Picking up boxes

The government and the shipyard marketing departments may be anxious to connect the future of Korean shipbuilding with high value ships, but the reality of today is that much of the shipyards? capacity is taken up by fairly standard vessels ? container ships among them. Without these standard ships the shipyards would have an excess capacity in terms of physical facilities and workforce that would make profits somewhat harder to come by.

Until recently, the shipyards had leveraged their expertise in building container ships to promote their capability of building bigger box vessels than had ever been built before ?vessels big enough to carry 10,000 20-foot boxes and more. But then came the September 11 terrorist attacks, which helped exaggerate a downturn in world trade. No longer, it seemed, could the container lines sell 7,000 box slots on the long-haul trades, let alone 10,000. Demand for the giant box ships waned as did the shipyards? interest in promoting their ability to build them.

However there have been some recent signs that box ship owners think the worst might be over. The re-awakening of activity in the newbuilding market (see table) may merely result from owners playing the currency exchange markets to their advantage ? the weakness of the US dollar, the international ship buying currency, presenting a value opportunity for owners accounting in strong currencies such as the Euro. Recent box ship purchases by MSC, NVA and Danaos could alternatively be taken as a sign that the downturn has bottomed out and things are set to get a whole lot better.

The ships purchased by the three European companies mentioned above are in the 4,000 to 5,000 TEU size range. This is hardly a 10,000 TEU ship, but yards are pulling their big box ship designs off the shelf and dusting them down in case owners believe in a sustained trade pick up and pounce while prices, when converted into their local accounting currency, remain relatively low.

“I think that the market has got out of the bottom but not reached the average condition,” says SC Choi, a manager in Samsung Heavy Industries ship sales department. “We are still interested in and developing 10,000TEU plus vessels, which are leading the next generation for this market.”