As new ship orders appear to be slowing down following last year's rebound and deliveries might have passed their peak, the challenge for shipbuilders in filling the expanded global capacity will begin to loom larger.

The urgency is still a little way off as the order backlog remains enormous by any historic standard, at over 400m dwt.

But such has been the expansion in capacity and the employment issues that go with it, especially in China, that the pressures to fill that capacity could have a significant effect on owners' decisions.

It is clear that China's market share is continuing to rise, mainly at the expense of Japan, but it is also increasingly battling with South Korea for more sophisticated and high value orders.

Speaking last weekend at a conference in China, Li Dong, vice-director of the equipment industry department of China's Ministry of Industry and Information Technology, was reported as commenting that having become the world's leading shipbuilder, China aims to become the leading builder of the most advanced ships by 2015, in accordance with the government's current five-year plan.

He accepted that China still lags in terms of innovation and technology but it is making big strides in improving quality to follow its rapid rise in quantity. Chinese yards have already started to win orders for large hi-tech ships that until recently were considered the preserve of more advanced yards in Japan and South Korea.

Clarksons reported that new orders placed so far this year are running some 38% down on the same period in 2010 in compensated gross tonnage. This is partly due to the perceived risk of overcapacity and also due to greater caution by finance providers.

Some $24.7bn of new orders was contracted in the first three months of this year, a trend which if continued would mean about $100m being placed in the full year and more or less the same as in 2010. However, this must be considered in the context of lower newbuilding prices, which suggests that the volume of contracting could be even higher than last year.

Clarksons also pointed out that newbuilding output has started to decline from its peak in the third quarter of 2010, at 13.8m cgt with China producing some 5.2m cgt in that three-month period. In the first quarter of this year output eased to 10.3m cgt.

Clarksons commented that these trends mean that shipyard capacity is a big issue for owners and shipbuilders as yards try to attract new orders while owners face the dilemma of whether to succumb to the temptation of lower newbuilding prices being offered.

But the growing overcapacity in global shipbuilding is likely to lead to further price falls. Newbuilding prices increased slightly, having bottomed out in early 2010, and then appeared to stabilise, but recently there are signs that prices are easing again, although so far not dramatically.