In China, through the first eight months of the year, new ship orders dropped off substantially due to recent import and export slowdowns.
Data from the China Association of the National Shipbuilding Industry (CANSI) showed that year-over-year new ship orders have declined 68.3 percent, according to Hellenic Shipping News. The significant blow to Chinese shipbuilders through the first eight months of 2015 is believed to be caused by the disappointing state of the global shipping market in recent months, and will likely make things worse for beleaguered shipyards in the world's most populous nation.
Chinese shipbuilders see slowdown due to global trade decline
The slow market, however, did give shipbuilders an opportunity to to take chunks out of their backlog, and also pulled down prices for new ships, the news outlet reported. From January through August, Chinese shipbuilders completed 14.6 percent more ships by tonnage than they did during the same period last year. By the end of August, shipbuilders' order backlog was down 12.1 percent.
"The cloudy economic picture discouraged shipping firms from placing more orders," Zhang Yongfeng, a market analyst with the Shanghai International Shipping Institute, told Hellenic Shipping News. "Now most of the orders are for large vessels, such as 20,000 20-foot equivalent unit (TEU) container ships. Smaller vessels are disappearing and that means only leading shipbuilders can secure orders."
From January to July, the 1,447 medium- and large-sized shipbuilders monitored by the CANSI made an aggregate operating income of 414.47 billion yuan ($65.1 billion), an increase of 4.2 percent over the first seven months of 2014. Combined profits, meanwhile, dropped 22 percent to 11.99 billion yuan.
U.S. East Coast a rare bright spot in recent Chinese exports
Shipping out of East Asia has been up and down throughout the year. Containerized volume from the Far East to Europe through the first seven months of 2015 dropped 38.3 percent year-over-year, according to the Journal of Commerce (JOC). China-to-U.S. containerized volumes, meanwhile, fared a bit better. Traffic from China to the West Coast was down 0.1 percent from last year. Volume from China to the East Coast was 10.5 percent through the same seven-month period. Many shippers rerouted from the West Coast to the East Coast due to congestion issues that plagued port complexes in late 2014 and early 2015, such as those in Los Angeles and Long Beach due to a labor dispute, among other things.
Increased household spending in the U.S. and European Union is expected to drive up container shipping demand in the coming months, the news outlet explained. Back-to-school season in the U.S. may also be a boon to shipping lines importing goods into the country. The expected increase in demand in the latter half of the year may come as welcome relief to flagging shipbuilders in China. Thus far in 2015, Beijing has seen a sharp drop in trade.
Through the first eight months of 2015, trade has dropped 7.7 percent year-over-year to 15.67 trillion yuan, Hellenic Shipping News noted. Exports ticked down 1.6 percent while imports tumbled 14.6 percent during the same stretch.
"Other key indexes such as the China export container freight price index and the Baltic Dry index were also weak for the first eight months of the year, compared with figures in previous years, and shipping companies in the country are having a hard time," said Zheng Ping, chief analyst of industry portal chineseport.cn, according to thew news outlet.
Chinese shipbuilders are facing rising competition from those in nearby countries, as well. Though Chinese production capabilities are enough alone to meet global demand, regional rivals are cutting into local shipbuilders' business, Zheng told Hellenic Shipping News. Shipyards in both South Korea and Japan are taking on business that would have normally gone to China due to their weaker currencies.