Shipbuilding - BRS

Shipbuilding

The Covid-19 pandemic cast its shadow over the global economy in 2020 amid trade wars and other political and economic uncertainties. Newbuilding orders declined logically in response, from 75.3 m tons deadweight (1,120 ships) in 2019 to 70.6 m tons deadweight (859 ships) in 2020. It was the second consecutive year of falling demand after peaking at 87 m dwt in 2018. Nonetheless, the shipbuilding industry remained remarkedly resilient in 2020 compared with some other recent years such as 2009 and 2016, when newbuilding orders barely exceeded 30 million tons deadweight. Although the demand for bulkers and special ships followed this global downtrend, demand for tankers was almost on a par with the previous year. Meanwhile container carrier orders exceeded the 2019 mark.

Shipbuilding resilience as a powerful sign of future recovery

SIEM CONFUCIUS Car carrier, 7,700 CEU, delivered in March 2020 by Xiamen Shipbuilding Industry to Siem Car Carriers.

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The three Asian shipbuilding giants, representing more than 95% of the global orderbook by deadweight, continued to fight fiercely in a poorer market. China and Korea improved their market share from 44.6% to 45.0% and 28.1% to 31.9% resepctively. However, China managed to out-do Korea for the first time in containership construction last year in third place Japan's market share slipped from 22.5% to 18.4%. The shares held by the rest of the world (RoW) and Europe stood at 2.7% and 2.1%, respectively, last year.

Despite the logistical hurdles and difficulties in travelling and crew positioning, newbuilding deliveries maintained a swift pace in 2020 at 88.7 m dwt versus of 97.8 m dwt in 2019. As a consequence of the imbalance between deliveries and newbuilding orders, the global orderbook decreased from 199 m dwt at end-2019 to 180 m dwt at end-2020, the lowest figure since 2003. Meanwhile, the world fleet has continued its uninterrupted growth since 1999, as it increased to 2,008 m dwt (39,782 ships) at end-December from 1,940 m dwt (38,992 ships) one year earlier.

If shipowners shifted away from newbuildings in 2020, they dedicated a similar level of interest as in 2019 to the second-hand market as approximately 142 m dwt changed hands in 2020 versus 144 m dwt in 2019. We tentatively suggest that this reflected the desire of market participants to take advantage of the better terms and conditions on offer last year. Nonetheless, sales decreased in terms of the number of ships sold (2,914 vs. 2,491).

16 17

SHIPBUILDINGKEY POINTS OF 2020

KEY POINTS OF 2020 Orderbook 2019 2020

China

Market Share 44.6% 45.0%

m dwt 88.6 81.2

ships 1,252 1,147

Korea


m dwt 55.8 57.5

ships 477 483

Japan


m dwt 44.7 33.1

ships 628 478

Europe


m dwt 4.1 4.8

ships 299 279

ROW


m dwt 5.5 3.8

ships 202 147

Summary 2019 2020

Ordersm dwt 75.3 70.6

ships 1,120 859

Deliveriesm dwt 97.8 88.7

ships 1,284 1,180

Orderbookm dwt 198.6 180.4

ships 2,858 2,534

Active Fleetm dwt 1,940.1 2,008.4

ships 38,992 39,782

Orderbook/Active Fleetm dwt 10,2% 9,0%

ships 7,3% 6,4%

Fleet evolution

Million dwt

Deliveries Fleet EvolutionDemolitions

Deliveries vs demolitions

Million dwt

DemolitionsMillion dwt

Deliveries vs.Fleet

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50

100

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300

Million dwtOrders

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20192017 2018 2020

bulk tanker container other

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Deliveries (M DWT) Demolitions (M DWT) Fleet evolution (M DWT)

Million dwt

Orders

Million dwt

Million dwt

DemolitionsMillion dwt

Deliveries vs.Fleet

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50

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Million dwtOrders

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20192017 2018 2020

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Deliveries (M DWT) Demolitions (M DWT) Fleet evolution (M DWT)

BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021

SHIPBUILDINGKEY POINTS OF 2020

Containers OthersBulk Tanker

2019 2020

GT Dwt N° Ships GT Dwt N° Ships

Market Sales 92,109,113 143,743,391 2,914 87,850,259 141,949,699 2,491

Demolition Sales 4,435,311 6,744,438 115 2,749,687 4,425,892 53

NB Resales 10,131,884 16,621,477 198 10,013,953 14,200,313 163

As a consequence of this lower shipbuilding activity, newbuilding prices decreased by 5 to 10% but then met with a growing resistance from the yards in the last months of the year. Prices were supported by three factors; firstly, increased building costs which in turn were propelled higher by stronger steel prices. Secondly, from the depreciation of the US Dollar versus the currencies of the main shipbuilding countries and thirdly, from an increase in the number of orders placed at end-2020. For example, December 2020 saw around 12 m dwt of new-building orders placed versus a monthly average of about 6 m dwt across the year.

Last year it was interesting to note a somewhat radical change in the attitude of shipowners towards new types of propulsion. We can easily say that scrubbers, the hottest of shipping topics in 2019 and pre-Covid times, is no longer a talking point. Some countries are planning to ban scrubbers regardless of type (open loop, closed-loop, hybrid). On the other hand, 146 ships with dual fuel (LNG/LPG/other) propulsion were ordered, representing about 17% of new orders.

World EconomyThe Covid crisis and its associated lockdowns saw the world plunge into deep recession last year. Latest estimates put the global economic decline at -4.4% in 2020 compared with growth of 2.8 % posted in 2019. According to the IMF, this was the worst recession since the second world war and even trumped the sub-prime crisis that shook the world in September 2008. Indeed, the fall recorded in 2009 was only -0.1%. Unfortunately, the woes of 2020 truly harmed global trade and the maritime transportation sector: seaborne trade growth plunged from 1.7 % in 2019 to –3.0 % in 2020.

Maritime TradeDry bulk trade growth dropped from +0.5% in 2019 to -2.1% in 2020.

The fall in tanker trade growth was much steeper, from -2.5% in 2019 to – 9.6% in 2020.

Finally, container throughput growth fell from +2.0% in 2019 to –1.4% in 2020.

Freight RatesDry bulk

While the Baltic Exchange Dry Index (BDI) had remained remarkably flat in 2018 and 2019, averaging on an annual basis 1,352 and 1,353 respectively, it plunged to 1,066 in 2020 (more than a 20% drop). But as was the case in previous years, the dry bulk market was characterized by volatility throughout 2020. The BDI started the year at 976 before rapidly plunging by 50% and then fluctuating at around 500 before touching a nadir of 393 on 14 May. It then rebounded before the summer to peak at 2,097 on 6 October 2020 before ending the year in the 1000-1500 point bracket.

Average 1-year time-charter rates illustrate the drop in earnings between 2019 and 2020 and the large spread highlights how the key to shipping remains as ever, timing.

Average 1-year Time Charter rates were as follows:

• Supramax (50-60,000 dwt): $9,964 in 2019 and $8,189 in 2020• Kamsarmax..................................: $12,451 in 2019 and $9,923 in 2020 • Capesize........................................: $18,004 in 2019 and $13,070 in 2020

During 2020, 1-year Time Charter rates fluctuated within the following bands:

• Supramax... : between $4,208 and $11,631 per day• Kamsarmax: between $4,681 and $16,415 per day• Capesize..... : between $1,992 and $34,896 per day

The Baltic Capesize 5TC averaged $4,558/day in Q1, $9,932/day in Q2, $20,761/day in Q3 and $16,949/day in Q4.

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SHIPBUILDINGWORLD ECONOMY, MARITIME TRADE AND FREIGHT RATES

WORLD ECONOMY, MARITIME TRADE AND FREIGHT RATES

Global trade and world GDP & active fleet growthGlobal Trade and World GDP & Active Fleet Growth

World GDP Seaborne Trade World Active Fleet Growth

-8%

-4%

0%

4%

8%

12%

0

20

100

Alphaliner Charter Index since 2010

2010 2011 2012 2013 2014 2015 2016 2017

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100

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Alphaliner Charter Index since 2010

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

40

60

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120

-0,1%

5,4%

4,3%

3,5%

3,5% 3,5%

3,4%

3,3% 3,8% 3,5%2,8%

-4,4%-4,1%

9,8%

4,2%

3,9%

3,4%

3,3% 2,2% 3,0%

4,2%

2,7%1,7%

-3,0%

7,0%

10,1%9,3%

6,5%

4,1%

3,4%

3,6%

3,2% 3,7%2,8%

4,4%3,4%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*2011 2012 2013 2014 2015 2016 20182009 2010

Seaborne Trade World Active Fleet GrowthWorld GDP

Maritime trade growth

Oil TradesGrowth (mt)

Container ThroughputGrowth (teu)

Dry Bulk TradesGrowth (mt)

Maritime Trade Growth

Dry Bulk Trades Growth (Mt) Oil Trades Growth (Mt) Container Throughput Growth (Teu)

11,3%

5,8%

5,5% 5,5%

5,2%

0,2%1,4%

3,9%

2,6%

0,5%

-2,1%

4,3%

0,1%1,8%

-1,0% -1,7%

5,0%

4,0% 3,4%

0,7%

-2,5%

-9,6%

12,2%

8,5%

3,1%5,0%

5,5%

2,3%

4,3%

1,6%

4,2%

2,0%

-1,4%

-15%

-10%

-5%

0%

5%

10%

15%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Tanker

The tanker sector was characterized by chaos in the wake of the Covid-19 pandemic and Saudi Arabia’s ill-fated battle for oil market share during 1H20. The pandemic saw global oil demand crater in 2Q20 to stand 16.2 mb/d below one year earlier, which in turn saw global refinery throughputs plummet. Saudi Arabia's actions led to a huge increase in crude oil hitting the market at a time when demand was collapsing. The upshot was that the majority of incremental crude was put into inventory. Eventually storage capacity was pressured at key terminals. Markets accordingly moved into a super contango, which improved the economics of storing oil on tankers.

