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For this edition’s Analyst Abstract, we’ll be focusing on the three main sectors as normal, but just one dataset affecting each segment - as the orderbook to fleet ratio reaches amazing lows for containers, dry bulk and tankers. The global orderbook for all sectors as a percentage of the fleet ratio is now at its lowest point since the year the Berlin Wall tumbled down. Data compiled by Clarkson Research Services shows that the orderbook to fleet ratio, a yardstick for assessing future supply growth, is now, at 7.4%, as low as it has been since 1989. There are sector variations with LNG, for instance, standing at 22%, but the tanker, bulker and boxship ratios are all at multi-decade lows. Clarksons notes that global shipyard capacity today is around 40% below the peak seen in 2010-11. So far just 23m dwt has been ordered this year. The full year total, Clarksons suggests, could be similar to 2016’s 30m dwt. By contrast, 180m dwt was ordered as recently as 2013 in what turned out to be a year of severely mistaken hubris by shipowners. As of September 23, a total of 437 ships of 15.1m gt have been reported ordered in 2020 so far, down 55% in tonnage terms on an annualised basis. Clarksons has also been tracking annual ship deliveries. From 2010 to 19 annual deliveries averaged 116m dwt. This year, deliveries have continued to ease, with disruption at yards in China a factor earlier in the year. The 2020 total is projected by the world’s largest shipbroker to reach 84m dwt, way above the order total, with the size of the orderbook falling by 20% from 195m dwt at the start of the year to 156m dwt by September. “Ordering and delivery scenarios suggest the overall ratio could drop lower still in the short-term,” Clarksons predicted. Dry Bulk The dry bulk orderbook as a share of the existing fleet has reached its lowest level in since January 1996, according to Cleaves Securities. Braemar ACM notes capesizes have the largest orderbook expressed both in absolute dwt terms and as a percentage of today’s fleet. With almost 32m dwt slated to deliver over the early 2020s, the orderbook amounts to around 9% of today’s carrying capacity. But this is still the lowest fraction on order since 1997. For panamaxes, there’s just over 16m dwt on order, translating to around 7% of today’s fleet, though a third of this figure is made up of ships which are scheduled to deliver later this year. In the supra segment, there’s 11.4m dwt of capacity on the books, representing under 6% of current capacity, the lowest since 1993. The handy fleet stands out as one sector which has both a very low forward orderbook and has seen limited additions so far this year. The 10,000 to 40,000 dwt sector has grown by just 1.2% in dwt terms so far this year, a net increase of 26 units. And going forward, the orderbook stands at 115 vessels, which add up to around 4% of today’s handy capacity. Banchero Costa reckons the year 2022 will see 0% growth for the overall global dry bulk fleet, the first time this century this has happened, with the handysize fleet tipped to contract in size by 2% that year. Tankers The scarcity of newbuild tankers this year combined with a widely predicted growing demand for floating oil storage is seeing rates flipped around. Just 27 new VLCCs have been delivered this year with another 17 slated to hit the water before the end of the year, contrasting significantly with the 68 VLCCs delivered from Asian yards in 2019, according to data from Alphatanker, which has noted that access to a clean VLCC is becoming difficult. “This scarcity has been reflected in hire rates with newbuild VLCCs now commanding a hefty premium of up to $10,000/day versus units already trading. This is the opposite of last year when newbuild units were being hired at a discount to market rates due to their lack of certification and approval with IOCs,” Alphatanker noted in a recent report. Banchero Costa reckons the year 2022 will see 0% growth for the overall crude tanker fleet. Demolition activity is expected to remain strong going forward also because of the fleet age profile, the Italian broking house notes in a recent note on the global tanker fleet. 7% of the trading fleet is over 20-years-old, 23% is 15- to 19-years-old, whilst 23% is less than five-years-old. The orderbook-to-trading ratio is 8.6% in dwt terms, according to Banchero Costa, a low not seen since this century. Says Joakim Hannisdahl from Cleaves Securities, “I have argued for many years that there is a systemic underinvestment in dry bulk and tankers.” Uncertainty surrounding technology and regulations are making investors very hesitant investing in an asset with a 20- to 25-year life, Hannisdahl points out. Also, lacklustre rates have left generalist funds reluctant to provide equity to shipping projects. “Despite expected abating demand growth for these two shipping segments, the aforementioned underinvestment in newbuildings is the main reason I expect the 2020s could be a very strong decade for shipowners. You need very little demand growth to outpace the expected annual net fleet growth of zero to 3%,” Hannisdahl says. Containers According to the latest Alphaliner data, the orderbook to existing ratio today stands at just 8.4%, the lowest level seen since 1970. This marks the first time that the metric has ducked below 10% this century. The boxship orderbook has been declining for many years. At the time of the global financial crisis 12 years ago the newbuild ratio stood at 60%. “The fact that the decline already began years ago means that the ongoing Covid-19 scare and its knock-on effects on the global economy and the liner trades are not solely to blame for the recent dry spell,” Alphaliner noted in a recent report. Evergreen and CMA CGM are the two carriers with the largest orderbooks currently. The current orderbook also shows the vessel pipeline has gaps in several size ranges. For instance, remarkably there are no ships on order in the size range from 4,000 to 9,999 teu except two 5,295 teu sisters that are still on the books of defunct Zhejiang Oahu, a shipyard that went bankrupt in 2018. "It is a positive for the industry that contracting has been so muted in that it gives it a chance to rebalance the structural oversupply problem it has had ever since the global financial crash. There will however be a need for more ships in the not too distant future as there is very little scheduled post-2021,” says Simon Heaney, Drewry’s senior manager for container research. The fall in orders in in recent years has left the orderbook to fleet ratio for almost all ship types, not just containerships, at its lowest level in many years. This is however not a reason for a flurry of new contracting activity, some analysts warn. The larger fleet today means that even this lower ratio represents a significant amount of tonnage especially given the poor outlook, BIMCO said in a statement last month.

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