While global newbuild order volumes fell (20% y-o-y in CGT terms), 2022 was still an active year for the global shipbuilding industry with higher pricing (up 15% on average), more complex ships ordered (e.g. a record 182 LNG orders of $39bn) and alternative fuel investment increasing (a record 61% of tonnage ordered) all supporting a 6% increase in value of orders to $124.3bn.

Step On The Gas …

Ordering in 2022 was dominated by LNG (record 182 vessels, 36% CGT), container (350 vessels, 29% CGT: down 50% y-o-y but still the third largest on record basis TEU) and Car Carrier (69 vessels, 2.4 CGT). FPSO and “wind” niches also did well. Despite improving charter markets, tanker orders fell 64% while bulkers dropped 54%. Increased tanker orders seem likely for 2023, along with a continued flow of LNG.

Regional Market Share …

China (49%) and South Korea (38%) took the “lions share” of orders and Japanese orders fell by nearly 50% (but watch for late reporting). Overall shipbuilding output fell by 8% (China 47% of output, S. Korea 25%, Japan 16%). European output has stabilised (at 2.5m CGT and 8% of global market share helped by Cruise deliveries). We are projecting that output will start to tick up (by ~6% in 2023), become increasing dominated by container and LNG (41% of 2023 scheduled deliveries, rising to 58% in 2024) and that South Korean output share will tick upwards. From an owner perspective, China ($18.4bn), Japan ($15.1bn) and Italy ($11bn) contributed 36% of investment but Greek owners “kept their powder dry” (“only” $8.5 bn).

With only 131 “large” active yards (2009: 320), we estimate shipbuilding capacity is ~40% lower than a decade ago. Our monitoring of individual facilities suggests only moderate or marginal capacity increases in the medium term. Shipyard forward orderbook cover has edged up to 3.5 years (from 2.5 years in 2020) and prices increased 5% across 2022 (LNG: 18%) but were 15% higher on average in 2022 compared to 2021.

Fleet Renewal …

At the heart of reducing shipping’s 2.3% (855mt) contribution to global CO2 will be an unprecedented fuelling transition and we project increasing underlying fleet renewal requirements as the decade develops (see Shipping & Shipbuilding Forecast Forum). The entry into force of IMO “short term measures” (EEXI, CII) is a hugely significant milestone in shipping’s decarbonisation pathway (as will the EU’s ETS be in 2024) and is a market “wildcard”. Across 2022, 61% of tonnage ordered (35% by number) was alternative fuelled (World Fleet Register).

Over half of tonnage ordered (397 orders, 36.7m GT) was LNG dual fuel, 7.0% was methanol (43 orders, 5.0m GT), 1.1% LPG (17 orders, 0.8m GT) and 1.2% included battery hybrid. 10.8% of orders were ammonia “ready” (90 orders, 7.7m GT), 1.4% of orders were LNG “ready” (31 orders), 0.1% were hydrogen “ready” and 22 orders were methanol “ready”. Although long term trends point to increasing fleet renewal (besides emissions reduction, fleet age is increasing), 2023 will have its marketing challenges for yards: macro-economic risk is material and may weigh on investor sentiment, alternative fuel choices remains tricky and newbuild prices and berth availability are a hurdle for some owners. But there are “mitigating” factors for shipping and the product mix is likely to change: the container market will be weaker (although don’t rule out orders, possibly in feeders) but tankers and bulkers have historically low orderbooks (4% and 6% of fleet). Along with currency and inflation (perhaps some easing), yards will need to be as agile as ever.

Agencies

Marex Media