By
David Mott |
The global economic downturn, whether technically a recession or not, has significantly changed the thinking behind the ordering of new cruise ships. In the boom years before 2008, when there was a constant stream of new orders, cruise lines frequently appeared to be competitive while seeming to rejoice in having ever bigger and more expensive ships, partly as a marketing ploy for the future.
But since economic decline became the norm, financial reality has set in and owners now make much of the fact that they have negotiated a reduced price for a ship which is similar to a previous order. Biddable shipyards, desperate for work, have undoubtedly colluded in this.
As an example, Carnival Corporation & plc chairman Micky Arison, who negotiates construction contracts for all 10 of his subsidiaries, let it be known publicly that the combined average price of two new ships ordered last autumn for Holland America Line (2,660 berths), and Carnival Cruise Lines (4,000) beds, is as low as US$195,000 per lower berth. Sharp-eyed analysts were quick to point out that this is 15 per cent cheaper than the US$228 per berth paid for the last previous orders for those two lines.
Not only are prices lower, but Arison is now only ordering about 50 per cent of pre-2008 ship numbers: no wonder shipbuilders are finding the going tough. Another evolving change is that deliveries are now being delayed to preserve yields from dilution. The HAL ship will not come on stream until the autumn of 2015 and the Carnival vessel will be delivered in the winter of 2016. The Carnival Group now has nine new ships being built over the next three years, not far short of half the global total of 23.
But this has not deterred Norwegian Cruises Ltd, the market’s third force, from ordering a slightly larger version of the Breakaway-class ships at Meyer Werft in Germany with an option for a second vessel. Delivery is expected in October 2015. The new ship will have 200 berths more than the 4,000-passenger Breakaway class. At 163,000 tons, the latest ship is likely to cost marginally more than the US$834 million paid for Norwegian Breakaway which is 20,000 tons less. NCL CEO Kevin Sheehan says bookings for the Breakaway ships have been “very strong”.
Another active company is Royal Caribbean, the industry’s second force, which confirmed a long-standing rumour by ordering a third 5,400-berth Oasis-class ship between Christmas and New Year. The major surprise was that the order did not go to STX in Finland, builder of the first two ships, but to a sister STX shipyard at St Nazaire in France. The price for the 5,400-berth ship is said to be compelling when compared to the US$1.4 billion paid for each of the first two. Included in the consideration is a 28-year-old cruise ship switched to the yard from Pullmantur, the Royal Caribbean Spanish subsidiary.
The Finnish Government, which played a crucial part in securing the finance of the first Oasis ship, was only prepared to offer only €28 million of the €50 million the Turku shipyard wanted to complete the finance. This leaves the Finnish shipyard short of work, but is a major boost for the French facility, one-third state owned, which has not won a major cruise contract for two years.
But the news is not so positive at MSC Cruises, part of the huge Mediterranean Shipping Group, which has over 100 cargo vessels, built up by chairman Gianluigi Aponte. He says he will not order any more cruise ships until there are signs of stabilisation and improvement in the global economy. Affected by this will be two long-rumoured 4,200-berth vessels for delivery in 2014 and 2015. A new 2,000-berth prototype being considered will now go on the back burner. When the Preziosa is delivered in March this year the MSC fleet will consist of 13 ships.
Viking Ocean Cruises sprung a surprise at the end of last year by ordering another two 998-berth ships to go with the two booked earlier in 2012 with Fincantieri as the new company’s first two ocean cruise ships. There is also an option for two more, making six in all. But a note of caution here – none of the orders are yet firm as the initial ships, worth US$399 million each, are still subject to finance being completed. The affiliated Viking River Cruises is reported to have booked another 10 longships to go with the 12 ordered last year in Germany. Deliveries are over the period from 2012 to 2014. The additional ships are part of an existing US$400 million fleet expansion and refurbishment programme.
If European shipyards are being forced to give ground on price, they will view with some alarm possible future international competition from China as well as renewed activity from Mitsubishi in Japan. Unconfirmed reports from China indicate the nation is close to building its first major cruise ship as part of an infrastructure and tourism development at the west coast port of Xiamen, situated between Shanghai and Hong Kong.
The 2,000-berth ship will be built by Xiamen Shipbuilding at a reported price of US$490 million. Interestingly, this works out at US$196,000 a berth, a very similar price to the two latest Carnival ships. But the ship will take 1.5 years to design and a further 2.5 years to build. Though this contract is not confirmed, perhaps a more significant point is that there has been no denial.
In other ship order activity, it is reported that two more building slots have been booked by AIDA at the price-competitive Mitsubishi shipyard. As widely predicted, TUI Cruises took up an option for a second 2,500-passenger ship with STX in Finland, for delivery in 2015.
In all, just over 12,000 new berths in six ships worth a total of US$3.2 billion will enter service this year. This compares with almost 19,000 berths in seven ships worth close to a combined US$5 billion in 2012. It is a delivery figure unlikely to be topped in 2014 or 2015, the present limit of the rebuilding horizon