The containership
       market in 2007

2007 was a year of transition. After some
hesitation at the beginning of the...
Controlling terminals helps opera-
Given this fact, it is no surprise that          knots. In the case of an 8,500 teu                 tity of cargo at the s...
                                            Deliveries                  ...

Demolition prospects
                    A total of 23 cellular ships equal to 26,134 teu and 427,000 dwt        By contra...
Panama-based company, Altiplanic       London-based Lonrho, a conglome-        extraordinary shareholders mee-
Shipping In...
MAIN PLAYERS IN THE MARKET IN 2007                                 Notable sale:
                  Buyers                 ...
This category of containership,          compared to 2006, the tone has           amusing to note that when it comes
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Containership Market In 2007


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Containership Market In 2007

  1. 1. The containership market in 2007 “ 2007 was a year of transition. After some hesitation at the beginning of the year, demand took off again rapidly. All the newbuildings coming onstream were filled, and some shortages even appeared in the networks of leading car- riers such as MSC and CMA CGM. These companies filled the gaps by chartering surplus tonnage from other lines, inclu- ding Maersk Line. The largest carriers continue to benefit from economies of scale. During 2008, the companies will continue to receive large ships of 8,000 teu - 1 1,000 teu, and after that, the new Super Panamax gene- ration of ships of 12,500 teu. So, will the floating hardware prove deci- sive? It will help, especially in a high fuel cost era, as the impact of the fuel bill can be spread over a larger number of containers. However, many carriers are set to compete with ships that are based on the same, or similar molds as their Then came the subprime mortgage cri- rivals. Only Maersk Line has ships genui- sis, which first dampened US imports nely larger than the others, and in 2007 during the second half of the year, and it put into place the first China-Europe subsequently created ripples throughout 15,000 teu loop. the global economy which have not yet been fully appreciated. MARKETING INNOVATIONS As a result, a darker picture started to With this in mind, competition will move emerge in late 2007-early 2008. A wob- to other areas and, in particular, to mar- bling world economy threatened to lead keting innovations and the management to a softening in transportation demand. of complex logistics operations. It will be As a result, the competition to fill larger especially true this year on the Europe- and larger newbuildings intensified. related trades, with the disappearance of the European conferences in October With expectations that world trade would 2008. continue to grow at a fast pace, several carriers launched huge construction pro- With the abolition of the conferences, the grams in 2007, focusing on ships of very notion of “outsiders” becomes obso- 12,500 teu, mostly aimed at the Far East- lete. In the post-October 2008 world, the Europe trade. conference carriers will all become “outsi- The containership market in 2007 - BRS 83
  2. 2. Controlling terminals helps opera- tors avoid the disruptions in sche- dules caused by the “first come, first served” principle practiced in some common carrier terminals or - as the case may be - fixed berthing windows, with other carriers see- king the same window. Controlling terminals allows operators to orga- nise an ideal match between ships, enabling them to swap boxes bet- ween main lines or between main lines and relay/feeder services. THE IMPACT OF THE FEEBLE DOLLAR CMA CGM Fidelio The never-ending fall of the dollar Container ship, 9,415 teu, delivered in May 2006 by Hyundai to CMA CGM, continued to have a positive impact operated on the FAL 2 service between North Europe and Asia on ship occupancy ratios. The dollar reached a low of $1.45 per euro at the end of 2007. As observed during 2006, the dollar/euro parity ders” to each other and will have to ◆ The conversion of box rates from has continued to assist in keeping compete without cartel arrange- dollars to euros in the Europe-Ocea- ships close to full in 2007, thanks to ments, even within alliances (allian- nia sector. This is aimed at counte- cargo flowing on the longer Far ces are mere technical arrangements ring the effects of the falling dollar, East-Europe route rather than the aimed at multiplying sailings and and also at eliminating the CAF shorter Far East-US route. port coverage, not at setting rates). which, like the BAF, adds to the basic box rate to the despair of ship- A typical Far East-Europe loop Maersk Line is anticipating the requires on average eight ships, ins- pers. (In terms of operating costs, disappearance of the Europe-rela- tead of roughly six ships per loop revenues in a falling dollar do not ted conferences with an interesting for the Far East-USWC / Far East- compensate for operating expenses set of initiatives that will probably USEC trade (figure weighted for the in euro. In the case of European- set the tone for the years to come. controlled tonnage, quoting rates in number of loops). This helped main- These initiatives are aimed at euro makes sense since most fixed tain demand for global capacity at a attracting both new customers, and running costs are in euro). good level up until November 2007. customers lost due to difficulties The occupancy ratio is alas accep- integrating the P&O Nedlloyd busi- Although it often seems to take the table in one direction only, and ness with that of Maersk Line. lead, Maersk is of course not the ships have to re-position to Asia only one to set up new schemes. For with huge quantities of empty Three such initiatives have been example, APL Logistics has laun- boxes, together with loaded boxes unveiled by Maersk Line in the early ched “Guaranteed Delivery Servi- carried at depressed rates. weeks of 2008: