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In the June edition of the ‘World Fleet Monitor’, we identified how many vessels on order would have to be delivered before July 2012 to avoid non-compliance with the IMO resolution on the ‘Performance Standard for Protective Coatings’ (PSPC), which refers to the coatings on the ballast water tanks of new vessels. As vessels delivered before July 2012 would not be subject to these provisions, it was expected that a flurry of deliveries would take place just prior to this deadline, as classification societies have announced that vessels which do not meet these requirements will not receive a cargo ship certificate, effectively banning them from be in able to trade.
This is borne out by the volume of deliveries in June. As shown by the Graph of the Month, vessels of a cumulative 20.1m dwt were delivered in June, which is the largest volume of deliveries in a single month on record. The largest proportion of these deliveries was output by Chinese shipyards, who delivered vessels of 11.6m dwt, of which 9.4m dwt were bulkers. This alone is almost equal to the total global volume of deliveries in February (11.7m dwt). This large influx of new tonnage into the global fleet came at a bad time for already weak markets, and earnings for both tankers and bulkers declined even further over the course of the summer.
As a result of the accelerated pace of deliveries recently, total 2012 deliveries as of the start of September stood at 113.6m dwt. This is up 3.5% year-on-year, as 109.8m dwt of new vessels were output in the same period of 2011. This increase is due in part to a decreased level of non-delivery in the year-to-date, with 16.0% of vessels due for delivery in the first eight months of 2012 recorded as having not yet been delivered.
This puts 2011’s record delivery volume (162.9m dwt) within reach. For yards to achieve this level of output, they would need to deliver 12.3m dwt of new vessels per month, which is lower than both the average monthly delivery volume they have achieved in 2012 year-to-date (14.2m dwt) and 2011’s average monthly delivery volume of 13.6m dwt. The likelihood of this occurring is reflected in the latest delivery forecast (see Page 6), which suggests that 169.0m dwt of new ships will be delivered in 2012.
One should not be misled by the graph, as this appears to show that delivery volumes have fallen dramatically since June, with just 5.8m dwt delivered in August. Although it is likely that fewer vessels will have been delivered post-June, the size of the decline is exacerbated by the fact that the delivery of some vessels is not always immediately reported, and therefore the total for any month is subject to revision upwards.
Even if there has been a slower rate of deliveries over the past couple of months, possibly due to yards taking summer holidays, it seems unlikely that this is going to have a significant negative impact on 2012’s full year output. Undoubtedly, deliveries received a short-term boost in late 1H 2012 as yards output large volumes of vessels to avoid non-compliance with the PSPC regulation. But the wider trend still suggests that the overall volume of deliveries in 2012 (in dwt) will at least reach 2011 levels.