UBS Investment Research Says Seabourn Is Talking to Shipyards


Photo by Susan J. Young
Photo by Susan J. Young

In UBS Investment Research’s latest “Cruise Capacity Monitor,” cruise industry financial analyst Robin Farley says “we believe CCL [Carnival Corp.] may be in discussions with shipbuilders for another Seabourn order which could be announced before the end of 2013, perhaps in the range of a 450-600 berth vessel.”

She said her firm believes Carnival “is done ordering for 2016” and that any new Seabourn order would come for 2017 delivery.

Elsewhere in the industry, she notes that Royal Caribbean Cruises Inc., currently has an option for a fourth Oasis-class order for mid-2018 delivery; that option expires in December. Farley also said, “Viking Ocean Cruises has been in discussions for additional orders which we may see later this year.”

Capacity-wise, Norwegian Cruise Line Holdings on July 16 exercised an option for a second Breakaway-Plus order, while Prestige Cruise Holdings announced in early July that it had ordered a new 738-berth luxury ship for its Regent Seven Seas brand.

Despite these orders, Farley said her firm expects only “3-4% compound annual capacity growth in North America for 2012-2016, which is below the trailing 10 year average of just under 6% (2003 to 2012).” She also said 2013 and 2014 will almost certainly be below average growth years.

“While balance sheets are improving in the industry, investors remain focused on disciplined capital spend dictated by a balanced supply/demand environment in the cruise industry,” Farley told investors in a note. She said UBS anticipates continued conservatism in ship ordering.

Farley acknowledged that shipyards have been starved for business and have been more willing to negotiate on price, but “we don’t think pricing will go much lower than recent levels on average.”

Over the last two years, new-build prices have come down to the lowest dollar cost per berth since 2006, said Farley, and “our takeaway from this is that if companies are not filling up the order book in this low-price environment with the shipyards in serious need of business, capacity growth will continue to be modest in the coming years.”