Drewry: More ULCVs to Hurt Chances of Supply, Demand Balance

Following a recent spate of ultra large container vessel (ULCV) orders, the addition of any further boxship giants to the orderbook would damage carriers’ chance of reaching a supply and demand balance, shipping consultancy Drewry said.

The current containership orderbook is very top-heavy with ships of 18,000 TEU and above, with almost 50% of all ships scheduled to be delivered by the end of 2020. Based on the current demand outlook that is arguably already more than what is required in the short and medium term.

CMA CGM and Mediterranean Shipping Company (MSC) ordered ULCVs of over 18,000 TEU earlier this year. In its container market outlook webinar last month, Drewry informed that it was unlikely, but not impossible, that other carriers will follow CMA CGM and MSC’s ordering spree.

Since then, China’s Cosco Shipping Holdings announced plans to raise a huge USD 1.9 billion war chest through the issuance of new shares to part fund the purchase of 20 new ships. Under the plan, unveiled in late October 2017, the purchase would include 11 units of over 20,000 TEU and nine in the more modest 13,800-14,500 TEU range.

Furthermore, Korean line Hyundai Merchant Marine (HMM) has denied various reports that it is planning to splurge on as many as 14 vessels of up to 22,000 TEU.

Drewry said that adding the Cosco and possible HMM orders into the current orderbook mix “will only damage carriers’ chance of attaining supply and demand equilibrium.”

Due to the uneven distribution of 18,000 TEU ships by operators and alliance, CMA CGM’s order “made some sense because it helped them play catch up with its nearest rivals,” Drewry said, adding that the any future ULCV orders were expected to come from an operator within an alliance with the fewest of them.

The obvious candidate using those parameters was THE Alliance, comprising of Hapag-Lloyd, Yang Ming and the three Japanese lines (NYK, MOL, and K Line) that will next year merge container operations into the Ocean Network Express (ONE) brand. However, ULCV orders from this group are unlikely because of more limited financial resources, and because nothing in their public utterances suggested any of them would make the splash, Drewry said.

Outside of the Top 20, two carriers to watch out for as potential ULCV buyers because of past expansionist rhetoric are IRISL of Iran and newcomer SM Line from South Korea.

“Companies with the most logical reasons to order ULCVs probably won’t, whereas companies that already have plenty are the most interested in adding to their fleets. The supposed prestige of being the biggest carrier appears to be outweighing economic sense at the moment,” the shipping consultancy concluded.

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