Stopford upbeat on prospects for yards.

(From Lloyds List)

Byline: Market correction more likely than a crash, according to Clarkson Research's managing director, writes Hugh O'Mahony

ALTHOUGH caution has crept into the shipbuilding market over recent months, as Chinese government pronouncements over intentions to limit economic growth have collided with spiralling material costs, the fundamentals driving the sustained boom in orders point to a coming market correction, rather than an imminent crash, according to one leading analyst.

Martin Stopford, managing director, Clarkson Research, told last week's SMM 2004 'advance press conference' that the shipbuilding industry continued 'to fire on all four cylinders'. Tankers, bulk carriers, container ships and LNG tankers were all on an investment roll, he said, funded by low interest rates and record earnings. 2003 production established records and the momentum had continued into 2004.

With shipyards mainly full until 2007 and prices rising rapidly, Dr Stopford's forward view took in the fact that shipbuilding is by nature a cyclical business.

He told the SMM audience that, in 2004, the shipbuilding industry was coming to the end of a very long cycle.

He compared the situation with 1977, when world shipbuilding output reached a peak of 60m dwt (21m cgt) of merchant ships delivered. This bubble, he said, driven by the expanding European economies, easy finance and a booming tanker market, had coincided with the two oil crises in 1973 and 1979, which caused the demand for new ships to slow and then, in the early 1980s, to decline.