From late June 2020 onwards, it has been all downhill for the tanker sector. Saudi Arabia swiftly halted its battle for market share after oil prices collapsed which even saw US prices briefly turn negative for the first time in history. The OPEC+ Alliance subsequentley reverted to their market management role and cut a record 9.7 mb/d of crude production from May. The Alliance has since scaled this cut back by 2.5 mb/d. As markets moved from oversupply to a deficit in 2H20 this saw volume from inventory replace a portion of crude imports. Furthermore, amid woeful refinery economics due to the enormous refined product over hang built in 1H20, refiners the world over are struggling and by end-2020 global crude demand stood a significant 6.6 mb/d below one year earlier.

In the clean segment, the Baltic Exchange Clean Tanker Index (BCTI) began 2020 at 889 and ended at 385, and averaged 585 over the year, compared with 607 in 2019.

Average 1-year Time charter rates were as follows:

• MR2.........: $14,440 in 2019 and $13,976 in 2020• LR1..........: $16,070 in 2019 and $16,760 in 2020• LR1..........: $20,310 in 2019 and $22,140 in 2020

During 2019, 1-year Time charter rates fluctuated within the following bands:

• MR2........: between $11,500 and $17,500 per day• LR1.........: between $13,500 and $28,000 per day• LR1.........: between $16,000 and $37,500 per day

In the crude segment, the Baltic Exchange Dirty Tanker Index (BDTI) started the year at 1,503 and ended at 466. The year was a tale of two halves. 1H20 was

characterised by a strong spot market averaging at 987 and peaking at 1,518 on 16 March. Meanwhile, the second half saw rates weaken and the BDTI average 458, hitting a low point of 403 on 6 November All told, the index averaged 721 in 2020 versus 855 in 2019.

If the BDTI hinted that 2020 was less beneficial to tanker owners, the peaks in October 2019 and March 2020 greatly influenced the one-year time charter rates.

Average Time charter rates were:

• Aframax: $20,690 in 2019 and $21,500 in 2020• Suezmax: $26,360 in 2019 and $28,577 in 2020• VLCC....... : $34,860 in 2019 and $40,529 in 2020

During 2019, 1-year Time charter rates fluctuated within the following bands:

• Aframax: between $15,000 and $33,500 per day• Suezmax: between $19,000 and $48,000 per day• VLCC....... : between $25,000 and $85,000 per day

Time charter rates for VLCCs started the year at $49,000/day and sunk to a low of $25,000/day at the beginning of November before ending the year at $25,500/day.

Container

The Alphaliner Charter Index rose by 4% in 2020. However,

if that marginal growth was welcome in a challenging

economic year, the market remains characterized by a wide

disparity in the performance of different liner segments. For

the second year in a row, the Panamax segment was the

star of the market as rates surged by 25% to $13,813/day,

following the 78% increase in 2019. Nonetheless, these rates

were barely sufficient to justify the $40 million investment

into a newbuilding.

SHIPBUILDINGWORLD ECONOMY, MARITIME TRADE AND FREIGHT RATES

Size 2017 avg$/day

2018 avg$/day

2019 avg $/day

2020 avg $/day

Change2020/2019

8,500 teu 13,396 15,538 25,875 24,375 -6%

5,600 teu 12,063 13,708 16,633 18,188 9%

(Panamax) 4,000 teu 7,533 11,163 11,088 13,813 25%

2,500 teu 8,179 10,792 9,275 9,850 6%

1,700 teu 7,404 9,646 8,096 8,138 1%

1,000 teu 6,375 7,242 6,283 6,017 -4%

Alphaliner Index 54.6 68.1 72.3 75.1 4%

Charter rates for cellular ships (6-12 month fixtures)

2017 2020

2011 2012 2013 2014 2015 2016 20182010 2017 2020


2019

2019

Tanker orders remained broadly flat in 2020 (28.6 m dwt) compared with 2019 (28.4 m dwt). This figure was slightly below the ten-year average (26.3 m). Orders for larger tankers (VLCC and Suezmaxes) remained strong whileorders for smaller tankers droppped.

Unlike bulkers, tanker deliveries slipped from 38.5 m dwt in 2019 to 24.3 m dwt in 2020. The active tanker fleet grew from 640 m dwt at end-2019 to 661 m dwt at end-2020 by which time the tanker orderbook represented 9.6% of the active tanker fleet.

Korea continues to dominate the tanker segment and increased its market share slightly last year to 48.9% from 45.1% in 2019. Meanwhile, China saw its market share rise again from 30.5% in 2019 to 32.4% in 2020. On the other hand, Japan conceded ground to its two main competitors as its market share fell from 18.3% 13.8%.

Containerships orders jumped by more than 20% from 8.9 m dwt in 2019 to 10.9 m dwt in 2020. However, this was below the 2011-20 average of 12.8 m dwt.

Attention was focused on the Megamax segment (over 20,000 teu), as the number of newbuilding orders doubled from 16 to 30.

Contrary to previous years where there had been no newbuilding activity in the 4,000-10,000 teu range, we counted 8 newbuilding orders placed in the 5000-7500 teu range.

2120 21

SHIPBUILDINGORDERS AND ORDERBOOKS


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10

15

20

25

30

VLCC Suezmax Aframax / LR2 Panamax / LR1 MR Handy Capesize Panamax Supramax Handysize Containership

Million dwt

New Orders for Standard Vessels per Year

2018 2019 2020

0

20

40

60

80

100

120

no.ships

New Orders for Specialised Vessels per Year

2018 2019 2020

44

3939

0

68

24

61

44

181

21

114

65

38

106

23

3 2

Chemical carriersstainless steel

LPG carriersLNG carriers Ferries & Ro-pax Ro-RoCar carriersCruise vessels

VLCC Suezmax Aframax/LR2 Panamax/LR1 MR Handy Capesize Panamax Supramax Handysize Containership

New orders for standard vessels per yearMillion dwt

Orders and orderbooks for standard vesselsNewbuilding orders decreased by 6% in 2020 to reach 70.6 m dwt. This is the third-lowest figure posted over the last ten years and well below the annual average of 84.3 m dwt across the same period. While orders for bulkers decreased in 2020 by more than 20%, those for container carriers increased by more than 20%. As for tanker orders, they remained broadly flat with the previous year.

Tanker Summary 2019 2020

Orders m dwt 28.4 28.6

Deliveries m dwt 38.5 24.3

Orderbook m dwt 59.2 63.5

Active Fleet m dwt 639.8 661.5

Orderbook/Active Fleet 9.3% 9.6%

Chinam dwt 18.1 20.6

Market share 30.5% 32.4%

Koream dwt 26.7 31.0


Japanm dwt 10.8 8.8


Container Summary 2019 2020








Koream dwt 12.3 10.2


Japanm dwt 4.0 5.4


New orders per year (2010-2020)

Bulker orders decreased by more than 20% from 28.2 m dwt in 2019 to 22.2 m dwt in 2020, the second-lowest figure posted over the last ten years and a level well below the 2011-20 average of 37.7 m dwt.

All bulker sizes were affected by this downward trend except for the Supramax / Ultramax segment (50,000 to 64,000 dwt), which saw increased newbuilding activity in 2020.

A total of 49.3 m dwt was delivered in 2020 versus 41.3 m dwt in 2019. Under the chiseling effect of fewer orders and more deliveries, the dry bulk orderbook dropped to 62.8 m dwt at end-December 2020 from 90.1 m dwt one year earlier. Meanwhile, the active dry bulk fleet continued to grow from 869 m dwt to 904 m dwt.

Tonnage on order represented 6.9% of the active bulker fleet at end-2020 versus 10.4% at end-2019. This was the lowest figure since 1992.

Chinese shipbuilders managed to increase their share of the dry bulk market to 66.9% in 2020 from 61.3% in 2019. This was to the detriment of Japan and Korea's market shares, which decreased to 28.2% and 1.6%, respectively. This was a further indication of the distressing levels of prices reached in the segment.

Bulk Summary 2019 2020








Koream dwt 3.7 1.0


Japanm dwt 28.3 17.7


ORDERS AND ORDERBOOKS

2018 2019 2020

m dwt 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

bulk 89.3 40.2 24.1 75.7 57.6 35.2 16.7 36.5 40.8 28.2 22.2

tanker 30.0 8.9 13.3 33.6 32.6 51.5 11.8 30.5 24.0 28.4 28.6

container 7.3 21.0 3.5 22.9 12.6 23.4 3.2 8.7 13.4 8.9 10.9

other 4.5 6.8 6.0 9.1 12.5 7.0 1.6 3.8 8.9 9.7 9.0

Total 131.2 76.8 46.9 141.4 115.2 117.1 33.2 79.5 87.1 75.3 70.6


m dwt Orderbook Fleet Ratio

Handysize/handymax 5.3 113.6 4.6%

Supramax/ultramax 10.9 185.1 5.9%

Panamax/kamsarmax 12.5 186.4 6.7%

Post-Panamax/babycape 5.5 58.3 9.5%

Capesize/Newcastlemax 0.4 3.6 10.0%

VLOC 4.6 77.3 5.9%

m dwt Orderbook Fleet Ratio

MR1 0.07 19.6 0.4%

MR2 7.6 81.3 9.3%

Panamax/LR1 0.4 33.9 1.3%

Aframax/LR2 13.0 114.5 11.4%

Suezmax/LR3 12.6 96.7 13.0%

VLCC 26.7 256.2 10.4%

Similar to the tanker segment, container carrier deliveries slipped in 2020 to 9.3 m dwt from 11.4 m dwt in 2019. The active container carrier fleet grew from 275 m dwt at end-2019 to 282 m dwt at end-2020. The orderbook represented 10.3% of the active fleet at year-end.

