After a decade of declining output, shipyard production has begun to edge up in recent years with deliveries in Q1 reaching a seven year quarterly high (10.1m CGT). Our projection for full year 2024 suggests a 15% y-o-y increase to ~40.6m CGT, although with a near term product mix dominated by gas carriers and containerships, the outlook varies by tonnage unit.
Mind The Unit…
After a 45% decline in shipbuilding output between 2010 and 2020 (basis compensated gross tonnes – CGT – a widely used (but not perfect…) measure of shipyard “work”), deliveries have now begun to edge up in recent years. Output in 2023 totalled 35.4m CGT, up 12% y-o-y, and we project an increase to a ten year high of 40.6m CGT this year before a marginal decline in 2025. And while output in gross tonnes (GT) shows similar trends, this year’s output by deadweight (dwt) is relatively flat (and in fact lower than 2019), reflecting more limited near term deliveries of typically higher-dwt, lower-CGT bulkers / tankers.
Product Mix…
Reflecting the investment cycles of recent years, record containership deliveries are the largest driver of higher output today (2024f: 13.6m CGT, more than double the 2016-22 container average of 5m CGT). LNG deliveries are also projected to double in 2024, to a record 6m CGT and there will also be increases in Car Carriers (+0.9m CGT), steady output in bulkers and a y-o-y decline in tankers. Although we expect some pivoting towards tanker deliveries in the second-half of the decade, containerships and gas carriers now account for 50% of all tonnage on order (vs 23% in 2012).
Constraints…
With increased pricing (up ~40% since 2020, albeit with significantly increased costs for yards), a strong forward orderbook (3.5 years versus 2.5 years) and good, cross-sector, order demand, shipyard capacity has been a limiting factor in output. We have now begun to see “incremental” capacity increases, principally in China, with some re-activation, expansion and productivity gain. The product mix of individual yards has also evolved: ~20 yards will deliver a containership for the first time in 2023-24, while 4 Chinese yards took their first orders for LNG carriers in 2022.
On The Turn?
Although the long shipbuilding cycle (peaks in 1976 and 2010, troughs in 1986 and 2020) may have reached a “turning point”, there are additional dynamics to consider for the decade ahead. The total number of “active” yards has dropped by two-thirds since 2010, leaving a smaller and more consolidated industry while Chinese yards have reached a 50% market share (South Korea’s share peaked at 35% while Japan touched 50% in the 70s and 80s). There is little sign of “greenfield” yard development and we have an ageing fleet and a vital green transition driving fleet renewal but with huge uncertainties in regulation and fuel choice. And even with higher output, deliveries in 2024 will be equivalent to just 4% of fleet capacity compared to 10% in 2010. So after a decade of “pain”, shipyard output is now edging up, with a strong flow of orders and long lead times as yards grapple with questions of future demand, fuel technology, capacity, cycles, competition and costs.
