Container Shipbuilding Boom Continues With Fresh Orders

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  • That’s almost quadruple what was due for delivery in 2025 at the beginning of this year.
  • They need to have the capacity that’s perfect for the peak but can be justifiably removed in the trough.
  • In the case of ships on order that will be owned by intermediaries and leased to liners, new and more fuel-efficient chartered tonnage can replace older chartered tonnage.

Nearly 30% of the water’s available container ship capacity is in the orderbook as reported by American Shipper.

Doing a lousy job maintaining 

For an alleged cartel accused by President Biden of ripping off Americans, the container shipping oligopoly is surely doing a lousy job of managing its future capacity.

The price of newbuild container ships keeps rising, yet liner operators and ship-owning companies keep placing more orders at Asian yards, guaranteeing an ever-larger deluge of new vessels in 2023-25.

Capacity on order has now reached 27.9% of on-the-water capacity, according to Alphaliner.

The ratio was a mere 8.2% at the cycle low in October 2020.

Total capacity on order now tops 7 million twenty-foot equivalent units.

As orders mount, tonnage for 2025 delivery is rising too.

‘You know it’s coming, but you can’t look away’

“Orders still keep flowing in as carriers reinvest their profits in modern fuel-efficient tonnage,” Alphaliner shipping analyst Stefan Verberckmoes told American Shipper. 

“The size of the orderbook is obviously a reason for concern.”

“You know it’s coming, but you can’t look away.”

According to Alan Murphy, CEO of Sea-Intelligence, “The fact that it takes two or more likely three years to build supply is something that’s always been a problem in this industry.”

[As a result] we’ve always had booms and busts.

You overshoot a bit and it balances out over time.

World’s largest ocean carrier is ordering the most ships

Critics of ocean carriers claim the freight market is no longer competitive enough.

MSC and Maersk cooperate on service capacity via the 2M Alliance.

MSC unseated Maersk as the world’s largest ocean carrier in January.

MSC’s orderbook capacity is now 33.4% of its on-the-water fleet.

“The orderbook has grown bigger than the combined capacity of the existing fleets of the world’s fourth, fifth and sixth largest carriers: Cosco Shipping, Hapag-Lloyd and Evergreen,” said Verberckmoes.

New container ships by size category

The popularity of different size categories has changed since container shipping’s latest building spree began in Q4 2020. 

“Two other ship types have become increasingly popular since the 13,000-TEU to 15,000-TEU ‘Neopanamaxes’ that can be deployed on all major trades, and compact 7,000-TEU-plus ships that are expected to become the successors of a generation of older classic ‘Panamax’ ships.”

Such orders could offer relief for U.S. importers and exporters.

Most of the new vessels don’t come onstream until the second half of 2023.

“That’s when we would start to see a material impact on the supply-demand balance.”

In search of ‘golden solution’ to capacity

One theory on why there have been so many container-vessel newbuild contracts: Shipping habitually overorders.

“One of the head-scratchers behind the continued ordering of container ships is the fact that prices are high and continue to move higher,” said Nolan.

Current new-build prices are 18% higher than normal levels and up 5% since the first of the year.

Not only do companies continue to order vessels into what is likely to be a period of persistent oversupply, but they are taking increased residual [resale] value risk in doing so.”

“What used to take two to three months can be done in a week.”

But the carriers need to thread the needle.

Charter expirations, scrapping, slow steaming

Beyond blank sailings, carriers can reduce fallout from the coming newbuild wave by letting charters expire and increasing the share of their fleets that they own versus lease. 

“There’s clearly an increased focus on owning [assets] right now,” said Murphy.

In the case of ships on order that will be owned by intermediaries and leased to liners, new and more fuel-efficient chartered tonnage can replace older chartered tonnage. 

“The newer vessels are much more efficient to run.”

According to Nolan, “One of the culprits is undoubtedly people ordering to have more efficient ships that operate on LNG or methanol or whatever is the latest flavour of the month with respect to fuel types.”

The slower the shipping speed, the more ships needed to provide the same service.

 

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Source: American Shipper

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