Last year, China succeeded in raising its market share to 45.8% from 38.7% in 2019 and therefore became the number one builder in the containership sector, much to the detriment of Korea whose market share receded from 44.4% to 34.8%. Japan's market share inched up from 14.6% to 18.5%.

2015 2016 2017 2018 2019 2020

Ships 46 2 22 12 16 30

Teu 948,455 40,776 509,600 286,708 380,304 715,800

Existing Orderbook O / E Orders in 2020

Size range teu ships teu ships teu % ships teu

18,000-24,763 132 2,714,613 51 1,211,664 44.6% 30 715,800

13,300-17,999 220 3,210,353 54 808,266 25.2% 14 208,652

12,500-13,299 85 1,107,456 2 25,452 2.3% 0 0

10,000-12,499 161 1,728,546 27 322,236 18.6% 7 845,580

7,500-9,999 485 4,273,040 0 0 0.0% 0 0

5,100-7,499 436 2,714,500 9 52,496 1.9% 8 47,200

4,000-5,099 628 2,840,714 2 8,038 0.3% 0 0

3,000-3,999 255 882,869 12 39,020 4.4% 5 17,500

2,000-2,999 702 1,794,483 87 215,329 12.0% 19 47,012

1,500-1,999 594 1,030,321 42 76,526 7.4% 23 42,234

1,000-1,499 692 801,690 55 60,724 7.6% 10 10,342

500-999 663 493,609 5 3,101 0.6% 3 1,888

100-499 194 65,277 6 1,606 2.5% 2 830

Total 5247 23,657,471 352 2,824,458 11.9% 121 1,176,016

Cbm Ships

2001 3,566,085 26

2002 1,972,148 14

2003 2,934,074 20

2004 9,940,342 66

2005 7,525,197 47

2006 6,049,231 31

2007 4,203,854 25

2008 969,241 6

2009 142,741 1

2010 1,964,348 13

2011 7,527,720 49

2012 5,481,558 34

2013 5,626,497 39

2014 11,178,628 71

2015 3,877,316 27

2016 896,766 7

2017 3,145,678 22

2018 11,164,445 71

2019 10,238,268 67

2020 10,531,024 65

2322 23


Order cancellations remained almost unnoticed in 2020, with the lowest ever level at 0.2m dwt. We would have expected to see more cancellations given the yards' likely difficulties to deliver ships on-time and the new financial challenges being faced by Owners in the wake of the pandemic, but they did not occur.

ORDER CANCELLATIONS IN 2020

m dwt 2012 2013 2014 2015 2016 2017 2018 2019 2020

Orders 46.9 141.4 115.2 117.1 33.2 79.5 87.1 75.3 70.6

Cancellations 16.6 31.0 15.0 11.3 12.1 4.5 6.1 1.6 0.2

Orders for specialised vessels

New orders for specialised vessels per year

N° of ships



2018 2019 2020

-

5

10

15

20

25

30

VLCC Suezmax Aframax / LR2 Panamax / LR1 MR Handy Capesize Panamax Supramax Handysize Containership

Million dwt

New Orders for Standard Vessels per Year

2018 2019 2020

0

20

40

60

80

100

120

no.ships

New Orders for Specialised Vessels per Year

2018 2019 2020

44

3939

0

68

24

61

44

181

21

114

65

38

106

23

3 2



2015 2016 2017 2018 2019 2020 N° of Ships 2018 2019 2020

LNG (cbm) 3,877,316 896,766 3,145,678 11,164,445 10,238,268 10,531,024 LNG 71 67 65

LPG (cbm) 3,789,908 26,768 1,331,798 1,359,081 2,755,401 1,908,675 LPG 36 55 38

Ferries & Ro-pax(gt) 330,483 765,981 433,882 1,008,809 907,571 183,636 Ferries & Ro-pax 45 39 10

Cruise (gt) 2,497,770 2,524,022 2,900,082 2,308,665 1,711,038 130,084 Cruise 30 27 6

SST Chemical (dwt) 2,180,239 828,693 436,945 313,896 491,335 458,092 SST Chemical 29 25 23

Car carriers (cars) 202,282 19,248 38,310 21,250 32,620 21,020 Car carriers 5 8 3

Ro-Ro (lm) 30,246 48,890 36,960 122,352 30,649 4,676 Ro-Ro 23 11 2

Orders vs cancellations (2012-2020)

Historical LNG carriers orders

SHIPBUILDINGORDER CANCELLATIONS AND DEMOLITIONS

Once again, the long-awaited surge in scrapping, expected to bring some relief to the shipping markets did not materialize. Demolition activity remained at very subdued levels, slightly up from 16.7m dwt in 2019 to 19.9m dwt in 2020. This was the second-lowest annual total posted over 2011-20 at around 50% of the 35.9m dwt 10-year average. It represented less than 1% of the total worldwide fleet.

This trend was very much accentuated in the tanker segment where tonnage sent to the beach fell from 4.4m dwt in 2019 to 2.7m dwt in 2020, well below the 10-year average of 8.5m dwt and a tiny portion of the active tanker fleet (661m dwt). This clearly reflects the buoyant tanker freight market that prevailed over 1H20 which eased the financial pressure on owners and their ships. Low demolition activity also occured in the containership sector where 2.5m dwt was scrapped in 2020 compared with 2.7 m dwt scrapped in 2019. This was the second-lowest level in 10 years and 40% below the 10-year average of 4.2 m dwt. It also represented less than 1% of the container fleet (281 m dwt).

DEMOLITION IN 2020

m dwt 2012 2013 2014 2015 2016 2017 2018 2019 2020

Demolitions 59.3 45.0 34.6 36.3 44.4 32.2 28.6 16.7 19.9

Deliveries 153.7 107.4 88.4 94.7 99.0 96.4 79.4 97.8 88.7

Demolitions vs deliveries (2012-2020)

Orders and orderbooks for specialised vesselsThe specialized vessels segment, which had been buoyant in 2019, saw its overall trajectory go south in 2020 with the noticeable exceptions of LNG carriers and chemical tankers. Last year saw orders placed for 65 LNG carriers totaling around 10.5m m3 of capacity, well above the 2011-2020 average of 6.9 m m3 and the third-best year of the decade. On the other hand, orders for Ro-Ros, ferries, and cruise ships almost collapsed. These segments became victims of the negative impacts of the Covid pandemic which drove the near- disappearance of market activity amid lockdowns and border closures. This was further compounded by the heavy investment of previous years.

Demolitions in 2020 (n° of ships)

Tanker* - 19% 74 Ships

Container - 22% 82 Ships

Others - 27% 103 Ships

Bulk - 32% 121 Ships

* Incl. Chemical Tankers

There was a slight rebound of demolition activity in the bulk segment (from 7.9m dwt to 13.4m dwt) but again this was insignificant when compared with the bulk fleet of 903m dwt. This demolition activity was the third lowest over the last ten years and amounted to only around 40% of the 20 m dwt 10-year average.

Demolition prices continued their decline last year. After strengthening in 2018 across the Indian subcontinent to reach an average of $420/ldt for bulkers and $430/ldt for tankers ($350 and $375 in 2017) and container carriers ($445/ldt versus $375/ldt in 2017), prices softened in 2019 to $384/ldt, $395/ldt and $398/ldt for bulkers, tankers and container carriers, respectively. In 2020, the downward trend continued as annual average prices slipped to $329/ldt, 340$/ldt and $349/ldt for bulkers, tankers and container carriers, respectively.

The average age of vessels demolished in 2020 decreased for bulkers from 30 to 27, inched up for tankers from 28 to 29, and remained flat at 24 for container carriers.

BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021Picture: CELEBRITY APEX , 130,818 gt, 1,450 cabins, delivered by Chantiers de l'Atlantique in 2020. Photo: Bernard Biger – Les Chantiers de l’Atlantique Picture: A cut section on the impermeable floor of the Hong Kong Convention compliant Ege Gemi Ship Recycling Facility in Alliaga, Turkey.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Active building facilities per year & region (excluding offshore)Million dwt

South Korea N° of facilities

-

100

200

300

400

500

600

700

800

N° of facilitiesMillion dwt

Active building facilities per year & region (excluding offshore)

CHINA JAPAN SOUTH KOREA EUROPE ROW N° of World Active Shipyards

-

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

288

700

295262

N° of facilities

Japan Europe ROWChina

2524 25

SHIPBUILDINGSHIPBUILDING CAPACITY

Total deliveries waned to 88.7m dwt in 2020 from 97.8 m dwt in 2019. On a segment-by-segment basis, deliveries were 49.3 m dwt of bulk carriers (41.3 m dwt in 2019), 24.3 m dwt of tankers (38.5m dwt in 2019), and 9.3 m dwt of containerships (11.4 m dwt in 2019).

