Box ship orders swell as ‘massive scrappage’ looms

Orders in the the container ship sector have swelled, with 294 ships of 2.7M TEU contracted through January to August this year, according to the latest figures from Clarksons Research. 

The shipbroker pointed out in its September Fleet and Regulatory Updates: World Shipyard Monitor, the volume of box ship tonnage is double the 10-year average in capacity terms. “Ordering,” it said, “continues to be led by larger ships, though feeder ordering is up y-o-y, [with] substantial further orders reported since the start of September.

Echoing Clarksons’ sentiment, BRL Weekly Newbuilding Contracts highlighted the expanding feeder fleet, offering “no apology” for its focus on what it describes as the week’s “big mover”. 

BRL said “There simply is no slackening in orders for this sector. The one defining factor is that nearly all the contracts are signed for feeder vessels. Several of these are exercised options where, in a bullish climate, most are exercised within two to four weeks of placing the firm orders, otherwise there is a risk of losing reserved berth space,” adds the consultancy.

This ordering frenzy, explained BRL, is at least in part being driven by the notion among owners that a “massive scrapping programme is on the cards” for currently trading vessels which are “now not able to compete with new ships.”

BRL’s analysis said that this scrapping may yet be a couple of years out in the absence of a global trading slump – which cannot be ruled out, given current market turmoil and political upheaval – “but it will inevitably happen”. And it is the inevitability of a looming scrapping surge, the consultancy said, that is driving the current box ship newbuilding trend and giving a business boost to small and medium shipyards.

Evidencing the trend, BRL noted that although still negotiating, South Korea’s HMM is looking to place an order with a Chinese yard for 10 or more feeder ships. It said that the vessels involved are for two sizes of 1,900 TEU and 3,000 TEU and that HMM is said to be ready to order in China after negotiating with South Korean yards.

“HMM is adopting a new policy of building up its feeder fleet,” said BRL. “The ambition for feeders lets in China for consideration. Currently there is said to be a 20% gap in lower pricing. Nothing is finalised at this stage, but [an order] would come as no surprise in a cut-throat market.”