Monday, January 31, 2011

Normalizing Container Shippers

Last year brought plenty of newbuild orders for big hulls from big shippers.  Those newbuilds are now tapering off, with orders expected to return to normal levels.  This is a sign of sanity for the shipping industry given that many of its players are loaded to the gills with debt.  Newbuilds orders need to stay at levels that can replace obsolete ships. 

One shipbuilding sector that will probably not be able to maintain even a status quo level of production is the defense sector.  Northrop Grumman's shipbuilding spinoff is encountering rough waters before it even leaves its corporate drydock.  Credit rating agencies are giving NG Shipbuilding a massive thumbs down.  This is an appropriate signal anticipating a peak in defense spending for capital ships. 

Full disclosure:  No position in NOC.