French orders to foreign shipyards

10
The latest price reductions also contributed to "jumpstarting
the order machine" and in spring, demand surged
especially for Handymax and Panamax bulkers, which filled
the docks of specialised shipyards such as Oshima and
Tsuneishi. The product tanker specialist Daedong also filled
its orderbook.
Over the summer, two other events contributed to the rise
in prices that had been sparked by the onset of recovery.
In the first place, the yen, which in the early stages of the
year had depreciated against the dollar from 113 to 122,
gained strength after June reaching a parity of 102 yens.
This caused Japanese shipyards to negotiate slightly higher
prices with each new contract, and this task became easier
as docks filled up.
On the other hand, Korea had to address the legitimate fears
of shipowners who still had doubts about the second-largest
world shipbuilder Daewoo’s life expectation, and about
the fate of Halla. This shipyard’s contract cancellations could
have driven to little better discernment from shipowners.
This action's effect could have been to reduce newbuilding
capacity and keep shoring up prices. However, this is all
theory because other more speculative shipowners will
take advantage of these conditions to get better deals
from Daewoo.
Newbuilding prices variations (in millions US$)
3rd Qtr. 3rd Qtr. Change Change
1998 1999 99/98 1991 99/91
Tankers VLCC 70 68,5 -2% 115 -40%
Thus, by the end of summer, prices firmed up. Once again,
some shipowners were probably able to get marginally
better terms depending on options previously negotiated
or on the shipyard's interest towards certain projects.
Japan
Suezmax 45 41,5 -8% 65 -36%
Aframax 34 34 - 55 -38%
Panamax 30 30 - - -
IMO2 45k Product 29 28,5 -2% 40 -29%
Bulkers Capesize 35 34 -3% 55 -38%
Panamax 20 20,5 3% 30 -32%
Handymax 19 19 - 29 -34%
Mr Kentaro Aikawa, President of the Japanese Shipbuilders'
Association, said in December 1998: "1999 will not be
an easy year for Japanese shipbuilders. I see no signs that
indicate improvement in prices. The industry is suffering
from overcapacity and financing difficulties and the yen
has become stronger".
He was correct, 1999 was a very bad year for Japanese
shipbuilders for numerous reasons.
First and foremost is the rise of the yen, which eradicated
all gains in productivity made by Japanese shipyards.
At the same time, Korean competitors were assisted by
the devaluation of their currency of around 30% compared
to the period preceding the crisis. This problem had already
been encountered in 1998, and was aggravated in 1999.
In 1998, Japanese shipyards were able to take advantage
of a more favourable average yen/dollar parity. The yen
had started the year at 125 yens/$ and reached a level of
145 by September before plunging abruptly in October
by around 35 yens. Japanese shipyards took on more
than 10 million gt in orders in that interval, bringing their
orderbook to a record 20.1 million gt in the third quarter
of 1998. Since that date, the orderbook fell continuously,
stabilising a year later at around 17.5 million gt. However,
estimations at the end of 1999 seemed to show an
improvement to around 20 million gt.
Indeed, the yen began depreciating slowly to around
123 yens/$ in May, giving the maritime industry grounds
for greater optimism. However, it gathered considerable
strength in the second half of the year, which resulted
in pushing Japanese shipyards out of the market.
Japan’s market share fell from 34% to 31%. Japanese
shipyards appear to have lost a step in some whole market
segments, to the benefit of their Korean rivals. There were
some exceptions, like the large LNG carrier orders for Brunei
and Malaysia (Japan is a major importer of LNG produced
by these countries). The Malaysian contract represents
the first time Mitsubishi builds a membrane-LNG carrier.
The country’s market share on tanker segment fell from
46% in September 1998 to 38% a year later. This phenomenon
is even more accentuated for containerships,
with market share receding from 25% to 12% over the same
period, while in Korea it rose from 31% to 58%. Many
people agree that to maintain a modicum of equilibrium
between Japanese and Korean shipyards, the yen/won
ratio should be 1/10. It is currently 1/12.
Changes in Japanese and Korean market share on
the world tanker and container shipbuilding market
(in % of gt)
Sep Dec Mar Jun Sep
98 98 99 99 99
Tankers
Japan 46% 43% 42% 40% 38%
Korea
Containerships
47% 50% 50% 51% 50%
Japan 25% 24% 20% 16% 12%
Korea 31% 34% 42% 49% 58%
Germany 14% 11% 10% 9% 10%
More and more of these Japanese shipyards, realising
that they are now less competitive than the Koreans, no
longer quote some types or sizes of vessels. This follows
the pattern set by European shipbuilders who have long
stopped quoting some standard bulker and tanker vessels.