In China, annual shipbuilding production increased by about 440% over 2006-11 from 12.7 m dwt to 69m dwt. Production inched up from 36.3 m dwt in 2019 to 38.1 m dwt in 2020.

In South Korea, annual production, which more than doubled between 2006 and 2011 from 25m dwt to 53.4 m dwt, fell from 32.4 m dwt in 2019 to 24.8 m dwt in 2020.

In Japan, annual output increased by 10% between 2006 and 2011 from 28.9 to 31.9 m dwt. Last year output declined from 24.6 m dwt in 2019 to 22.5 m dwt in 2020.

The number of active building facilities (yards that either won new contracts and/or delivered tonnage during a given year) dropped from 295 in 2019 to 262. This is now less than 40% of the peak of 700 facilities seen in 2007.

Ship deliveries in China, Korea & Japan (2009-2020)

As a consequence of lower global shipbuilding activity in 2020, newbuilding prices weakened by around 5 to 10%. The situation was further aggravated when building costs started to rise in the wake of higher steel prices and a weaker US Dollar. When ordering activity became stronger at the end of the year, newbuilding prices started to inch up. All told, this was the second consecutive year low global demand has put newbuilding prices under pressure.

NEWBUILDING PRICES IN 2020

2018

US Dollar exchange ratesMillion $

0,50

0,70

0,90

1,10

1,30

1,50

Daily Exchange rates with US$

100 Yen 1000 Won 10 Yuan 1 EUR

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1,084.5

103.2

0.82

6.53

108.6

1,154.1

0.89

6.96

1,000 Won

Prices in the second-hand market followed a similar pattern to the charter markets. Tanker prices, which had posted double-digit increases in 2019, continued to rise until early May before weakening by about 15% thereafter. Bulker prices which had decreased in 2019, declined by close to 10% in 1H20. They then rose slightly in the second half of the year.

Newbuilding prices weakened by around 5 to 10% before inching up at the end of the year

2020

10 Yuan100 Yen 1 Eur

DELIVERIES AND WORLDWIDE SHIPBUILDING CAPACITY IN 2020

Deliveries (million dwt) 2009 2013 2014 2015 2016 2017 2018 2019 2020

China 36.5 43.1 36.0 38.4 36.0 38.7 34.8 36.3 38.1

South Korea 42.9 33.4 24.5 29.2 35.9 30.8 19.0 32.4 24.8

Japan 29.2 25.0 22.4 21.1 21.6 20.2 20.1 24.6 22.5

BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021 Picture: TORM ELIZABETH , LR1 tanker, 74,999 dwt, delivered in 2020 by GSI, operated by Torm. Photo: Electrician Hernandez, Ariel Garcia.

2019 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20202019

Shipbuilding in ChinaChina maintained its position as the world’s leading shipbuilder in 2020, ranking first with an orderbook of 81.2 m dwt (a 45.0% share). Meanwhile, it holds the greatest number of newbuilding orders at 30.8 m dwt and the largest number of deliveries at 38.1 m dwt.

New orders placed at Chinese yards slipped by about 5% in 2020 (30.8 m dwt) versus 2019 (32.0 m dwt). But with 5.5 m dwt of containership orders in 2020 (about 50.9% of global orders), China succeeded for the first time in overtaking Korea to rank first in that segment. Furthermore, with 14.9 m dwt of dry bulk new orders (about 67.3% of global orders), China retained its lead in the segment. In the tanker segment, it succeeded in maintaining second place behind South Korea, securing 29.1% (8.3 m dwt) of orders placed last year.

2726 27

SHIPBUILDING IN THE WORLD

China2019 2020

m dwt Ships m dwt Ships

Orderbook

Market share 44.6% 43.4% 45.0% 44.7%

Bulk 55.2 501 42.0 422

Tanker 18.1 291 20.6 271

Container 10.7 206 13.3 206

All ships 88.6 1,239 81.2 1,132

Orders

Bulk 17.6 163 14.9 167

Tanker 9.1 141 8.3 82

Container 3.5 56 5.5 53

All ships 32.2 477 30.8 354

Deliveries

Bulk 23.1 223 28.0 244

Tanker 8.1 145 5.8 102

Container 4.1 88 2.9 53

All ships 36.3 533 38.1 459

Last year, Chinese total shipbuilding output increased slightly, to 38.1 m dwt compared with 36.3 m dwt in 2019. However, the orderbook/ yearly output ratio continued to slip, decreasing from 2.4 to 2.1.

Picture: IRENE A , LPG tanks Installation during construction.Picture: ATLANTIC ORCHARD , ex CIELO DI TOCOPILLA, handysize bulkcarrier converted into an orange juice carrier.

1993Low 4Q

2002Peak 2Q

2008End 2018

China 1st tier**End 2018SK/Japan

End 2019China 1st tier**

End 2019SK/Japan

End 2020China 1st tier**

End 2020SK/Japan

Tankers

VLCC 100 64 140-155 85/90 90 84 90/95 81 86

Suezmax 63 44 90-100 55/59 64 55 63/65 52 57

Aframax (A) LR2

45 (A) 34 (A) 70-75 (A) 47 (A)48 (LR2)

51 (A)55 (LR2)

44 (A)44.5 (LR2)

53 (A)55 (LR2)

43 (A)47 (LR2)

45 (A)49 (LR2)

MR2 IMO 3 32,5 27 48-51 34/35 37 33.5 36 33.5 33.5

Bulkers

Newcastlemax (205k dwt) N/A N/A N/A 52/54 58/60* 51 63* 51/53 63/65

Capesize (180k dwt) 48 36 90-101 50/52 55/57* 48 60* 48/49 60/61

Panamax (P) Kamsarmax (K) 29 (P) 21.5 (P) 53-60 (K) 29/30 (K) 34 (K)* 27 (K) 35 (K)* 26/27 33/35

Ultramax (U) Supramax (S)

Handymax (H) 25 (H) 20 (S) 47-50 (S) 27/28 (U) 31 (U)* 25.5 (U)

23.5 (H)32 (U) 26 (H)

21/22 (U) 24/25 (H)

24/25 (U) 27/28 (H)

Newbuilding prices (million $)

* Japan only, ** Prices at China’s 2nd tier yards are an estimated 5% lower

Jan 2020 High Low Dec 2020 Variation Jan- Dec

VLCC 75.48 77.21 01 May 64.19 18 Dec 64.19 -15.0%

Aframax 40.21 41.78 01 May 34.13 18 Dec 34.13 -15.1%

MR Tanker 29.62 30.44 07 May 25.68 20 Nov 25.71 -13.2%

Capesize 33.67 33.67 03 Jan 30.51 05 Jun 31.88 -5.3%

Panamax 22.86 22.86 03 Jan 20.33 12 Jun 20.96 -8.3%

Supramax 16.91 16.91 03 Jan 15.04 18 Dec 15.04 -11.1%

Second hand price evolution during 2020 for 5 year old vessels (million $)

Four Chinese Shipbuilders in the top ten

Following the reshaping of the Chinese shipbuilding landscape in 2019, four main shipyard groups now account for the majority of the orders placed in China. At end-2020, CSSC, CHI, NTS and Yangzijiang represented 79% and 36% of the Chinese orderbook (64 m dwt) and world orderbook, respectively.

China State Shipbuilding Corporation (CSSC), the result of the merger between the two largest state-owned shipyard groups (CSSC and CSIC) which owns 10 large shipyards, is the world’s number one shipbuilding group holding 47% of the Chinese orderbook (38.4 m dwt) and 21% of the world orderbook. CSSC secured 13.1 m dwt of new orders in 2020, slightly less than the largest Korean group HHI with 16 m dwt.

COSCO Shipping Heavy Industry (CHI) formed by the merger between COSCO Group and China Shipping Group, which owns 13 large shipyards, is the second largest shipbuilding group in China, holding 16% of the Chinese orderbook (12.8 m dwt). It is also the third largest global shipbuilding group accounting for 7% of the world orderbook. CHI secured new orders totaling 8.4 m dwt in 2020.

Ranking respectively third and fourth behind CSSC and CHI, Yangzijiang and NTS are the two largest private shipbuilders in China with orderbooks of about 7.1 m dwt and 5.7 m dwt tons respectively, thereby ranking at the 7th and 8th position in the world league.


South Korea2019 2020


Orderbook

Market share 28.1% 16.7% 31.9% 19.1%

Bulk 3.7 15 1.0 4

Tanker 26.7 199 31.0 218

Container 12.3 94 10.2 66

Gas 13.1 160 15.2 188

All ships 55.8 477 57.5 483

Orders

Bulk 0.4 2 0.0 0

Tanker 14.1 118 17.5 118

Container 4.3 38 3.5 23

Gas 5.8 74 5.4 70

All ships 24.7 238 26.5 212

Deliveries

Bulk 2.0 6 2.7 11

Tanker 22.5 128 13.2 99

Container 4.7 39 5.6 51

Gas 3.2 43 3.3 42

All ships 32.4 220 24.8 206

2928 29

SHIPBUILDINGSHIPBUILDING IN SOUTH KOREA

Picture: IONA , 184,089 gt, 2,600 cabins, delivered by Meyerwerft to P&O Cruise in 2020. BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021

Some newsworthy events of the year

• Newbuilding orders with dual-fuel propulsion (based on either LNG, LPG or methanol together with diesel) Last year cemented the boom in the construction of dual-fuel propelled vessels in China with 60 ships ordered (9 bulk carriers, 24 tankers, 2 containerships, 12 LPG carriers and 13 other ship types). Among the most notable orders were:

• • Hong Kong Tiger Group signed 2 x dual fuel (LNG) 14,000 teu containerships and 4 x dual fuel (LNG) 690 feu MPPs. Meanwhile, Swedish owners Tarbit signed 2 x dual fuel (LNG) 13,000 dwt tankers all with Yangzijiang

• • Eastern Pacific Shipping signed orders for 5 x dual fuel (LNG) Newcastlemax Bulk carriers (3 with CSSC SWS and 2 with NTS) based on long-term contracts with BHP.

