Container industry hopes that the current glut of vessel capacity might come into balance with demand by 2015 appear to be doomed. Most carriers stopped ordering new container ships in the middle of 2011 when growing overcapacity eroded freight rates and plunged their bottom lines into the red.
The global container fleet is expected to increase 9.8 percent in 2013, following a 7.2 percent increase in 2012, according to Alphaliner. The growth of new vessel capacity scheduled for delivery in 2014 will drop to 4.8 percent. Because carriers had almost no new ships due for delivery in 2015, analysts thought the industry might be able to work off the current overcapacity by 2015 when the amount of new vessel capacity scheduled for delivery was supposed to be down by almost half from 2014. But they changed their minds as more carriers started breaking the dry spell.
“The temptation to order new ships is getter very strong because of the pricing and the performance,” said Peter Shaerf, managing director of AMA Capital Partners.
The price of new ships has never been so attractive. A new container ship with a capacity of 13,000 20-foot-equivalent units costs about $110 million now, compared with $165 million at their peak, when they were hovering around $10,000 per slot. Even a 9,000-TEU ship costs in the low- to mid-$80 million range right now and has significantly lower fuel consumption than earlier versions.
Carriers hope to maintain market share and lower their operating costs by ordering the new more fuel-efficient ships.
“That’s why we are going to see some more orders in the next six months as more carriers come to realize the value of these new eco-ship designs,” Shaerf said. “The lemming effect comes into play. When one starts, they all do it.”
Evergreen Line was the first carrier to arrange for new ship orders this year. It will charter 10 new 13,800-TEU ships that were ordered by Enesol, another Taiwanese shipping line. Yang Ming has requested tenders for five ships of up 16,000 TEUs, with an option for another five, probably on a charter basis, probably for delivery after 2015. CCNI has ordered six new 9,000-TEU ships. And Seaspan, which has three 10,000-TEU ships due for delivery in 2014, will announce its plans for new ship orders soon.
These deliveries can be pushed back until 2015, when the current overcapacity has been absorbed. But unless global demand for ship space can catch up with this new spate of vessel capacity coming to market then, the new orders will prolong the present glut of capacity and the resulting up and down cycles of rates into 2015 and beyond.