The total order book for all ship types bottomed to its lowest level in 17 years, according to BIMCO, as the coronavirus pandemic continued to impact the industry.

The order book for container ships has fallen 10.3% in the past 12 months to its lowest level since September 2003.

For dry bulk, in particular, the order book has fallen sharply at 63.4m DWT, which is at its lowest level since April 2004 and 34.7% smaller than twelve months ago. 

BIMCO said in a report that the coronavirus pandemic has “massively slowed contracting” (-50%), although deliveries of new vessels have proved more resilient (-2%).

In the January to July period, contracting for dry bulk vessels was down 65.6% from the start of the year and orders for new containerships are down 37.7%.

Dry bulk contracting down by 6m DWT

“The falls have in particular been driven by the scarcity of new orders as the drop in trade volumes and long road to recovery looms,” said Peter Sand, BIMCO’s Chief Shipping Analyst.

“Contracting activity has been quick to feel the effects of the pandemic with owners and investors showing little appetite for new ships,” he added.

Newbuilding deliveries, however, have not been heavily affected by the pandemic. Total deliveries are down 1.7% in the first seven months at 46.4m dwt.

Smaller decline for tanker order books

BIMCO noted that the tanker shipping industry has also recorded a fall in its order books, though not as sharp as the falls in dry bulk and container shipping books.

 
This is primarily because the tanker order book has been at a much lower level than that of dry bulk and containers in the past two decades.

The order book for crude oil tankers stands at 36.3m DWT and for the oil product tanker fleet at 12.1m DWT, down 4.2% and 12% from 12 months ago respectively.

Deliveries have fallen by 39.1% for crude oil tankers and 46.1% for oil product tankers while total tanker deliveries so far this year have amounted to 10.1m DWT compared to 17.2m in the same months last year.

Demolition activity rises as yards re-open

The decline in appetite for new ships comes at a time when many owners are keen to get rid of their existing ships.

BIMCO said as major demolition nations around the world have eased their lockdowns and once again opened their yards, June and July saw a strong uptick in demolitions.

Total demolition activity in July totalled 1.8mDWT, up by 1.2m DWT from July 2019, an almost 400% increase from demolitions in April 2020.

In particular dry bulk and container demolitions have increased, up 80.9% and 26.3% respectively, while 8.8m DWT of dry bulk capacity and 152,770 TEU of container ships have been sent for demolition since the start of the year.

“The sharp uptick in demolitions following the reopening of yards is entirely expected due to the demand shock from the COVID-19 crisis and expectations of a long road to recovery ahead of us,” Sand said.

“This is reflected in both the higher demolition numbers, with owners pushed to act on older and substandard ships that they had kept sailing until now, as well as the drop in contracting as the outlook for the next few years has become much gloomier than it was at the start of the year,” he added.

Fleet continues to grow

Despite the rise in demolitions and decline in deliveries in many sectors, the fleets continue to grow because, in volume terms, deliveries are much higher than demolitions.

The dry bulk fleet has exceeded 900m DWT for the first time (901.67 as of 3 August), with the fleet growing by 2.6% since the start of the year.

The crude oil and oil product tanker fleets have experienced the next highest fleet growth of the four, at 2% and 1.7% respectively, with the container shipping fleet bringing up the rear by growing 1.2% since the start of the year.

“The continued increase in the supply of ships, despite higher demolitions and lower contracting, cannot be ignored as the volume of world trade is set for a considerable drop this year, and not forecasted to return to pre-pandemic levels until at least 2022. While the decline in contracting will result in slowing fleet growth in the coming years, balance in the shipping markets may prove elusive for many years to come,” Sand further said.