Ultra large container ship (ULCS) orders have recently increased but the coronavirus will lead to slippage and suspended orders
After a lull in newbuilding orders, the giant box ships are on the move again. This has given a major boost to shipbuilders who can handle the maximum sizes.
In the current situation it is difficult to see where these behemoths will gain full-load employment, especially as the latest orders are for vessels with record capacity. Owners are now inching closer to 26,000 TEU, the maximum current shipyard capacity can handle. Is this a miscalculated gamble or sheer madness where the giants seek to destroy smaller owners? Eight vessels in excess of 23,700 TEU are currently on the orderbook, reflecting a race to be the biggest and the best.
There has been little sign of scrapping but, faced with a global recession due to the coronavirus, owners facing a delay on deliveries from China and South Korea will privately accept delays of up to three months as welcome.
Recently the tables were turned on the lucrative Asia-Europe trade which is where the major ULCS employment is centred. There was a slump in rates for westbound trade, but ships were leaving Europe on the return leg with full loads. However, the coronavirus will have an adverse effect on business and finance. Casualties could be inevitable across the box industry. Shippers will turn to smaller vessels for cargo and slot requirements. This was evident in recent weeks as conventional reefers enjoyed the best spell of business for years.
Faced with rising slot prices on big container ships, owners have favoured shipments in palletised form on conventional reefers. For ULCS, more trade is being captured on routes outside of Europe and Asia. More prominence is noted in new services to North America where some ports have been deepened and new berths provided to accommodate ULCS, although they are not necessarily carrying full loads. More trade is also flowing to Middle East ports. However, this was dented by the coronavirus epidemic spreading to Europe.
There is currently an order backlog of 48 ULCS which will eventually commission 1,099,676 TEU capacity into the world fleet up to 2024. Of these, 26 are due for delivery this year but there will now be slippage of up to three months due to the coronavirus crisis. Only two deliveries are currently scheduled for commissioning in 2021 reflecting the 12-18-month lull in ordering when fears were expressed of too many ships being ordered. A further 15 ships are due in 2022 reflecting order uptake after the lull in newbuilding business.
The 48 ships on order are shared by six major owners (see table) while the Shoei Kisen ships from Imabari will be chartered out. Japan has lost out heavily to China and South Korea and is unlikely to recover lost ground having complained of unfair competitive prices from rivals. Next in the frame is Hapag-Lloyd who are looking to order up to six circa 23,000-TEU units. Promising negotiations with China and South Korea have now been suspended until the coronavirus crisis is over.