Why Cosco is scrambling to revamp shipbuilding order book

Delivery of 36 vessels are schedules early 2014.

According to DBS, Cosco managed to shorten its delivery lead time for dry bulk vessels to 10 months and reduce offshore project losses, which led to margin improvement in FY12.

However, excess capacity in both the shipping and shipbuilding sectors, as well as stiff competition in offshore space pose great challenges to Cosco.

As >80% of its existing US$6.1bn orderbook comes from offshore projects, it is under pressure to replenish its shipbuilding order book as existing orders for 36 vessels will be delivered by early 2014.

Here's more from DBS:

Separately, Cosco won a contract to construct 1 unit Semi Submersible Tender Assist Drilling Rig worth over US$200m from Energy Drilling, with an option for an additional 1 unit.

This brings YTD wins to US$254m or 13% of order win assumption. Cosco has completed one similar project previously though it was not identical. Repeat orders especially the cylindrical rigs are positive as these orders will likely fetch better margins due to familiarity.

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