Jefferies: New ship orders could delay recovery

   Shipping industry analysts at the brokerage firm Jefferies wrote in a new research note that they “see risk of new shipbuilding orders delaying the recovery of the shipping industry as much as they did during the last extended downcycle for shipping between the 70s and 90s.”
   “Container shipping has seen the most new building orders relative to deliveries,” the firm said. It noted 1.1 million TEUs of new orders have been placed, 4 percent higher than the deliveries year-to-date and 170 percent higher than the new orders placed in fiscal year 2012.
   “Higher fuel efficiency, economies of scale and low construction costs have spurred container liners to place new orders despite a challenging market,” the firm said.
   Jefferies’ analysts said recent earnings reports from shipping companies show the potential of savings from modern tonnage, and that new construction orders may continue to be placed in the second half of this year.
   “Influx of new shipping building orders reminds us of old demons,” the report said. It noted dry bulk and tanker shipping segments have also witnessed various degrees of pickup in new building orders placed this year.
   “We have seen in the past 40 years that the pickup in new building orders could cause the shipping industry to recover slower than the global economy. Dry bulk ship owners famously placed a record amount of new orders in 1983 as the global GDP growth seemed to have bottomed in 1982. They were right about their projection for the macro economy but wrong on the freight rates cycle as the new orders they placed depressed the dry bulk shipping market for three more years. VLCC has also seen almost two decades of down cycle between the 70s and 90s with multiple spikes of newbuilding cycle in-between,” the firm said. – Chris Dupin