When Will International Oil Prices Rebound? ... Red Light for Shipbuilding Industry's Order Targets

[Asia Economy Reporter Hwang Yoon-joo] An analysis suggests that if the low oil price trend continues, the shipbuilding industry may fail to achieve its order targets this year.

According to Clarkson data, the cumulative order volume as of March this year recorded 6.99 million DWT, a 61% decrease compared to the same period last year. During the same period, the order amount also fell by 77%, remaining at 5.5 billion dollars.

On the other hand, the cumulative delivery volume as of March 2020 recorded 6.82 million DWT, down 27%, showing a poor performance where this year's order volume significantly lags behind the delivery volume. Due to the sluggish order volume, the global order backlog as of the end of March fell by 9.4% compared to the beginning of the year.

If the low oil price trend continues, global energy companies' capital expenditures (CAPEX) will decrease, which will also affect shipbuilders' orders.

In the short term, the decline in U.S. shale oil and gas production is expected to appear most rapidly. The U.S. Energy Information Administration (EIA) lowered its 2020 U.S. crude oil production forecast by 1.24 million barrels compared to the previous month in its April 'STEO report.' In fact, from mid-March, global E&P companies including those in the U.S. announced an average CAPEX cut of about 30%.

Researcher Bae Se-jin of Hyundai Motor Securities analyzed, "If international oil prices remain at the current level, a downward revision of the order outlook for merchant ships and offshore vessels is inevitable," adding, "As the U.S., which had led the increase in energy exports, lowers its energy export outlook, it is considered a factor reducing the cargo volume of LNG carriers, LPG carriers, and tankers."

This content was produced with the assistance of AI translation services.