Japan yards to see more cancellations

Japanese shipbuilders could yet be hit by order cancellations as the regional shipowning community based around the Seto Inland Sea prepares to pull out on verbal shipbuilding deals.

The yards have been generally viewed as immune to the cancellation rush because the country’s orderbook is based on firm contracting with refund guarantees and finance in place. However, a long-standing relationship between family-owned shipowning companies in and around Imabari has led to a situation where some orders were based on an “understanding” between the yard and owner, with no secure contract in place.

The local owners have generally acted as tonnage suppliers to the major operators, Nippon Yusen Kaisha (NYK), Mitsui OSK Lines (MOL) and K Line, which have all drastically reduced their fleet-expansion plans. Cancellations at Japanese yards have been few, one of which was Norway’s Eitzen Chemical and Eitzen Gas which pulled out of a deal to order a series of chemical and LPG carriers at Sasaki Shipbuilding.

In a separate development, Mitsubishi Heavy Industries estimates that up to 807 newbuildings have been cancelled since the markets slumped last year. Japan’s largest shipbuilder has been keeping tabs on the orderbook and revealed its findings in Tokyo last week. According to reports, 60% of cancellations have been in the dry-bulk sector, with 459 orders erased from the book. There have also been 143 tanker and 105 containership cancellations.

Mitsubishi’s figures cover the period from October last year to the end of May 2009. However, it says it expects more cancellations to emerge this summer.