Can the box ship newbuilding boom dodge post-Covid curveballs? 

Feeders continue apace  

Feeder vessel deliveries also continued apace in Q1 2022, with SITC Container Lines receiving their 2015-placed orders for two 2,400-TEU and an 1,800-TEU Bangkokmax vessels from Jiangsu New Yangzi Shipbuilding. Wan Hai Lines also contributed to the delivery profile with a pair of 2,000-TEU feeders from Guangzhou Wenchong Shipyard, while other Asian regional operators received smaller feeder newbuildings. 

Looking ahead, the outlook for container ship deliveries is clouded by the curveballs thrown at the shipbuilding industry in Q2. Operations in major Chinese shipyards located in Shanghai were forced to halt operations from mid-March until lockdown restrictions were eased a month later. Despite rolling back draconian lockdown measures, Shanghai yard operations remain stifled by shortages of raw materials and equipment due to disruptions crimping the supply chain.  

South Korean shipbuilders, on the other hand, are being confronted by severe labour shortages due to earlier years of layoffs during the shipbuilding slump, resulting in a lean workforce that is now unable to cope with the surge in shipbuilding demand. 

Anecdotal evidence suggests yards have already declared force majeure on pending deliveries owing to delivery postponements, although owners are unlikely to cancel orders given most of these newbuilds in the pipeline were ordered around two years ago, before newbuild prices skyrocketed.  

As at the end of May, Jiangnan shipyard has reportedly not begun constructing any of Sinokor’s four 2,400-TEU vessels ordered in 2019, despite deliveries being scheduled to take place from May 2022. The yard has also not begun working on MSC’s orders for 24,000-TEU vessels – two of which were scheduled to be delivered by the end of 2022. 

MSI now forecasts 1.1M TEU of newbuilds to hit the water this year, before picking up to an annual average of 2.4M TEU over 2023-25, when the surge of ordering over the past year comes to fruition. While there is now increased likelihood of orders slipping into 2025 (and we have increased our forecast for orderbook slippage in both 2023 and 2024 and have made a modest upward revision to our expectations for orderbook cancellation), it is now unavoidable that container ship delivery volumes will remain far above recent average levels for three straight years. 

With the increased contracting activity in recent months, the prevalence of alternative bunker fuels has also become a prominent feature of the orderbook. With 55 LNG or methanol dual-fuelled vessels ordered between April and early June (compared with 49 in Q1), Q2 2022 now holds the record for the quarter with the highest number of ships powered by alternative fuels ordered.  

This is equivalent to 67% of tonnage contracted so far in Q2 2022, compared with 54% in Q1 2022 and 47% in Q4 2020. In TEU terms, LNG has emerged as the alternative fuel of choice for vessels designed to run on a dual-fuel system. 87% of dual-fuel vessels in the current orderbook (up till early June) will run on LNG, while methanol dual-fuel vessels made up the remainder. 

Not all carriers are approaching this issue in the same way, however. There are clear indications Asia-headquartered liners remain reluctant to take the leap into alternative propulsion. ONE and PIL are among the few in the region who have made forays into the alternative fuel markets, while their counterparts have stuck to their conservative approach of bunkering with conventional fuels. For now, Europe-headquartered carriers remain in the driving seat. 

Riviera Maritime Media will provide free technical and operational webinars in 2022. Sign up to attend on our events page