A strong Yen and very limited appetite for new tonnage has pushed Japanese shipyards into a dangerous position. New orders in the first half plunged 82%, the worst performance seen since 2008.
Japan’s yards have become famous for dry bulk ships – a sector that has been especially reticent to order new tonnage in the last couple of years as it fights extreme overcapacity amid record low rates.
June was especially bad for the Japanese yards, despite their strong presence at Posidonia in Athens. Orders last month were for just four ships, totalling 162,700 gt, down 97% year-on-year, the worst month in the 21st century for the nation’s yards.
Many yards are still marketing 2018 delivery slots, which could lead to a significant price drop to keep drydocks busy.
Speaking with Splash last week, the president of Clarkson Research, Dr Martin Stopford said that with global shipbuilding output at least 30% above the underlying demand for new ships, current output could only be sustained by “heroic price cutting”.
“Cutting capacity makes sense,” Stopford said, “but with the market split 37% China, 35% South Korea and 19% Japan it’s a game of chicken for who cuts first and most.”
Stopford also questioned whether the cuts are in capacity or prices.
“Don’t rule out some big price cuts,” he told Splash.