Since the second half of the year, many factors were conducive to the development of the new container ship market, which included not only the developing trend of the concentrated transportation, but also the decline of the idle container capacity and the total number of container ships under construction. In terms of concentrated transportation, according to Shanghai Shipping Exchange, China export container integrated freight index was 1107.28 points on November 13th, which increased 31.53% from 841.83 points on June 24th. In terms of idle capacity, according to Alphaliner, the global idle container capacity in late October was about 380,000 TEU, which decreased about 1.94 million TEU, compared with the statistics in late June. Meanwhile, according to Alphaliner, the total number of container ships under construction in July fell to 2.21 million TEU, accounting for only 9.4% of global container capacity, which was the first time it fell below 10% in two decades.
Driven by multiple favorable factors, the newly built container ship market was no longer as depressed as it was in the first half of the year, because of the emergence of the several orders, including 7 container ships with the capacity of 23,000 TEU of OOCL (International). In this regard, based on the current market situation, some professionals commented that it would be a better time to order and construct container ships, taking into account the interest rate, exchange rate and ship cost, etc.
New ship orders appeared frequently
In the first half of the year, affected by the COVID - 19 outbreak, 19 ships with the capacity of 180,000 TEU were transacted in the global newly built container ship market, which was a significant decline(according to the Clarkson data), compared with the 69 ships with the capacity of 280,000 TEU in the same period of 2019. And in June, the zero transactions occurred again, and the depression of the market was comparable to that seen after the outbreak of the international financial crisis in 2008.
Since the second half of the year, the newly built container ship market has recovered and the transaction has been increasing. According to Clarkson's incomplete statistics, from July to early November, 37 ships with the capacity of 330,000 TEU were transacted all over the world. The trading volume in less than four and a half months already far exceeded the total amount of the trading volume in first half of the year. At the same time, several of the recent deals are spot-on, reflecting liner companies' re-entry into the newly built container ship market.
At the end of October, Orient Overseas International ordered seven ships with the capacity of 23,000 TEU at two Chinese shipyards at a cost of about 158 million dollars per ship. Previously in March, the company ordered five ships with 23,000 TEU at a price of about $157 million per ship.
It was worth noting that, in early November, Lepta Shipping in Japan ordered (5 + 5) ships with the capacity of 3,500 TEU in Yangzijiang Shipbuilding Co., Ltd, which were equipped with 700 reefer sockets, and a single new ship costed about 39.6 million dollars (Details are shown in table). It is understood that Lepta Shipping in Japan is backed by Maersk's 5-year charter agreement to order this batch of new ships.
In this regard, industry insiders said that this indicated that Maersk's attitude toward new container ships was changing rapidly. In late August, Maersk's chief executive Soren Skou said: “Maersk has no plans to order any new ships given the ‘significant uncertainty’ and ‘lack of visibility in relation to global demand’”.
In early November, Britain's Zodiac Maritime ordered six ships with the capacity of 15,000 TEU at Daewoo Shipbuilding in South Korea at a cost of 108 million dollars per ship (Details are shown in table). People familiar with the matter said that the order may receive a long-term charter from Hapag-Lloyd.
The new shipbuilding broker said, the booming newbuilding container ships market was manifested in the request for quotations and the increase in the number of projects under negotiation. Not long ago, foreign media also reported that the liner companies, including Mediterranean Shipping, Hapag-Lloyd and Evergreen Marine Corp, were all negotiating with Asian shipyards for new orders.
New ships are cheap to build
The recent boom in the market for new container ships has also been driven by the low cost of building new ships. A newbuilding broker said: “The ship with the capacity of 15,000 TEU ordered by Britain's Zodiac Maritime in South Korea costs only 108 million dollar, which is in line with the Quotation from some Chinese shipyards.” In early November, Clarkson's global newbuilding container ship price index was 75.77 points, dropping 4.71% year-on-year, at a low level in 20 years (Details are shown in table).
A shipyard business personnel said: “Taking into account the withdrawal of shipbuilding capacity in recent years and the improvement of shipbuilding industry, the current container shipbuilding prices might become a low point over a longer period of time.”
Of course, the shipowners also considered the investment cost of new container ships, including the cost of construction, the funds, the exchange rates and other factors. For this, commercial personnel said: “At present, it happens to be the low point of global interest rates, and the exchange rate of US dollar against major Asian shipbuilding countries continued to fall.”
Thanks to the global quantitative easing and other factors, the current global borrowing costs almost had been in its the lowest point for a while. On November 12th, the 3-month USD London Interbank Offered rate was 0.22%, dropping about 87% year-over-year. “The low cost of funds is motivating shipowners to invest in new ships”, the businessman said.
The newly built container ships were generally settled an account in U.S. dollars, and the exchange rate trend of the settlement currency would also affect the shipowner's decisions on investment. For example, on November 12th, USD/CNY Bank of China Conversion Price was 6.6236, dropping 5.19% year-on-year.
Nevertheless, for the new container ship, the industry still has a different voice. In mid-October, a panel of experts said at the “New York Maritime Forum": According to the regulations of carbon reduction made by IMO, new requirements for ships are put forward, and it makes more sense for liner companies to charter existing ships than to order new ones.” In other words, the panel expressed concern about the uncertainty of the future trend of container ship technology.