companies, as its proven fuel efficiency gives greater comfort to ship owners about the stability of ship earnings, mainly through significant fuel-cost savings. With new ship orders expected to be strong for the next few years, JP Morgan forecast new-build prices will rise 10 percent to 12 percent price next year. (1 U.S. dollar equals to 1. 26 Singapore dollars)

Editor: An
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