• • Shell signed orders for 12 x dual fuel (LNG) LR2s with CSSC Group (8 to be built at GSI and 4 at SWS).

• • Total secured 4 long time charter contracts with Hafnia (2 units) and Viken (2 units) for the construction of dual fuel (LNG) LR2s at GSI.

• • Jiangnan signed contracts for 9 x dual fuel (LPG) VLGCs (5 for AW Shipping, 3 for Petredec and 1 for Kumiai Senpaku).

• The consolidation of the industry at group level saw several takeovers. For example, the Shanghaiguan, Bohai and Tianjin Xingang yards are now part of Dalian SIC Group.

• Private Chinese shipyard Taizhou Kouan which entered into a court-led restructuring after it was declared bankrupt in August 2020 was taken over by two local companies: Taizhou Changqin Ship Engineering and Taizhou Changyue Enterprise Management. Taizhou Kouan Shipbuilding was formerly a state-owned yard before its privatisation in 2007.

• Zhejiang Rongsheng Petrochemical Co. (RSPC) signed a cooperation agreement with CSSC Group to invest in the construction of VLCCs to transport crude oil from the Middle East to its petrochemical base in Zhoushan. The first batch of the order (10 units) will be shared between SWS and DSIC.

• China's first domestically built large cruise ship was transferred to the docks in SWS for assembly and is expected to be delivered in 2023. The Vista-class cruise ship will be 323.6 meters long and 37.2 meters wide and able to accommodate 5,246 passengers. To assist with China’s entry into cruise ship construction, CSSC and Fincantieri established a separate joint venture to grant a technology license of the ship model platform and provide technical and project service support throughout the shipbuilding process.

With 60 dual-fuel propulsion newbuilding orders out of

354 in 2020, China confirms the trend of the year

Shipbuilding in South KoreaKorea maintained its position as the world’s second largest shipbuilder in 2020. It ranked second globally for its 57.5 m dwt orderbook (31.9% market share), its 26.5 m dwt of newbuilding orders (37.5% market share) and its tonnage output of 24.4 m dwt (28.0%). Despite the drop in global ordering, Korean yards managed to increase their new orders to 26.5 m dwt compared with 24.7 m dwt in 2019.

In the tanker segment, Korea consolidated its lead with 17.5 m dwt of new orders (61.4% of the global tanker orderbook). Meanwhile, it conceded first place to China in the container carrier segment after securing 3.5 m dwt of new orders (32.2% of the global container orderbook). In 2020, Korean yards did not secure any dry bulk orders but this was largely compensated for by their dominant position in the construction of LNG carriers as they took 75% of new orders placed globally (49 new units out of 65 in 2020).

Illustrating the strong consolidation of the Korean shipbuilding industry, 95% of orders in 2020 were secured by the Big Three, with Hyundai H.I. holding 60.0%, DSME 19.8%, and Samsung 15.1%.

Korean shipbuilding output fell by 23% from 32.4 m dwt to 24.8 m dwt, but the orderbook to yearly output ratio increased from 1.7 at end-2019 to 2.3 at end-2020.

for 6 Aframaxes and 2 Suezmaxes. They had 16 ships in their orderbook at end-2020 which puts them in a relatively comfortable position for the years to come.

In January 2021, STX Offshore & Shipbuilding (STX) and KH Inc. (KHI) concluded an investment contract for KHI to acquire more than 80% of STX O&S shares jointly with South Korea’s United Asset Management com-pany (UAMCO). When this process is finally completed, it will be a significant milestone and heralds a re-birth for STX O&S. In 2020, the yard secured orders for 7 tankers including 4 MRs.

Dae Sun Shipbuilding and Engineering’s major creditor (Korea Eximbank) signed a memorandum of understanding with Dongil Steel to sell its 83% stake in the shipyard with the condition to continue its shipbuilding activities. Dae Sun secured 8 new orders (6 MR tankers and 2 small containerships) in 2020 compared with 5 in 2019.

A consortium led by Dongbu Construction was selected as the preferred bidder to take an 83% stake in Hanjin Heavy Industries & Construction. Their intention is to continue building ships at Busan shipyard. The take-over should be finalized in 2021.


The merger between HHI and DSME remains subject to the approval of anti-trust regulators in South Korea, Japan and the EU. A merger would form the world’s largest shipbuilding group holding 25% of the global orderbook.

Hyundai Heavy Industries (HHI) secured some 60% of new orders placed in Korea in 2020 worth $12 billion (76% of its initial target) versus 50.4% in 2019. The group has maintained its 2021 sales target flat at 2020’s level of $15.9 billion ($8 billion for Ulsan, $4.25 billion for Samho and $3.65 billion for HMD).

Samsung HI (SHI) also failed to meet their sales target with orders worth $5.5 billion compared with $7.8 billion in 2019. However, they signed contracts for 13 large LNG carriers and 13 Suezmaxes.

Daewoo Shipbuilding and Marine Engineering (DSME) secured 19.8% of the total new orders placed in Korea in 2020 amounting to $5.42 billion (75% of its initial target). DSME was initially aiming for more than $7 billion of orders in 2020.

Hyundai Mipo Dockyard (HMD) continued to dominate the medium sized shipyard segment (below LR2 size), collecting around 78% of small and medium sized new orders placed at Korean yards in 2020. It won 57 orders in 2020 versus 49 in 2019. Its main product remains the MR tanker and together with its Vietnamese affiliate (HVS), it succeeded in winning about 68% of MR orders placed worldwide.

Daehan Shipbuilding is now focused on the construction of two types of standard tankers (Aframax / LR2 and Suezmax). Last year it secured orders

Japan maintained its position as the world’s third largest shipbuilder in 2020, ranking third overall for its 33.1 m dwt orderbook (18.4% of global market share), its 10.9 m dwt of newbuilding orders (15.4% of global market share) and its tonnage output of 22.5 m dwt (25.4% of global market share).

Newbuilding orders declined steeply in 2020 with about 33% fewer new orders placed compared with 2019 (10.9 m dwt versus 15.6 m dwt). This reduction hit all segments except containerships.

Japan’s three largest shipyards Imabari, JMU and Oshima picked up 64.7% of the new orders placed at Japanese yards in 2020 (41.9%, 13.2% and 9.6%, respectively).

The ratio between the current orderbook and yearly output fell from 2.8 at end-2018 to 1.8 at end-2019 and 1.5 at end-2020.


• Imabari Shipbuilding and Japan Marine United (JMU), Japan’s two largest shipbuilders, launched their new joint venture company, Nihon Shipyard Co, with Imabari holding a 51% stake and JMU 49%. The joint venture will handle all commercial ships excluding LNG carriers.

• A merger plan led by Japan’s government is exploring the possibilities to integrate 15 major shipyards in the country under a so-called All Japan Shipbuilding merger plan. This follows similar steps taken by neighbouring shipbuilding rivals China and South Korea.

• Oshima Shipbuiding’s discussions to buy the Koyagi shipyard in Nagasaki from Mitsubishi Heavy Industries (MHI) have been held up.

• Tsuneishi Shipbuilding reached an agreement to acquire a stake in compatriot Mitsui E&S Shipbuilding as the pair seek ways to merge their merchant shipbuilding activities.

• The world’s first liquid hydrogen propulsion carrier, the MV Suiso Frontier, built by Kawasaki Shipbuilding Heavy Industries, was successfully delivered. Suiso is the Japanese word for hydrogen. The cargo capacity corresponds to about 75 tonnes of liquefied hydrogen, enough to fill the tanks of 15,000 fuel cell vehicles. In 2020, KHI secured 3 x VLGCs as new orders.

• Imabari Shipbuilding Group together with JMU signed orders for 6 x 24,000 teu containerships (the world's largest such vessels) with Shoei Kisen Kaisha. This is backed by a 15-year time charter contract with ONE (Ocean Network Express). The six new ships are planned to be delivered over 2023-24.

Shipbuilding in Japan

3130 31

Some significant orders of the year

• In 2020, Korean shipyards secured orders for 32 dual-fuel propulsion ships (excluding LNG Carriers) against 42 orders in 2019. This represents 34.5% of the total dual-fuel ships ordered globally last year. These orders included 14 dual fuel (LPG) LPG tankers (2 VLGCs, 8 MGCs and 4 Ethane Carriers), 11 dual-fuel (LNG) oil tankers and 7 dual-fuel (LNG) containerships.

• HMD secured orders for 10 MR tankers from UAE Bahri.

• DSME secured 6+6 x dual-fuel (LNG) 23,500 teu container-ships for Hapag Lloyd.

• The Big Three secured 45 of the 54 large LNG carriers ordered globally in 2019 (24 units for HHI, 13 for DSME and 8 for Samsung).

