Shipbuilding Markets & the Financial Crisis

The economic recession, going hand-in-hand with the severely imbalanced supply-demand characteristics in the shipping industry has severely hampered the new building sector in its ability to meet contractual agreements between the shipyards and owners. The time lag in ship production led to an inflated order book, and the problems have been compounded by a sharp downturn in the finance sector, leading to an instantaneous dip in demand. This is one of the major reasons behind the dire conditions of the new building market. Under these circumstances, owners are rushing to cancel their vessels presently on order, or at least postpone delivery until market conditions improve. Also, yards are finding it difficult to deliver the promised vessels under the agreed time frame and within the allocated budget. The fate of the order book scheduled to be delivered between now and the end of 2012 is critical to the yards that are building them, the owners that ordered them, as well as the banks that are providing the financing.

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