Its a Bad Time to Build ShipsUnless They Are Cruise Ships

The worlds top shipbuilders are reeling from years of heavy losses, but two European companies are making big money by cornering the lucrative cruise business.

Italys Fincantieri S.p.A and Germanys Meyer Werft GmbH are fully booked for the next four years, according to the companies and marine-data provider Clarksons. Orders for luxury cruise ships last year came in at $19.5 billion, more than double the value of such orders two years earlier.

They are the only ones that can do cruise ships and this keeps the industry sustainable, said Pierfrancesco Vago, chairman of Swiss-based MSC Cruises, the worlds fourth-largest operator by capacity. The yards are full, and the more ships we get, the bigger the demand from passengers. Its a good place to be in shipping.

Japan, Korea and China emerged as the primary shipbuilding nations starting in the 1970s, developing lower-cost yards that churned out tankers, bulk carriers and container vessels as globalization took hold. But the 2008 financial crisis dealt a serious blow to global trade, creating a glut of ships that forced many yards to close.

The survivors, mostly part of giant groups like Hyundai, Samsung and Daewoo, are coping with stagnant orders and razor-thin margins. Many have gone through painful restructuring programs or been bailed out by state creditors.

The industrys Europe-based cruising sector took advantage. Starting in 2014, Meyer Werft and Fincantieri acquired the European yards of faili....

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