• Samsung and Hyundai HI received additional orders of the world's largest 98,000 m3 VLEC (Ethane Carriers) from Eastern Pacific Shipping (EPS) for China Satellite Petrochemical. These VLECs are designed to export ethane derived from shale gas produced in the US and will feature dual-fuel ethane propulsion.

Picture: AN JI 23 , RORO, 11,671 dwt, built in 2017 by CMHI Jingling, owned by Anji Shipping Co. Ltd. BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021

Japan2019 2020


Orderbook

Market share 22.5% 22.0% 18.4% 18.4%

Bulk 28.3 370 17.7 253

Tanker 10.8 110 8.8 87

Container 4.0 52 5.4 60

All ships 44.7 629 33.1 466

Orders

Bulk 9.4 132 6.5 91

Tanker 4.3 39 2.3 38

Container 1.1 19 1.8 22

All ships 15.6 257 10.9 153

Deliveries

Bulk 14.4 188 17.0 208

Tanker 6.1 88 4.4 62

Container 2.4 21 0.5 14

All ships 24.6 356 22.5 317

Picture: HAFNIA NANJING , LR1 product/chemical tanker, 74,999 dwt, built by Guangzhou Shipyard International (GSI) for HAFNIA, delivered on January 2021.

SHIPBUILDINGSHIPBUILDING IN JAPAN

Despite the drop in global ordering, Korean yards managed to increase their new orders by about 7%

Shipbuilding in Europe

3332 33

SHIPBUILDINGSHIPBUILDING IN EUROPE

It is necessary to drop deadweight and instead view shipbuilding through the lens of gross tons (gt) to understand the relative importance of the European shipbuilding industry versus its Asian competitors. When ranked by gt, Europe claims its place among the world’s main shipbuilding regions, particularly when the comparative value of European-built gt is factored in. In 2020, China, Korea, Japan and Europe accounted for 54.4, 45.4, 21.1 and 12.9 million gt of the orderbook, respectively. In million dwt terms, the equivalent figures were 81.2, 57.5, 33.1 and 4.8 million dwt. Last year, European shipyards saw their gt market share rise from 8.8% to 9.4% mainly due to the sizeable order of 10 large LNG carriers placed at the Russian Zvezda shipyard and the 6 small and medium sized cruise ships ordered.

However, for the first time in 8 years, the pace of cruise ship contracting came to an abrupt halt in the wake of the Covid pandemic. The three major specialist cruise ship builders: Fincantieri / Vard, Meyer Werft and Chantiers

de l’Atlantique, received no new orders. The 6 new cruise ships orders were shared between Portugal’s West Sea (4 ships), the Helsinki Shipyard (1 ship) and Vard Soviknes (1 ship).

Last year, the output of the European shipbuilding industry plunged by 33% from 2.4 million gt to 1.6 million gt. On the other hand, the orderbook to yearly output ratio increased significantly from 5.4 at end 2019 to 8.2 at the end of 2020.

SHIPBUILDINGSHIPBUILDING IN EUROPE

Picture: MSC VIRTUOSA , 181,000 gt, pax 4842, built by French Chantiers de l’Atlantique.

• Russia’s orderbook is the second largest in Europe at 2,9 m gt. In deadweight terms it stands first with 3.06 m tons. Since 2017 there have been several large orders placed by Rosneft, Sovcomflot and Novatek at state-owned Zvezda Far Eastern Shipyard (31 ships including 15 LNG carriers, 9 Aframaxes, 6 MRs and 1 Panamax). Additionally, there have been several new orders secured by the 7 other Russian shipyards including Okskaya, Krasnoye, Nevskiy, Tretiye with a total of 27 units.

• France dropped one place to third place last year. Its leading shipyard Chantiers de l’Atlantique, has a total orderbook of 11 large cruise units, all to be delivered before 2027. Fincantieri will finally not take over Chantiers de l’Atlantique. After 4 years of discussions, the merger did not receive the blessing of European competition regulators. The French State will remain the main shareholder in Chantiers with an 84% stake.

• Germany is in fourth position due to Meyer Weft which is one of the world’s best cruise ship builders. By end-2020, its orderbook included 9 cruise ships representing 14.2% of the global cruise ship orderbook. MV Werften, purchased by the Hong-Kong Gentling Group in 2016, is currently in turmoil after its main shareholder experienced financial troubles stemming from the pandemic. The German State came to the rescue and injected emergency aid to complete the 20,000-gt cruise ship newbuilding Crystal Endeavor. It is also worth noting the relatively strong orderbook of Ferus Smit Leer with 5 small units including 2 x 8,000 dwt Tankers equipped with LNG propulsion for Swedish owner Thun. On the other hand, the Flensburger Schiffbau-Gesellschaft (FSG) yard found itself in a very different position, filing for self-administered insolvency, a German bankruptcy process in which the existing management team remains in control while the company restructures its finances. The international shutdown caused by Covid-19 made operations difficult for the yard, its subcontractors and suppliers.

• In Finland, Meyer Turku Oy holds an orderbook of 6 cruise ships to be delivered up to 2025 for Royal Caribbean, Carnival and TUI. In 2020, the Helsinki Shipyard was the only Finnish yard to receive a new order (one 12,000 gt cruise ship).

N° of ships1 1.5 2 2.5 3 3.5

Orderbook of European shipyards 2020

Ukraine

United Kingdom

Portugal

Azerbaijan

Poland

Million gt

0 0.5 4

ships

Romania

Netherlands

Spain

Turkey

Croatia

Norway

Finland

Russia

Germany

France

Italy

N°

35

58

12

22

11

23

34

10

10

37

6

4

6

7

2

2Ukraine

United Kingdom

Azerbaijan

Portugal

Poland

Romania

Netherlands

Spain

Croatia

Turkey

Norway

Finland

Germany

France

Russia

Italy

Orderbook of European shipyards at end-2020 (million GT)

Shipbuilding in

Europe China Japan South Korea

2018 2019 2018 2019 2018 2019 2018 2019

m gt Ships m gt Ships m gt Ships m gt Ships m gt Ships m gt Ships m gt Ships m gt Ships

Market share 8.8% 10.5% 9.4% 11.0% 39.6% 43.4% 39.8% 44.7% 18.4% 22.0% 15.5% 18.4% 30.7% 16.7% 33.2% 19.1%

Bulk 0.03 3 0.01 2 29.9 501 22.7 422 15.7 370 10.1 253 1.9 15 0.5 4

Tanker 1.2 58 1.1 47 10.4 291 11.6 271 5.7 110 4.7 87 14.5 199 16.5 218

LNG 0.6 5 1.9 16 1.3 21 1.4 21 0.4 5 0.4 5 14.5 123 16.4 140

Dry Cargo 0.4 84 0.4 81 1.1 103 1.6 108 0.3 28 0.2 22 0.01 2 0.01 2

Cruise 9.7 101 8.7 93 0.4 10 0.4 10 0 0 0 0 0 0 0 0

All ships 12.8 299 12.9 279 57.4 1239 54.4 1132 26.7 629 21.1 466 44.6 477 45.4 483

Bulk 0.01 2 0 0 9.5 163 8.1 167 5.3 132 3.7 91 0.2 2 0 0

Tanker 0.3 16 0.1 4 5.1 141 4.6 82 2.3 39 1.3 38 7.6 118 9.3 118

LNG 0.6 5 1.3 11 0.5 8 0.5 5 0.005 1 0 0 6.2 50 5.6 49

Dry Cargo 0.2 36 0.2 29 0.6 61 0.7 27 0.3 26 0.04 4 0.01 2 0 0

Cruise 0.1 21 0.01 6 0.1 5 0 0 0 0 0 0 0 0 0 0

All ships 3.0 91 1.7 54 20.6 477 20.2 354 9.4 257 7.0 153 19.3 238 19.0 212

Bulk 0.01 4 0.02 1 12.7 223 15.2 244 7.9 188 9.3 208 1.0 6 1.4 11

Tanker 0.3 13 0.2 15 4.6 145 3.4 102 3.3 88 2.3 62 11.8 128 7.2 99

LNG 0 0 0 0 0.3 3 0.4 5 1.5 11 0 0 3.2 28 3.6 32

Dry Cargo 0.2 33 0.2 32 0.4 46 0.1 22 0.2 18 0.1 10 0 0 0 0

Cruise 1.6 21 1.1 14 0 1 0 0 0 0 0 0 0 0 0 0

All ships 2.4 83 1.6 72 22.4 533 23.2 459 16.1 356 12.7 317 21.3 220 18.2 206

Ord

erb

oo

kO

rder

sD

eliv

erie

s

Million gt


Cruise ship contracting in Europe per year

Year 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ships 4 10 16 21 25 30 27 21 6


• In terms of gt, the orderbook held by Italy helps it retain its crown as the number one European shipbuilding nation. This is largely due to its ‘flagship’ shipbuilding group Fincantieri, the largest cruise ship builder in the world. This group will deliver 31 large units before 2027. Italy can also count on Visentini with 2 large Ropaxes on order including the LNG propelled unit for Corsica Linea, and on Mariotti which is building two 23,000 gt cruise ships to be delivered over 2021-22.

3534 35

• The Norwegian shipbuilding industry continued to suffer from the ongoing crisis in its core market, the oil & gas sector, and from the costs incurred by its entry into the cruise shipbuilding market. In 2020, only 2 ships were ordered in Norway, one 81,000 gt cruise ship at Vard Soviknes and one fishing vessel at Myklebust. The remaining orderbook totals 21 ships spread across 8 shipyards.

