One year ago the containership orderbook stood at 4.9 million TEU. Today, it totals 3.9 million TEU. Deliveries of 1.3 million TEU of newbuilt vessels have diminished the orderbook in combination with few signings of new contracts. The total orderbook is down by 21 percent over the last year.
That development stands in sharp contrast, in particular, to the dry bulk orderbook, which remains very high, but also to the tanker orderbook, which is down by eight percent. In the following piece we will, however, focus primarily on the container trades.
Source: BIMCO, Clarksons
This low level of new orders has brought the orderbook-to-fleet ratio down to 28 percent, which was the average ratio level until the ordering boom took off towards the end of 2003. The orderbook-to-fleet ratio reached its peak in November 2007 at 61 percent. The fact that the ratio is now back to normal means that owners may again be considering ordering, and if so, we hope at a moderate pace. New orders must be carefully considered, as massive deliveries over the past few years have resulted in a negative supply-demand balance, with demand contracting as a result of the global financial crisis. The balance has been restored via the temporary idling of ships as well as slow-steaming, but tonnage remains abundant. BIMCO expects 1.6 million TEU could be contracted in 2011.
Where are the orders placed?
Korean shipyards are dominant in the market for more advanced ship. This includes containership, LNG, LPG and other high-tech ship types.
680,000TEU were ordered in 2010. 53 percent of these orders were placed at Korean shipyards, with Chinese shipyards receiving 35 percent. This was back to normal following an extraordinary 2009 with newbuilding contracts reaching only100,000TEU.
While Chinese shipyards are keen to increase their share of the containership market, they still have some way to go in comparison to their South Korean competitors. This can, to some extent, be illustrated by the average size of the vessels being ordered in the respective nations. While an average containership being delivered from a South Korean yards over the coming year will be above 7,300TEU, the average size of containerships being launched from Chinese yard will only be 4,100TEU.
What has been ordered?
In 2010, the large Post-Panamax vessel, sized between 7,500 and 10,000TEU, has been in great demand. In terms of TEU, more than half of all orders have been placed in this segment. Ships of this size are for example are employed on Asia-Europe trade lanes as well as extended trans-Pacific trade lanes connecting Europe with the Far East and on to the US West Coast and have been in quite low demand recently until 2010. Behind this surge are orderings traceable back to Evergreen's comeback to the contracting scene. During the third quarter of 2010, Evergreen contracted 20 vessels of 8,000TEU at US$103 million each at Samsung Heavy Industries. Likewise, Neptune Orient Line took 10 vessels of 8,400TEU at US$98 million each at Daewoo.
There is a clear upward shift in the sizes of new vessels ordered, a tendency that is identifiable across ship segments. But while new dry bulk or tanker orders are no longer record-breaking in size, rumours have it that container vessels with a carrying capacity of 18,000TEU could be ordered in 2011. A vessel of that size will be tailor-made for the Asia-Europe trade but add further to the supply side, cascading pressure on that trade – with a potential flow-over effect impacting many other trade routes.
Source: BIMCO, Clarksons
Where are newbuilding prices going?
Newbuilding prices are expected to soften, as yards are eager to sign new deals and owners hesitating due to market conditions and the size of the active fleet. Container freight rates have declined throughout the second half of 2010 and the sliding tendency has continued in January 2011. BIMCO expects average container freight rates in 2011 to be lower than average 2010 container freight rates as a result of negative supply-demand balance and hesitation when it comes to increase idling of vessels to restore rates.
Where will it go from here?
A normal flow of orders are expected to be placed in 2011, with owners anticipating that a sustainable comeback of consumer spending in the US and Europe will have a positive impact on container demand. New contracting for more than 1.6 million TEU would not be a surprising level for 2011. Preferably, many of these would be new designs of more energy efficient vessels as the high-speed era is over and slow-steaming is here to stay. BIMCO predicts that the signing of a series of 18,000TEU vessels will not be followed by a massive flood of ordering of such vessels. Expect an even more slow-going trend to materialise like the one that followed the launch of the first 10,000+ TEU vessel; neither the supply or demand side of container shipping wish to see a more volatile market scenario. Port infrastructure may also have to be developed further to handle a possibly wider containership than ever seen before. Last but not least, a price tag of US$180 million is also a natural barrier to many ship owners.