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Cheaper
Prices for New Tonnage
Korean
and Japanese
shipyards have made deep price cuts and offered more favourable
payment terms, as competition with China's fast-growing shipbuilding
industry intensifies. As a result, the price differential
between a new ship and a young second-hand vessel has shrunk
by a significant margin. The cost of a new 75,000-tonne Panamax
dry bulk carrier, for example, has fallen to only 10-15% above
the price of a mid-1990s second hand vessel.
Prices
of new tankers have fallen more sharply. A large crude carrier,
(VLCC), which would have cost $85m two years ago, may sell
for about $70m. An Aframax vessel of 110,000 tonnes deadweight
costs about $34m, against $43m two years ago. New buildings
offer the additional benefits of larger cargo capacity and
lower running costs because of technological improvements.
Greek
owners have had few problems in securing financing for new
buildings. Piraeus-based banking operations, which specialise
in lending to the shipping industry -- both Greek banks and
branches of foreign banks - offer loans equivalent to 80%
of the cost of a new building, compared to 60% for a second-hand
purchase. Such loans have a longer maturity with a higher
percentage of installments rescheduled for the end of the
repayment term. The incentive for the banks is that lending
for new buildings raises the quality of their shipping portfolio.
However,
the market is likely to be overwhelmed by new capacity, with
two new ships due to be delivered weekly from next year. The
pace of demolition last year slowed marginally, with about
570 vessels reaching breakers' yards in the first 11months
of the year. Over-capacity in some market segments will bring
a sharp fall in charter rates, with operators of old vessels
likely to be hardest hit. The dry bulk operators, who suffered
a shake-out when charter rates collapsed in the wake of the
Asian crisis, are again expected to suffer.
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