• In Croatia, following the bankruptcy of state-owned Uljanik a new company named ‘Uljanik Brodogradnja 1856’, was formed to take over the Pula yard. This leaves 3 Maj, Trogir and Brodosplit as the main Croatian yards currently active.

• Turkey’s shipbuilding industry remained relatively active with 11 ships ordered in 2020 at 6 different shipyards. At end-2020, the country had 34 ships on order in 16 different shipyards.

• Spain experienced a reversal of fortunes and slipped down the rankings. As recently as 2018 it was ranked third in deadweight terms but lost market share upon the delivery of Navantia’s last Suezmax to Spanish owner Ibaizabal in 2019. Spain can still count on very dynamic yards such as Armon, Gondan, Freire, Metalships, Murueta, Zamacona, specialized in fishing, service and offshore vessels. In 2020, Armon secured an order for the construction of one 5,000 cbm LNG bunkering vessel for Knutsen OAS to be delivered in 2022.

Shipbuilding in the Rest of the World

The orderbook for shipyards across the Rest of the World (RoW) continued to crumble from 7.4 m dwt in 2018 to 5.5 m dwt in 2019 and stood at 3.8 m dwt by end-2020. Accordingly, the global market share held by builders in the RoW dropped from 2.8% to 2.1% last year.

Deliveries also decreased from 4.6 m dwt in 2018 to 3.5 and 2.7 m dwt in 2019 and 2020, respectively. The ratio between the current orderbook and yearly output also fell from 1.6 in 2019 to 1.4 in 2020.

With the collapse of Philippines shipyard Hanjin Subic in 2019 and CSBC in Taiwan not taking any orders since 2019, the RoW lost two major contributors. Last year only 7 RoW shipyards secured new orders (compared with 13 in 2019). Indeed, 92% of these new orders were concentrated in just 2 shipyards: Tsuneishi Cebu (Philippines) which bagged 63.5% and HVS (Vietnam) holding 28.5%.

ROW2019 2020


Orderbook

Market share 2.8% 7.1% 2.1% 4.1%

Bulk 2.8 51 2.0 57

Tanker 1.6 54 1.3 36

Container 0.6 18 0.2 10

All ships 5.5 202 3.8 105

Orders

Bulk 0.9 21 0.7 27

Tanker 0.4 16 0.3 7

Container 0,0 0 0,0 0

All ships 1.3 51 1.1 35

Deliveries

Bulk 1.8 23 1.5 21

Tanker 1.4 29 0.7 25

Container 0.2 4 0.3 8

All ships 3.5 86 2.7 87

Orderbook in Rest of the World at end-2020 (million dwt)

Million dwt

India

Argentina

Iran

United States

Brazil

Taiwan

Bangladesh

Vietnam

PhilippinesPhilippines

Vietnam

Taiwan

Brazil

Bangladesh

India

Million dwt

Orderbook rest of the world 2020

United States

Argentina

Iran

0 0.5 1 1.5 2 2.5

shipsN°

30

16

49

5

3

4

1

2

13


• The Philippines, supported by its Tsuneishi Cebu and Austral Philippines yards, remain by far the leader of the Rest of the World shipbuilding group, holding 52% of the total RoW orderbook. This compares with shares of 45% in 2019, 48% in 2018, 54% in 2017 and 55% in 2016.

• Hanjin Heavy Industries & Construction has been put up for sale after the troubled shipbuilder's creditors in South Korea and The Philippines agreed to sell part of their combined 83% stake by the end of 2020. Founded in 1937, Hanjin Heavy is the oldest shipyard in South Korea, and was once one of the world’s top 10 largest yards. The shipbuilding group’s major assets currently include one yard in Busan and one yard at Subic Bay in The Philippines.

• Vietnam retained its second position in the RoW group in 2020 thanks to HVS which accounted for 99% of the country’s orderbook (11 MR tankers and 2 Ultramaxes). But the country can count on other shipbuilders such as Pacific SB, Pha Rung, Ha Long and Vard Vung Tau.

• Taiwan remained in third place despite the fact that no new orders were secured last year. CSBC still has to deliver 3 x 3000 teu containerships and 1 Heavy-lift.

• Bangladesh rose to fourth place in 2020 thanks to the Bashundara Group which secured orders for 10 mini-bulkers for its own account. Bangladesh now has an orderbook of 49 units at 7 different shipyards.

• Brazil’s orderbook continued to shrink. No orders have been taken since 2016. Currently only one shipyard (Eisa Ilha) still has orders (3 units), all of which are scheduled to be delivered in 2021.

• Norway’s Misje Rederi placed an order at Sri Lanka’s Colombo Dockyard for the construction of up to 10 x 5,000 dwt eco bulk carriers to be fitted with diesel/electric hybrid power systems. Japan’s Onomichi Dockyard owns 51% of Colombo Shipyard.

Picture: GLOBAL MERCY , Hospital ship under construction for the humanitarian organization Mercy Ships. The contract to build the vessel was awarded to Stena RoRo, Göteborg, Sweden.

SHIPBUILDINGSHIPBUILDING IN THE REST OF THE WORLD

• Dutch shipbuilders are well known for their specialization in designing and building environmentally friendly and cost-effective ships. These are typically up to 20,000 dwt and comprise many different types including cargo vessels, multipurpose vessels which are able to carry project cargo, container vessels, geared vessels, mini-bulkers but also tankers and even extremely innovative LNG bunker tankers, gas carriers, offshore vessels, service vessels, tugs, inland navigation vessels and dredgers. These are built by renowned shipyards such as Damen, Royal Bodewes, TB Shipyards, Ferus Smit and Royal Niestern. By end-2020, the orderbook was composed of 37 ships which included 17 ships at Royal Bodewes and 12 at Ferus Smit Westerbroek.

• Romania, which used to be a top shipbuilding country by deadweight ranking thanks to DSME Mangalia, continued to lose ground. Unfortunately, the cruise ship previously ordered by Seadream was cancelled.

N° of ships


In 2020, only 7 RoW shipyards

secured new orders

Cruise ship contracting came to a halt following

the Covid pandemic. Still, European shipbuilders

enjoy a comfortable cruise orderbook stretching into

the mid-2020s

An incoming ripple effect of the mid-2000 boom The number of active shipyards plummeted from about 700 in 2007 to about 260 in 2020. Over the same period, the world orderbook crashed from 617 m dwt (representing 56% of the then world fleet of 1107 m dwt) to 180 m dwt (representing 9% of the active world fleet of 2008 m dwt). This is the lowest absolute figure since 2003 and the lowest orderbook to world fleet ratio since 1994. Meanwhile, the shipbuilding industry has pursued consolidation as a survival strategy against today’s poorer demand backdrop. Although the sector has self-adjusted to limit supply, it remains challenging and characterized by its reliance on subsidies and the routine acceptance of losses which has led to regular shipyard restructurings, closures and bankruptcies. Against this challenging backdrop, unsurprisingly, very little has ever been said about the profitability of shipbuilders. The following chart illustrates the importance of the top 10 global shipbuilding groups which together account for 78% of the world orderbook.

The shipbuilding industry follows in the footsteps of its own customers. The top 10 bulker, tanker, container carrier owners today hold shares of 17%, 23% and 83%, respectively, of the world bulker, tanker, container carrier fleet.

Despite this challenging picture, there are several solid arguments for a rebound in the industry in the years to come. This will not be driven by a new ‘boom’ such as that seen in China earlier this century, but by a ripple effect emanating from events that occurred 20 years ago. The factors expected to drive a rebound are; firstly, the need to replace the high number of ships delivered between 2005 and 2010, a period when annual deliveries ranged from 1406 in 2005 to 2426 in 2010, whereas the actual shipbuilding capacity in the world is now about 1200 to 1300 ships a year. Secondly, the requirement to replace non-eco and non-energy-efficient ships to meet carbon neutral or zero-emission targets and therefore comply with environmental regulatory requirements. Finally, to aid ship supply to adapt to higher global demand in the wake of continued globalisation and economic growth.

3736 37

SHIPBUILDINGSOME ASPECTS OF THE SHIPBUILDING MARKET

Clearly the fundamentals of

the cruise ship industry and of

the merchant shipping industry

have been substantially

altered by the Covid pandemic


The incredible reversal of fate of the cruise industry We wrote last year (sic) “the orderbook of the three major European cruise ship builders now stretches well into the late 2020s. Chantiers de l’Atlantique announced at the beginning of 2020 that a letter of intent had been signed with MSC for a new batch of cruise vessels, the last of which will be delivered in 2030! A delivery so far in advance is unheard of and shows how different the fundamentals of the shipbuilding industry have become in Europe and in Asia.”

In reality, trips ceased, planes were grounded and liners dropped anchor. Through an incredible reversal of fortunes, the cruise industry which we assumed was immune to crisis after uninterrupted growth over the last 40 years with only tiny hiccups in 2001 and 2008, almost ground to a halt in 2020 and most companies had no choice but to suspend their services.

For the first time in their history, a number of modern cruise ships were sent to demolition yards and the average age of demolition steeply declined from about 47 years to 28.5 years. The value of cruise vessels nosedived. Some buyers seized the opportunity to step into a business and purchase ships they could never have dreamed of buying in pre-Covid times. Time will tell if they were right in seizing the day, or victims of rash, pandemic-induced decision making.

Clearly the fundamentals of the cruise ship industry and of the merchant shipping industry have been substantially altered by the Covid pandemic.

