Ship owners and operators are betting their future profitability on super-sized container ships and must delay deliveries of additional vessels to avoid overcapacity and plunging rates, a European shipping bank warns in a research report.
Super-post-Panamax container ships -- vessels with capacities of at least 8,000 20-foot equivalent units - "are becoming the backbone of the operating fleet of the top tier global liners," said the report by DVB Bank, based in Rotterdam and listed on the Frankfurt Stock Exchange.
The world's top 15 global container fleet operators hold a 70 percent share of the 13.7 million-TEU capacity of the active liner fleet.
Carriers and vessel charterers are concentrating their investments on large ships that offer economies of scale and are using the big ships to displace other vessels, including post-Panamax ships in the 3,000-8,000-TEU range that are being bumped to other routes.
Balancing supply and demand of super-post-Panamax ships during the next two to three years will require moderate trade growth, capture of additional market share from smaller vessels, continued slow steaming to absorb capacity and "most importantly," further delays in deliveries of new ships, the report said.
If owners and operators abandon the "pro-active supply management" that restricted capacity and enabled them to return to profitability last year, the wave of large ships scheduled for delivery in 2011 and 2012 will cause Far East-Europe rates to crash. "This will in turn weigh on the entire container shipping market," the report said.
Because of their size, super-post-Panamax vessels can be deployed on only a limited number of high-volume routes, led by Asia-Europe, where 8,000-TEU ships already have displaced most smaller vessels since the first 8,000-TEU ships entered service in 2003.
Super-post-Panamax ships now account for 62 percent of nominal Asia-Europe capacity and 25 percent of capacity between Asia and the U.S. West Coast. Since the first super-post-Panamaxes entered service in 2003, average vessel size on Asia-Europe routes has risen to 7,594 TEUs from 4,816 TEUs.
By last November, 289 super-post-Panamaxes with 2.75 million TEUs of nominal capacity were in regular liner service. Of these, 197 ships were on Asia-Europe routes and 31 on Europe-Asia-West Coast pendulum services. Most of the remaining 61 were on trans-Pacific routes, with a handful on Suez routes between Asia and the U.S. East Coast.
An additional 236 super-post-Panamax vessels totaling 2.6 million TEUs are on order, the DVB report said. That total amounts to 95 percent of the existing super-post-Panamax fleet and two-thirds of the total container ship order book.
Orders for 8,000-TEU-plus ships peaked in 2007 at 181 vessels of 2 million TEUs before drying up when the market crashed during the 2008-2009 recession. Now some owners are again placing super-post-Panamax orders. Most are for vessels under 10,000 TEUs, although Maersk Line was reported recently to be in advanced discussion with Korea's Daewoo Shipbuilding to order 10 ships of 18,000-TEU capacity.
Taiwan-based Evergreen, which sat out the ordering spree of a few years ago, has ordered 20 ships of 8,800-TEU capacity for a reported $103 million each and plans to order 10 more. Neptune Orient Lines has ordered 10 8,400-TEU ships for APL for a reported $98 million each.
Average per-slot costs of 8,000-10,000-TEU ships have dropped to about $11,500 from the $16,900 that prevailed in 2008 when the last orders were placed for similar-sized ships, the DVB report said.
-- Contact Joseph Bonney at email@example.com.