Maritime Market Updates

Container ship fleet too large to match supply demand balance

The aggregate cellular containership capacity reached 16.5 million Teu an increase of 6.6% by the end of last year (2012).  This growth was below the initial predication of 8.3%.  With the demand - supply imbalance for container ships, there was a surge in vessel scrapping and ship delivery deferrals with 135,000 Teu of ship orders being rolled from 2012 to 2013. 

However, it is of concern that during this year the new vessel deliveries are expected to increase from 1.33 million Teu last year to 1.67 million Teu.   “This is expected to bring the cellular fleet to 17.9 million Teu by the end of 2013, a net growth of 9% after deducting a prospective 200,000 Teu for scrapping and 100.000 Teu for deferrals/slippage” said Alphaliners.  According to records, last year was the second highest year for container ships to exit the market after the record year of 2009 when a ship capacity of 381,000 Teu was lost.  The average age of ships scrapped last year was at a historical low of 24 years with 37 vessels under 20 years old sold for scrap.  Of the cellular container shipboard capacity of 16.5 million Teu, Maersk holds the top market share with 15.5% which is equivalent to 2.58 million Teu followed by MSC which owns 13.1% of the world container liner fleet.

Large container vessels – Is it a worry for medium size ports

Market research indicates that there are 20 service strings that deploy vessels with the capacity of more than 10,000 Teu (ULCS) of which 16 are on the Asia-Europe trade with 02 loops on the Pacific and remaining 02 strings are employed on the Far East to Middle East route.  Of the 20 service strings the Port of Shanghai has attracted 18 services and the Shenzhen Ports have attracted 17 weekly calls of ships with 10,000 Teu or larger.

For a port to attract ships with a capacity of 10,000 Teu and above - besides the availability of the right physical infrastructure and level of efficiency, a critical determining factor would be the availability of sufficient cargo traffic.  Some of the ports that have still not attracted such vessels are Kaohsiung, Yokohama, and Genoa.

Whilst North American ports on the West Coast such as Los Angeles, Long Beach and Oakland have commenced to service vessels of more than 10,000 Teus, when enlarged Panama Canal locks are commissioned larger vessels are likely to call on the East Coast of US as well.  Mediterranean Shipping Company currently has the large number of ships of 10,000 Teus in its fleet of 53 and is followed by CMA-CGM 28 and with Maersk 18.  However, Maersk will move into second place once its 18,000 Teu vessels are phased in.

Shortage of Small and Medium size ships to affect transshipment ports

The shortage of small and medium size ships faced by container lines will hinder the development of transshipment ports in some parts of the world. Due to lack of finance, few ships of 3000 Teu or smaller have been built since 2009 and the activity in the mid ranges up to 7500 Teu has been fairly low which could result in supply deficit of such tonnage.  Shipyards have reduced container ship new building price to a record low with the 2750 Teu gearless vessel costing around US$ 30.5 million down from US$ 38 million in 2012 and US$ 53 million in 2007.  Despite reduced prices, reluctance on the part of financial institutions to lend, investment on new container ships will remain low.  The latest Clarkson data shows that in the year 2012 only US$ 5.3 billion was committed to new container ships which is as against almost US$ 27 billion in 2011 and more than US$ 55 billion in 2007.

Carrier fortunes change during 3Q 2012

Though fortunes of many carriers started to swell with successfully implemented rate increases in the period March to June 2012 it was short lived with rates failing to hold during July to September 2012.  The 04th quarter results for carriers reporting on the basis of calendar months are expected to deteriorate further.  Some of the cumulative negative results posted by Shipping Lines during the 03rd quarter are Coscon minus US$ 1011 million, APL minus US$ 321, Hanjin minus US$ 213, Zim minus US$ 189, CSAV minus US$ 200, Hapag Lloyd minus US$ 121.

Service suspension during slack season

As reported in DynaLiners, in anticipation of 10th February 2013 Chinese New Year of the Snake, the G6 Alliance (APL, Hapag Lloyd, Hyundai, MOL, NYK and OOCL) will between early January and second half of February skip a total of 07 sailings from the Far East to Europe.  Many other carriers are expected to follow service suspension during the aforesaid period.

Transpacific Operators new rate hike – will it stick?

Can the rate hike announced by Transpacific Line and operators from mid January this year, the second increase in as many months following the 15th December rise of US$ 400 per Feu for US West Coast destinations from Asia stick is the question that is being posed.  The Shipping Lines in the Transpacific Stabilization Agreement has recommended an increase in Dry cargo rates of US$ 600 per Feu to the West Coast of USA and an increase of US$ 800 per Feu to all other destinations.  TSA Spokesman Brian Conrad said “this is a make or break period for Transpacific carriers”.  He further said “shipping lines cannot afford another year in which expiring contracts and seasonally weak demand erode rate levels.  Lines see breaking this cycle as key to their viability of going forward”.

DP World will not exit Mundra

Dubai based DP World has dismissed press reports that it is expected to exit its Mundra International Container Terminal concession in India.  Mundra port handled 1.3 million Teu through two terminals in 2011 which is a 16.9% increase over 2010.  A spokesman for DP World said “Far from exiting Mundra our facility has in fact added 02 new services to Europe over the year and has grown its intermodal rail services into the North Central region further underlining its business potential and its commitment to the Indian market”.  With traffic congestion witnessed at India’s Jawaharlal Nehru Port,  container flow to Mundra has increased in the recent past.

Nhava Sheva’s fourth terminal to split

Consequent to the withdrawal of PSA and ABG from Nhava Sheva’s 04th Terminal Project, the Jawaharlal Nehru Port Trust (JNPT) considers splitting the concession into two separate facilities of 2.4 million Teu annual capacity and a quay length of 1000 metres each.  This strategy is expected to evince greater interest for this project.  The slow pace of increase in port capacity is of concern to transshipment ports in South Asia as the availability of transshipment traffic from India will decelerate.

The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK) and a University of Oxford Business Alumni.