PRICE DETERMINATION IN THE SHIPBUILDING MARKET
Transcript of PRICE DETERMINATION IN THE SHIPBUILDING MARKET
203/12/2018
Price determination in the shipbuilding market
I. Prices determined by yards’ building costs –(steel prices, manpower etc)
II. Prices determined by supply and demand –(shipping market, yard capacity, alternatives to NB)
III. Are prices sufficient to have a sustainable newbuilding industry?
IV. What are the different strategies adopted by shipbuilders to counter prices that may be below building costs?
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Building costs
Category: %
Equipment 40%
Steel 30%
Labour 15%
Overheads 10%
Profit ? 5%
Representative cost breakdown to build an Ultramax bulker -China 2018
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1. Steel price
2. USD/Exchange rate
3. Labour costs
4. Regulatory requirements
Building costs
Fluctuations and challenges:
1. Steel price
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0
100
200
300
400
500
600
700
800
900
1,000
Chinese Steel Price (Shipbuilding Plate) in USD
Shipbuilding plate 20mm RMB
$/ton
$330 / ton
$600 / ton
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2. Exchange rates
Exchange rate variation with the USD
0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.80
0.90
1.00
1.10
1.20
1.30
Jan2014
Apr Jul Oct Jan2015
Apr Jul Oct Jan2016
Apr Jul Oct Jan2017
Apr Jul Oct Jan2018
Apr Jul Oct
100 Yen 1000 Won 10 Yuan
6.93 Yuan
1126 Won
113 Yen109
10036.63
4. Regulations
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Accumulation of Regulations has added to Newbuilding Costs:
2004 PMA (IACS RULES Permanent Means of Access)
2006 CSR (IACS COMMON STRUCTURE RULES)
2006 PSPC (IACS PERFORMANCE STANDARDS FOR PROTECTIVE COATING)
2010 IMO Tier I (Nox) Main Engine & 2012 IMO Tier II (Nox) Main Engine
2012 BWTS (Ballast Water Treatment System)
2013 IMO EEDI (ENERGY EFFICIENCY DESIGN INDEX)
2015 HCSR (IACS REVISED COMMON STRUCTURE RULES)
2016 Tier III Main Engine (SCR) for ships with keel laid after 2016, trading US/Europe
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Shipowner Demand – influencing factors:
• Global trade demand• Time charter rates and forecasts• Market sentiment• Fleet renewal • Regulatory requirements • Demolition prices• NB & S&P prices
Shipowner Demand
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Shipowner Demand – influencing factors:
• Global trade demand• Time charter rates and forecasts• Market sentiment• Fleet renewal • Regulatory requirements • Demolition prices• NB & S&P prices
Shipowner Demand
NB S&P Charter
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Shipyard Supply
Shipyard evolution since 2000
0
50
100
150
200
250
300
350
400
450
2000 2002 2004 2006 2008 2010 2012 2014 2016
Number of Shipbuilding Facilities - China, Japan, South Korea
CHINA
JAPAN
SOUTH KOREA
TOTAL
201
222
415
128
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Newbuilding prices since 1992
Newbuilding prices
0
20
40
60
80
100
120
140
160
180BULK Supramax
BULK Panamax
BULK Capesize
TANKER Aframax
TANKER Suezmax
TANKER VLCC
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VLCC newbuilding prices since 1992
Newbuilding prices
0
20
40
60
80
100
120
140
160
180BULK Supramax
BULK Panamax
BULK Capesize
TANKER Aframax
TANKER Suezmax
TANKER VLCC
$90m
$160m
$60m
$100m
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A sustainable industry?
Widespread losses in the shipbuilding industry
FY 2015 FY 2016 FY 2017 FY 2018e
SAMSUNG HI (Wn 962bn) Wn 475bn (Wn 150bn) Wn 139
NAMURA SHIPB ¥14.6bn ¥7.3bn (¥11.3bn) (¥20.5bn)
FINCANTIERI (€175m) €14m €53m €30m
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• Since 2007 the number of shipyards worldwide has halved
• China and Japan GT under construction -36% and -46% respectively
• S Korea orderbook -48% since 2007
A sustainable industry?
0
50
100
150
200
250
300
350
400
450
2000 2002 2004 2006 2008 2010 2012 2014 2016
Number of Shipbuilding Facilities - China, Japan, South Korea
CHINA
JAPAN
SOUTH KOREA
TOTAL
201
222
415
128
2003/12/2018
1. 21st Century Sb2. Dae Sun3. Daehan Haenam4. Daewoo5. Dongbang6. Hanjin Busan7. Hanjin Youngdo8. Hyundai Mipo9. Hyundai Samho10. Hyundai Ulsan11. Ilheung12. Jinse Hi13. Kwangsung14. Mokpo S&e15. Nokbong16. Samho Sb17. Samsung18. Sekwang Hi Mokpo19. Sekwang Hi Ulsan20. Shinan21. Sls Sb22. Spp Sacheon23. Spp Tongyeong24. STX Busan25. STX Jinhae26. Sungdong27. YS Heavy
A sustainable industry?
South Korea 2008: 27 yards
1. Hyundai Mipo2. Hyundai Ulsan3. Daewoo4. Hyundai Samho5. Samsung6. Daehan Haenam7. Dae Sun8. STX O&SB Jinhae9. Samkang M&t
In 10 years the number of yards in South Koreahas fallen by 65%
South Korea 2018: 9 yards
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State owned vs private Government/naval ship orders Tax breaks Debt waivers Soft financing Shipping funds Programmes for domestic owners Demolition bonuses Group cross-subsidisation
Shipyard strategies
Strategies to counter low prices/long cycles
How to qualify this support?
2303/12/2018
Building costs
Category: %
Equipment 40%
Steel 30%
Labour 15%
Overheads 10%
Profit ? 5%
Representative cost breakdown to build an Ultramax bulker -China 2018
2403/12/2018
Building costs
Category: %
Equipment 40%
Steel 30%
Labour 15%
Overheads 10%
Profit ? 5%
Representative cost breakdown to build an Ultramax bulker -China 2018