In 2020, due to the Covid-19 pandemic, the order book for containerships saw its biggest decline in a decade, while orders for dry bulk carriers and tankers saw similar declines.
However, in both 2021 and 2022, due to a number of factors, there has been a huge increase in orders, and concerns have started to prevail about a possible oversupply in 2023, with shipyards worldwide saturated. In fact, the demand for newbuildings is such that many shipyards find it increasingly difficult to meet new orders, opening the fan of deliveries.
Funding sources
Meanwhile, the new orders forecast for 2023 raise an important question: where is the capital coming from to finance all this newbuilding?
According to Trust Economics, the answer may lie in creative funding solutions and diversification of funding sources. Earlier this year, it was announced that a shipowner had secured financing for dozens of newbuild vessels through various financing solutions, including a set of loans backed by export credits, sale and leaseback agreements, syndicated bank loans and equity.
In contrast, a significant number of shipowners still rely on traditional equity and debt financing. In this context, it becomes clear that despite this increase in orders, shipowners continue to look for and find different and alternative sources of financing for building new ships.
Puchase of second-hand ships
When it comes to the global used ship market, according to data from Clarkson Research Services, 2022 is set to be a year of new records across all types and capacities changing hands. Against this background, the estimated value of used ship sales will further increase after last year’s high of $48 billion. So far, sales are up 30% year-on-year, surpassing $33 billion.
Assessing the outlook for the whole year, Trust Economics notes that activity has slowed down a little after the first half and uncertainty about shipping markets appears heightened. Recently, charter prices have reached record highs, mainly due to increased demand for capacity after the pandemic. This shortage of vessels has given shipowners the upper hand in charter negotiations, allowing them to obtain higher rates and longer charter periods for their vessels.
What Trust Economics points out is that it is unclear whether charter rates will stabilize at pre-pandemic levels once newbuildings and ship deliveries are completed in the coming months.
According to the forecasts, in the event that the increase in orders for new-build ships leads to an oversupply, there will be a simultaneous reduction in freight rates which may affect, among other things, the ability of shipowners to repay their financial obligations.