Top shipyard groups based on orderbook 2020(in dwt)

Shipyard deliveries by year N° of ships

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Million dwt

0rders

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0

50

100

150

200

250

300

Bulk Tanker Container Others

N° of ships

20201993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 20181992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2019

Bulk Tanker Container Others

0

500

1,000

1,500

2,000

2,500

3,000

11,863 ships delivered between 2005 and 2010

Shipyard Deliveries by year

316 323 332 382601

1033448 469600

753

769

635

273365

407

440

266

270

369

431

546

642 605

588

1,4061,588

1,885

2,217 2,241

2,526

Containers OthersBulk Tanker

2019 20201992 1993 1994 1995 1996 1997 1998 1999

11,863 ships delivered per year 2005-2010

World Orderbook and Fleet Evolution

Yangzijiang 4%

CSSC 21% Others 22%

HHI 18%

Tsuneishi 3%

NTS 3%

Samsung 6%

JMU 3%

CHI 7%

DSME 6% Imabari 7%

0%

10%

20%

30%

40%

50%

60%

0

500

1,000

1,500

2,000

2,500

RatioMillion dwt

World Orderbook and Fleet Evolution

Fleet Orderbook Ratio

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20201993 1994 1995 1996 1997 1998 1999

Million dwt


SOME ASPECTS OF THE SHIPBUILDING MARKETThe new post-Covid world has already become a reality

RatioOrderbookFleet

Scrubber fleet overview at 1st January 2020

38 39


Picture: HUMBRIA SEAWAYS , delivered by Chinese shipbuilding Jinling to DFDS on 7th January 2020. Loa 235 m – Beam 33 m – 6,700 lm or 450 trailers – 4th RoRo built and delivered by the yard for DFDS. Photo: Peter Therkildsen.

scrubbers which compares with 7.6% one year ago. Scrubber penetration in the bulker, tanker and container carrier fleets did not gain momentum in 2020 with the shares of scrubber-fitted tonnage in each sector currently standing at 10.5 % (versus 6.8% in 2019), 11.8 % (versus 9.3%) and 19.3% (versus 13.6%), respectively.

In a twist of fate, the wager placed by companies that decided to install scrubbers based on the spread between 3.5% HSFO and 0.5% VLSFO did not pay out last year. The spread which had rapidly exceeded $300/ton in December 2019 - January 2020, did not stay the course and narrowed so that from February onwards it oscillated around $70/tonne. These economics were insufficient to justify the initial investment case which was further diminished by the imposition of several country-wide scrubber bans.

The vast majority of the ship owning community decided to ‘wait and see’ and rely on compliant fuel with a sulphur content of 0.5% or lower, pending the emergence of greener and more reliable fuel solutions. Scrubbers now have the appearance of a temporary fix and regardless of how they are presented, they cannot be construed as the ultimate solution to fight climate change.

Wider shift to greener propulsion The new post-Covid world has already become a reality.

General Motor’s chief executive announced in January 2021 that the company will aim to sell only zero-emission vehicles by 2035. Wall Street investors consider that Tesla, the dominant electric carmaker, is worth more than the combined value of General Motors, Toyota, Volkswagen and Ford. China, the world’s biggest automobile market, decreed that most new cars must be powered by electricity in just 15 years’ time, while the UK expects to ban the sale of new petrol and diesel cars from 2030. Last year, Norway became the first country in the world where the sale of electric cars has overtaken those powered by internal combustion and hybrid engines. According to the Norwegian Road Federation (OFV), battery electric vehicles now constitute 54.3% of all new cars sold in Norway, up from 42.4% in 2019 and from a mere 1% of the overall market a decade ago. Seeking to become the first nation to end the sale of petrol and diesel cars by 2025, oil-producing Norway grants full exemption to electric vehicles from taxes imposed upon those fuelled by fossil fuels.

The shipping industry is striving hard to become greener as well. The choice of fuel and propulsion method remains something of a perpetual dilemma.

In 2019, some shipowners thought they had found solace in scrubber-fitted HFO propulsion. They also thought that issues surrounding the availability of compliant fuel would act as a catalyst to further widen the spread between prices for 3.5% HSFO and 0.5% VLSFO. According to our data, only about 10.5% of the existing fleet and ships under construction are to be fitted with

The shipping industry is striving hard to become greener as well

Rotterdam VLSFO/HSFO Spread$/mt

Fev 2020 Jun 2020 Aug 2020 Dec 2020Oct 2019

0

50

100

150

200

250

300

350

$/Mt

Rotterdam Spread VLSFO/HSFO

Oct 2019 Fev 2020 Jun 2019 Aug 2020 Dec 2020

Scrubber-Linked* Active fleet % Scrubbers

Vessels type Ships Million dwt Ships Million dwt Ships

Bulk 1,279 187.0 12,226 904.2 10.5%

Container 1,012 103.9 5,250 282.0 19.3%

Cruise 177 1.7 351 2.3 50.4%

Dry Cargo 90 1.3 6,434 54.7 1.4%

Ferry 75 0.5 1,144 4.0 6.6%

Gas 120 5.8 1,788 76.6 6.7%

Reefer 5 0.1 508 4.0 1.0%

Roro 145 2.6 1,397 19.0 10.4%

Tanker** 1,259 184.8 10,680 661.5 11.8%

Total 4,162 487.7 39,779 2,008.3 10.5%

*Including Delivered, on order and to be retrofitted **including chemical


Picture: LE BELLOT , 9,900 gt, pax 184, crew 110, delivered by Norwegian shipyard Vard to Ponant in March 2020. Photo: BORGARFJORDUR©StudioPONANT-Violette Vauchelle.

4140 41Picture: SUN PLOEG , Seafarers key workers in the world.BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021

We have now entered the second year of Covid and the recent emergence of Covid-variants could have a larger impact than initially thought. As usual, new black swans inevitably appear and by their nature it is impossible to know their number, timing and intensity.

On a positive note, the IMF’s forecasts remain relatively solid and trade wars appear to be slipping down the US agenda following the election of newly inaugurated President Joe Biden.

New orders, prices, deliveries, cancellations and demolitionsAs a consequence of environmental and regulatory pressure, the shipping industry is expected to give priority to eco or super-eco designs going forward. In principle, vessel scrapping should rise in the near future, especially since it has hardly featured over the recent years. Accordingly, we estimate that around 100 m dwt of tonnage could be ordered in 2021. As a consequence, we expect newbuilding prices to increase significantly by 10 to 20%.

We believe there will be relatively little slippage and cancellation and that deliveries in 2021 could reach a figure between 85 m dwt and 95 m dwt.

We expect cancellations to be marginal in 2021, on a par with 2020.

Several factors should favour a stronger demolition market in 2021. Notably, environmental and regulatory pressures. However, activity could be curbed by any future rise in freight rates stemming from increased economic activity. All told, we project that between 20m and 30m dwt of tonnage could be demolished in 2021.

PERSPECTIVES FOR 2021

The IMF’s forecasts remain

relatively solid and trade wars

appear to be slipping down

the agenda

Nonetheless, 2020 witnessed a flurry of orders for newbuildings to be equipped with dual fuel propulsion technology. The majority of these were based around LNG but several units to be propelled by LPG, methanol or batteries were ordered. The choice of fuel depended heavily on the type and size of ship ordered. The Energy Efficiency Design Index (EEDI) Phase 2, which requires CO2 emissions to be at least 20% below a set baseline, was introduced in 2020. Moreover, newbuildings will have to be EEDI Phase 3 compliant (30% below the same baseline) by 2025. This may make several existing designs, propelled by oil-based fuels and that can at best only comply with EEDI Phase 2, obsolete.

Going beyond EEDI requirements, the IMO decided in 2020 to mandate measures to cut carbon emissions in order to raise the fuel efficiency of existing vessels and to meet newbuilding standards that are to enter into force by January 2023. These measures seek to reduce the carbon intensity of shipping by 40% by 2030. The newly agreed Energy Efficiency Existing Ship Index, or EEXI, will require all existing ships to meet newbuilding fuel-efficiency standards by their first statutory survey from 2023.

There might be some allowances for VLCCs, VLOCs and ultra-large containerships along with exceptions for certain specialized tonnage. However, generally speaking, bulkers and tankers will have to comply with current EEDI Phase 2 standards, which will be raised to Phase 3 in 2025.

Vessels that meet the EEXI standard will be certified as compliant under their International Energy Efficiency Certificate. Those that are not fuel-efficient enough to comply will likely have to adopt ‘power limitation’. This will in effect restrict a vessel’s speed to a level at which it becomes compliant. Shipowners also have the option run lower carbon fuels or to retrofit energy-saving or emission-reducing technology to meet the EEXI standard.

Some other initiatives are also on-going such as the Carbon Intensity Indicator (CII) that involves rating the operational efficiency of a vessel from A to E. It assesses the actual performance of vessels in terms of fuel consumption and cargo carried. Vessels rated D and E will fall outside the required standard and their shipowners will have to take steps to improve their performance at the risk of financial penalties. These CII ratings will have a considerable impact on vessels’ trading prospects and might push some ships towards demolition yards.

The choice of fuel and propulsion method remains something of a perpetual dilemma

Picture: POINTE DE CAUX , M/T Tanker under construction at RMK Marine Turkey by Sogestran (France) for TOTAL Fluides. The 4,700 dwt product/chemical tanker features diesel electric propulsion, batteries and special shore power connection to reduce Greenhouse Gases emissions.


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