Vessel Ordering Mania – Why?

By Drewry Container Team
Friday, September 13, 2013

The flood of interest in ordering new container vessels is motivated by other factors than supply and demand.


The recent surge in new vessel orders at a time of industry-wide overcapacity suggests that market fundamentals are no longer the main driver. Even when the most recently ordered ships are delivered in 2016, Europe and the U.S. are still likely to be climbing out of recession, which means that capacity in the east-west trades will continue to outstrip demand.

One of the factors behind the surge in orders is plummeting shipyard prices. Smaller carriers now see an opportunity to gain a competitive edge over the big three at last, and have not been slow to take advantage of it. For example, CSCL’s recent order for 5 x 18,400 teu ships, the first of which is due for delivery in 4Q 2014, each cost $136.6 million, approximately 26% less than Maersk’s 20 x 18,000 teu vessels, which were ordered in 2011, with the first being named only two weeks ago.

The comparison is not exact, as there is a difference in design specification. Maersk’s hull is twin screw, whereas CSCL’s has only one propeller, and Maersk’s vessels also have expensive on-deck cell guides to facilitate cargo operations and improve safety.

The big advantage of the 18,000 teu vessels is its fuel consumption. Compared to the 13,000 teu ships, they are claimed to burn around 35% less per container. As fuel accounts for well over half of all voyage costs, it is easy to see why new market entrants can be lured in, including UASC, which is reported to be discussing the price of five of the giants with an Asian shipyard.

UASC has also expressed interest in ordering four 14,000 teu vessels. In this respect OOCL ordered six 13,000 teu vessels in 2011, each costing $136 million, and NOL ordered 10 x 14,000 ships in 2011, costing $154m, including the upgrading of ten 8,400 teu vessels, whereas Seapan’s order for five 14,000 teu vessels in March 2013 are estimated to have cost just $108m each. The price of K Line’s five 14,000 ships, which were fixed shortly afterwards, is not known.
Getting credit for such orders is still not difficult, strangely, despite the ships not always being ordered to meet demand growth. However, the credit is selective for certain companies and ship types. Also, with many ocean carriers being state-supported in some way, banks appear to see their loans as being as good as sovereign debt, so not high risk, even though the current surplus of vessel capacity is already destroying profitability through swinging freight rate decreases.

This means that maintaining the cash flow required to service ship mortgages is increasingly difficult for carriers. Cash-rich non-owner operators, such as Seaspan, Costamare, Technomar, and Capital Ship Management, clearly see this problem worsening, which explains why they have returned to the market in a big way, providing another factor behind the surge (see table).

They have also been using their cash advantage to help owners acquire specialist tonnage, such as the wide-body vessels now favored in South American schedules.So, even where borrowing to fund newbuilds becomes too difficult, carriers will be able to circumvent the problem through leasing or chartering. The container industry, it seems, remains dominated by optimists.

According to Drewry, non-operating owners clearly expect that, as ocean carriers’ cash flow gets tighter, the charter market will increasingly be used for newer fuel-efficient vessels, including the wide-bodied 8,000/9,000 units currently gaining currency in South America. drewry.co.uk
 

(As published in the August 2013 edition of Maritime Reporter & Engineering News - www.marinelink.com)

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Shipbuilding

Newport News, ODU Partner for Bachelor's Degree Program

Huntington Ingalls Industries (HII) announced today that apprentices at Newport News Shipbuilding will now have the opportunity to earn a bachelor of science degree

Azeri Shipyard, BP Sign Vessel Construction Contract

Azeri state energy company SOCAR's shipyard and British oil major BP have signed a $378 million deal to design and build a subsea construction vessel for the Shah Deniz II gas project,

Fishing Vessels Fit with Wärtsilä’s NOx Reducer

Wärtsilä said its new NOx Reducer will be fitted to two new fishing vessels under construction at the Celiktrans yard in Turkey. The ships are owned by HB Grandi,

Finance

Euronav Posts 62% Core Profit Increase

Belgian crude oil shipping group Euronav on Wednesday unveiled a 62 percent rise in first-quarter core profit as daily rates for its fleet rebounded from last year.

CNR: Innovation Maintains US Naval Advantages

An interview with Rear Adm. Matt Klunder, U.S. Navy Chief of Naval Research What are your near term, mid-term and long term science and technology (S&T) objectives?

BIMCO: Positive Economic Developments Benefits Shipping

The recovery of the Eurozone continues as job creation returns across the region. The hiring of more staff indicates that manufacturing and service industries believes

Container Ships

Global Shipping Exposed to Cyber Threats

The next hacker playground: the open seas - and the oil tankers and container vessels that ship 90 percent of the goods moved around the planet. In this internet age,

Shippers Vapores, Hapag-Lloyd Merger

A significant majority of shareholders in Chilean shipper Compania SudAmericana de Vapores lent their support to the firm's merger with Germany's Hapag-Lloyd,

USCG to Medevac Injured Mariners Battling Rough Seas off Alsaka

The U.S. Coast Guard said it is preparing to medevac three injured mariners from a vessel currently more than 300 miles south of Kodiak Monday after a large wave

Vessels

ABS Approves Design for GTTNA’s LNG Bunker Barge

GTT North America (GTTNA), the Houston-based subsidiary of French engineering and technology company Gaztransport & Technigaz SA (GTT), received approval in principle from ABS for the design of a 2,

Navios Time Charters Two Product Tankers

Navios Maritime Acquisition Corporation, an owner and operator of tanker vessels, has announced  that the Nave Equinox and the Nave Pulsar have been chartered out

RINA Launches Notation for Eco-ships

International classification society RINA has launched a new voluntary notation to clearly identify new ship designs which meet eco-ship criteria. The Efficient

 
 
Maritime Contracts Maritime Standards Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Ship Repair Ship Simulators Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1124 sec (9 req/sec)