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The Uphill And Downhill Of Two Long Cycles...
By Mr Trevor Crowe
01 September 2017
British cycling star Chris Froome has taken on one long cycle after another, currently tackling the Tour Of Spain following his fourth Tour De France victory back in July. Two long cycles are ongoing in the shipbuilding sector too, and this week’s Analysis takes a look at the progress of the delivery cycles in the merchant vessel and mobile offshore sectors, through a challenging period for the industry.
Back in 2006-08, an unprecedented 651m dwt of merchant vessel tonnage was ordered at shipyards globally. Although, following the onset of the economic downturn, the delivery of some of this tonnage was delayed or cancelled, output rose substantially in 2009-12, with the 12-month moving average (12mma) of monthly deliveries peaking at 14.8m dwt in June 2012 (an index point of 218 on the graph; see graph description for details). Inevitably, however, following the financial crash, a slowdown in ordering ensued, and after the peak in output, deliveries started to slide sharply. Deliveries in the offshore sector were impacted by the downturn too, but a strong oil price buoyed ordering in 2013-14 and output levels, which had dropped following a peak in 2009, improved again, with the 12mma of mobile offshore unit deliveries reaching a peak of 56 units (an index of 132) during April 2014, just as merchant output was approaching its low point.
On The Descent
Merchant tonnage output headed downhill for a prolonged period from 2H 2012. Delivery volumes bottomed out in November 2014, when the 12mma reached 7.6m dwt (an index of 112). On the offshore side, a slowdown eventually came too, with the impact of the oil price crash in 2014 sending offshore deliveries into a descent. Today, the 12mma of offshore unit deliveries has declined by 58% since January 2015. In July 2017 it reached 22 units (an index of 52); the lowest level on record for more than two decades. As well as a hiatus in ordering, significant deferral to offshore deliveries, despite the completion of many units at yards, has had a persistent impact.
Back On The Flat Yet?
Since 2014, however, merchant vessel deliveries appear to be back on flatter terrain, with if anything a gradual increase in delivery volumes over the last two years. In July 2017 the 12mma average was up to 8.8m dwt (an index of 129), and deliveries are expected to increase again slightly this full year and next. In the offshore sector, on the other hand, there has been no respite yet from the tricky descent and offshore output remains under severe pressure.
Checking The Time Splits
Undoubtedly conditions for builders in both the merchant and offshore sectors remain pressurised. But, like Chris Froome’s year, on closer inspection it’s a story of two long cycles, one still on the descent and one maybe on flatter ground. This confirms the stress being felt in the offshore sector, and backs up the idea that any improvement in that arena might come some while after any better conditions on the shipping side. In the meantime, unlike the dreams of most road cyclists, builders across the board will be hoping that the road eventually turns uphill again. Have a nice day.