Is a major cycle about to begin in the shipbuilding industry?!

2017-06-19 09:00

South Korean shipbuilders have been receiving a flurry of orders this year, shaking off the psychological impact of last year and brimming with confidence. Recently, a South Korean industrial expert publicly stated that a 15-year period of prosperity in the shipbuilding industry is about to begin, starting in the second half of this year.

A 15-year period of prosperity is about to begin again.

Choi Jin Myung, an analyst at CAPE Investment & Securities in South Korea, stated: “It’s time to consider when the shipbuilding industry will resume growth, rather than questioning the possibility of securing new ship orders. A roughly 15-year period of prosperity is about to begin again.”

Choi Jin Myung pointed out: “The shipbuilding industry’s business cycle generally includes a 5-year boom and a 10-year downturn. Recently, ship rentals and prices have been favorable, and the offshore equipment market has also seen positive news. Therefore, an increase in orders is expected in the second half of 2017 and the first half of 2018.”

1980-2016 New Ship Price Trend Chart

Data Source: Clarkson

He commented that, based on the trend of the ship price index over the past 36 years, a sharp increase occurs after a cycle of approximately 15 years, and this increase usually lasts 5 to 6 years; therefore, investing in shipbuilding and shipping businesses requires achieving profits within 5 years and waiting for opportunities in the next 20 years.

He pointed out that the stock prices of the shipbuilding industry have risen sharply from 2016 to 2017. However, this growth may only be the beginning. If this is the start of a major cycle, profits will be generated in the next five years.

This is also confirmed by the recent views of Petrofin Research, a well-known Greek ship financing research institution, which believes that the worst of the shipping market is over and ship prices are gradually recovering. The first areas to recover are Bulk carriers and Container ships It is expected that next year Oil tankers market will also see a moderate recovery. Over the past few months, the value of oil tankers and container ships has also risen, with the Clarkson Ship Price Index rising from an average of 75 points in 2016 to 88 points in May 2017, an increase of 17.3% year-on-year.

The surge in orders for South Korean shipbuilders confirms the overall recovery of the shipbuilding industry.

A South Korean industry insider also stated: “The growth in new ship orders this year reflects the gradual rebound and recovery of the shipbuilding business, which bottomed out in 2014. Based on current trends, South Korea’s three major shipbuilders may receive new ship orders worth more than US$20 billion this year.”

May 2017 Global Shipbuilding Monthly Report

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