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Container shipping has never been as much under the spotlight as
this year. Freight had been keeping flat for several years. One
debating question could be whether there's a shortage in container
shipping capacity or it is more of a misplacement in supply and
demand, the answer of which might be a factor for the long-term
market outlook.
Looking back for a decade, momentum in placing orders seems are
in pace with global containerised trade dynamics, with some synergy
in ordering activity peaks among top operators. Though cancelling
is not an unusual practice with higher cancelling seemingly after
weaker trade years.
Looking ahead, trade forecasting vs. newbuilding twining with
decarbonisation initiative, emerging alternative fuels together may
shape the market beyond traditional supply and demand.
For shippers, shipyards and carriers, keeping up with the latest
Trade Forecast, particularly trade volume en route deployable
markets is critical when placing ship orders; for equipment
vendors, following the trend of fleet and builders or owners'
ordering preference is a way for business and trade development;
financial institutes may need such market due diligence to evaluate
the investment in commercial and sustainable sense.
Containership orders in the past decade
Containership ordering has experienced both highs and lows in
the past decade. Following the global financial crisis in
2008/2009, there were only 132 orders placed with an aggregated
capacity of 643K TEU in 2010. The number climbed in the following
years reaching a short-term peak in 2015, when 440 vessels were
ordered amount to 3.19 million TEU (though not all delivered). The
size segmentation also shows the attitude where larger vessels
(e.g. New and Post Panamax) were taking increasing part on
orderbook.
However, this momentum was suddenly lost in 2016 and this has
lasted until this year - when the activeness bounced back in the
middle of a freight boom.
If combined looking at trade in the past decade, movements in
Containerised trade volume, freight level and ordering activities
seem to be in tandem. - though ordering could have some time
lag.
Many of those placing orders are familiar to shippers, among top
operators, Evergreen and MSC operate 201 and 168 ships, taken up
13% and 18% respectively in terms of total TEU - though apparently
average size of the two operators varied. They are followed by
COSCO/OOCL, CMA CGM and Maersk. Some regional shipping lines. Wan
Hai and SITC, also are placing significant new orders, though seems
to be in smaller segments.
On a year basis, these major players shows some orchestration in
ordering activity - relatively silent both in terms of fleet
expansion and number of players after 2015, reflecting the more or
less pessimistic market condition during this period; but this year
2021, another ordering boom is happening.
Are placed orders delivered in full?
When you come to the question whether all these placed orders
actually went into service? Unfortunately not. While 2015 was a
busy year in terms of ship ordering, the cancelled number is also
significant - more than 50 ordered containerships never went into
creation - and the majority fall under the Post-Panamax
segment.
In terms of cancel timing, the heatmap shows that majority of
cancelled ships were to be delivered in 2018 but finally called
back in 2016. For shipbuilding yards, this could bring some
challenges too. Though mainland China shipyards have the largest
market share in the past decades, 15% - 20% of cancelling rate
seemed frequent.
As we could imagine that 'cancelling' would possibly be a message
of pessimistic outlook for container shipping demand - at least
expected lower growth rate. By comparing the cancelling rate
against Global seaborne containerised trade volume (TEU) - whether
ordering ships be a lag indicator or the other way. Though each may
hold opinion in it's own right. From the cancelling rate and world
container trade perspective, in quite a few cases, coincidently a
year with lower growth rate (or even negative) seemed to lead to a
higher possibility that orders in the following year to be
cancelled, and vice versa. What is yet to be seen is with a
negative growth in 2020 trade and intense ordering activities in
2021, whether the market will experience déjà vu of either 'too
much' or 'never enough'.
Time ahead - Trade Growth vs. Capacity on the way
It is important for either ship owners, or the shipyards, to
have an in-time market size outlook, when placing or preparing for
any further orders. This may concern the size of ship to be built,
the planned deployment trade lane, and the construction or
machinery specifications required for those markets and
geographies.
With the current orderbook, a heavy delivery schedule is expected
in the next three years - with a majority from VLCC (>10,000
TEU).
From the demand side, as latest GTAS Forecasting results show,
"Going forward, the containerized trade is projected to grow by
2.8% on average per year for 2021-35. Head haul is estimated to
have an impressive expansion of 3.7% in 2021 and a more moderate
1.5% growth in 2022. while backhaul trade projections for 2021
point to a minor increase of 0.6%. Moving forward, our forecasts
suggest that growth on the backhaul routes will amount to 2.4% per
year for 2021-35."
Pathway to Shipping Decarbonisation
However, apart from the conventional thinking model of 'supply
vs. demand', we now count in more factors when understanding the
market ahead. Regulatory and industry initiatives on
Decarbonisation, alternative fuel, renewable energy with emerging
technologies are also variables and driving forces.
Looking back at orders placed in the decade from a fuel angle.
LNG Fuel was insignificant in containership orders, merely emerging
around 2016, but in recent years alternative fuel containerships
are increasing in share. The structure of fuel type by status shows
a higher percentage of new building fleet than in service. In 2021
till now, at least 68 Alternative Fuel orders are placed (excluding
another 77 vessels fuel type to be confirmed).
Tracking those already in service LNG Fuelling containership, we
can find these are almost all deployed on Trans-pacific and Eurasia
trade routes - in 2020 containerised volume delivered among North
America, Europe and East Asia, stood at 63 million TEU; with
forecasted 81 million toward 2030 by which the decarbonisation
target was set to be achieved.
The deployment may also linked to ship size where we noticed
alternative fuels are in favour of larger containerships, possibly
expect better compliance under current sustainability agenda. Major
container shipping lines are leading the way with CMA CGM with 39%
of TEU capacity in all alternative fuel containerships
expected.
