Containership orderbook on the up

The cellular containership orderbook stood at 3.79 Mteu or, 26.6% of the fleet, as at 1 November, based on Alphaliner figures, up from 3.73 Mteu a month earlier, following a slowing down in the pace of new vessel deliveries and a slew of new contracts placed in October.

October deliveries reached 92,000 teu, the lowest monthly figure since February. Even lower delivery figures are expected throughout the fourth quarter, coinciding with the slower winter period. Meanwhile, new contracts reported in October reached a total of 131,000 teu. Further containership orders are expected to be placed before the end of the year.

There is significant latent demand for new ships, as owners rush to place new vessel orders after having shied away from the yards for almost two years. Since the orderbook peaked at 6.89 Mteu in August 2008, it has been in continuous decline due to a combination of poor market sentiment and a lack of access to funding. This situation only started to change in June, as the recovery in the freight markets prompted carriers and some non-operating owners to return to the yards.

Although the orderbook will not return to the heady levels of 2007 when it reached a peak of 64% of the fleet, its size is expected to remain in the 25-30% range next year, if present interest levels are maintained. A total of 86 ships for 530,000 teu have been ordered between January and October, with most of the contracting activity recorded since June. An additional 250,000 teu could be contracted during the last two months of the year or early next year, since a few carriers already declared their intentions to sign up for new tonnage.

Amongst the carriers lining up to place new orders are Shipping Corp. of India, China Shipping and Hanjin, with confirmation of their orders expected shortly. These carriers will join Evergreen, NOL and Hamburg Süd who have taken advantage of favourable newbuilding prices and delivery dates to place orders for a total of 48 new vessels. Evergreen is due to add to their 20 ship order as part of their plan to order up to 100 new vessels. Several smaller Asian carriers have also entered the market this year for ships mostly targeted at the intra-Asia markets.

Apart from the carriers, some non-operating owners have also ordered ships or are planning to do so. While traditional German KG owners have not yet re-appeared on the ordering scene, Greek owners have been particularly active in placing new orders. Although bank funding remains difficult, as evidenced by two recent withdrawals to acquire new ships by Global Ship Lease and Rickmers Maritime Trust, there still remain some cash-rich owners with deep enough pockets, waiting to pounce on attractive opportunities.

With current newbuilding prices about 20-30% off the 2007-peak, many Greek owners with limited or no exposure to ships ordered during the market peak, will be in a strong position to increase their presence in the next two years. A two-tier market is developing, in which owners without significant obligations on high-priced ships placed before September 2008 are in a much stronger position than those who placed expensive orders during peak times.

The recovery in newbuilding activity will ensure that the increase in the annual supply of cellular capacity will remain at about 9% for the next two years. The increase in nominal capacity is expected to reach 9.6% this year and hit 8.9% in 2011. With open slots still due to be filled, the level of deliveries in 2012 is expected to increase slightly from the current 8.3% that is currently due.