In his conference presentation on trends in shipbuilding, analyst Tony Peisley quoted Carnival Corp. Chairman Micky Arison's cryptic comment in a recent quarterly analyst call: "As capital expenditure on newbuildings goes down," Arison noted, "some of those dollars will be shifted instead to upgrading the 1990s ships."
Peisley said that such large-scale upgrading "could provide a much-needed influx of work and revenue for shipbuilders.
These are not simple refurbishments, but as in the example Peisley cites of the Costa Victoria, involve the addition of balconies to a large number of cabins. This is in response to consumer demand, and is a justifiable expenditure given the higher tariffs cruise passengers are willing to pay for balconies.
Other areas of opportunity for shipyards are the looming SOLAS regulation deadlines, which will create rebuild scenarios costing nearly half the price of a newbuild; and rebranding, where ships are transferred between fleets (Carnival's Tropicale and Holland America's Westerdam going to Costa, for example), which almost always involve major refits, according to Peisley.
While the strong euro-to-dollar exchange rate continues, the rate of new ship orders will remain slow. However, Peisley pointed out that as of the first quarter of 2004, there were 19 ships on order at European yards, valued at a total of $8.3 billion.
"So exchange rate or not - building is still going on and will continue," Peisley concluded.