Could there be a faint whiff of insanity in the air, emanating from the giant South Korean shipyards?
According to the Korean news agency, Yonhap, Hyundai Heavy Industries, the world’s largest shipbuilder, said it was aiming for ship orders of US$17.7 billion this year.
Not to be outdone, Korean compatriot Daewoo Shipbuilding and Marine Engineering announced that it hopes to win orders of US$10 billion in 2010.
Yikes. That’s more than 200 ships, according the deeply scientific “rough estimate” method.
What it will do is take the yards back to the halcyon days of a couple of years ago when “bring me more ships” was the furious mantra being chanted by container line bosses blindly following the competition. Orders at Hyundai in 2008 totalled around US$17 billion, and at Daewoo US$10 billion, so the yards evidently expect a return to ’08 levels.
Of course, what the yards “aim” to achieve and the orders they actually get are two completely different things. One shipping expert dismissed the goals of Hyundai and Daewoo out of hand. “The Koreans always put up ‘aims’ at the beginning of the year, but they are seldom achievable,” he said.
Hyundai Heavy also announced plans to chop its workforce by 30 percent, which is hardly compatible with doubling ship production. Neither is the credit crunch and arranging finance for ships these days remains as fashionable as giving bonuses to bankers.
Over at Hanjin Heavy Industries, no one is making any bold predictions. CMA CGM has 45 vessels on order from Korean yards and has cancelled orders for 15 from Hanjin. Various reports put the value of the cancelled contracts at US$1.1 billion.
So it is highly unlikely the yards’ goals will be met this year, but whatever new ships are ordered, they are more likely to be bulk carriers and tankers. Show me a container line placing ship orders and I will show you someone destined for a meeting with men in white coats. There is more than enough box ship capacity laid up or being delivered over the next two years, thanks very much.
But to be fair, ordering new ships involves a serious amount of guesswork. Container vessels aside, it takes two to three years to build a bulk carrier or a tanker. Even though the commodity and oil sectors are expected to do well this year and maybe the next, it is a shipowner with Madagascar-sized cojones who will be confident enough to trot out his chequebook and sign away hundreds of millions on new ships.