ces” from Asia to the USA. The month of November marks the ◆ The launch of a transparent Controlling terminals is another key end of the transpacific peak season, online rating and booking system to success. It is with good reason once the US has stocked toys, clo- aimed at simplifying shipments for that a number of carriers set up ter- thes, kitchenware, furniture etc in small businesses, while offering all- minal operating subsidiaries a while anticipation of the winter period in rates on several port-port links. ago, and that others try their best and its festivities. The gap between ◆ A new way to handle the BAF, to either enter or develop their supply and demand at this period is with an online calculator allowing existing activities in this sector. This thus cyclical and usually does not shippers to have an accurate idea of trend was reinforced in 2007, and cause significant concern. Except the impact of increasingly expen- further initiatives in this direction for this year: the peak season has sive fuel oil on their shipments. will be taken in the years to come. not been as sustained as expected 84 BRS - Shipping and Shipbuilding Markets in 2007
  3. 3. EVOLUTION OF CHARTER RATES - 2002-2007 (12 months t/c rates) US $/day source: BRS-Alphaliner 50,000 4,000 teu 45,000 2,500 teu and the winter decline in US 1,700 teu demand has been steeper than 40,000 1,000 teu 500 teu expected in the wake of the sub- 35,000 prime mortgage crisis. 30,000 How deep the US crisis could go, 25,000 and to what extent could it slow the world economy, is a crucial question 20,000 with no ready answer. The omens 15,000 are not good. Credit conditions 10,000 have been tightened. Pessimism has replaced optimism. Most deve- 5,000 loped countries have revised down- 0 wards their GDP forecasts and the 01-07 07-02 01-02 01-06 07-07 07-04 07-05 01-05 07-03 01-03 01-04 01-08 07-06 stock markets are feeling the pinch. Even if China and India continue to produce inexpensive goods for the Western world, the perception that there are difficult times ahead With bunkers now hovering around Speed is costly. Roughly, a 10 % disencourages western consumers $500 per ton, their impact on run- increase in speed demands a 30 % from maintaining their levels of ning costs is huge. Confronted with increase in FO consumption. The consumption. ever increasing bunker costs, ope- most effective way of reducing both rators have started to take draco- FO consumption and CO2 emissions SPEED REDUCTIONS nian measures in order to rein in (they are directly linked) is to reduce the bunker bill. The most obvious, speed. For example, reducing the From a technical viewpoint, the two and most efficient, solution to speed from 25 to 19 knots halves main challenges for 2008 and achieve this is to reduce speed. both consumption and emissions. beyond will be to reduce fuel oil bunker expenses, while at the same time responding to increased envi- FO CONSUMPTION VS SPEED ronmental pressure to contain CO2 emissions and reduce emissions of 450 SO2 and NOx. 12,500 teu 400 8,000 teu As surely as human beings exhale 5,000 teu CO2 at every respiration, diesel 350 2,500 teu Fuel consumption in tons per day engines exhale CO2 at every cycle. 1,000 teu It is part of the combustion pro- 300 cess. There are currently no alter- 250 natives to the ubiquitous diesel engine and screw propeller combi- 200 nation, which offer unrivalled levels of efficiency. Nuclear power on 150 ships raises ecological and safety concerns, while electro-magnetic 100 propulsion tunnels, which allow the 50 elimination of the propeller, remain only a remote possibility. Wind 0 power and solar cells are not a rea- 14 kt 16 kt 18 kt 20 kt 22 kt 24 kt 26 kt 28 kt listic option, although kite sails are Service speed (knots) being experimented with, allowing The accompanying graph provides consumption figures for selected sizes of container ships loaded operators to save a small fraction at around 90 % in weight – as per Alphaliner figures. For example, an 8,000 teu ship burns around of the fuel burnt during favourable 220 tons per day at 24 knots. Ship capacities are given in nominal TEU. wind conditions. The containership market in 2007 - BRS 85
  4. 4. Given this fact, it is no surprise that knots. In the case of an 8,500 teu tity of cargo at the same rate) and several east-west carriers have ship, it means that the consumption the impact of the extra consump- started to reduce the speed of their falls from roughly 230 tons to 150 tion of reefer boxes, which will ships, in particular on the Far East- tons per day. Assuming a bunker spend more time on board. Europe route where the nine weeks price of $500 per ton and conside- Incidentally, reducing speed cuts instead of eight weeks compromise ring the impact of the consumption CO2 emissions as well as the pro- is a good one. The fuel savings lar- for the supplementary (ninth) ship, duction of sulphur and nitric oxides, gely offset the cost of running an the annual fuel bill drops from which are by-products of the com- additional ship. $230 m to just under $180 m, a bustion of fuel oil within the cylin- To take an example, a laden saving of around $50 m. ders. The new IMO Marpol rules on 8,500 teu ship running at 24 knots This more than compensates for air pollution implemented in the so- burns 230 tons of FO every day. the fixed running costs (including called ‘Sulphur Emissions Control Based on a typical Shanghai-Ger- capital cost) of the supplementary Areas’ (SECA) require vessels to run many loop, the addition of a ninth ship, which stand in the region of on low sulphur fuels in order to ship leads to an increase of time $12 m - 16 m per year ($12 m for an reduce the emissions of sulphuric spent at sea from 39 days to 46 8,500 teu ship ordered in early acid, formed in engine exhaust days per rotation, while the time 2003 at a price of $70 m, or $16 m pipes by the combination of water spent in port and for the Suez Canal for a similar ship ordered in mid- with sulphur dioxide. transit remains constant, at 17 days 2005 at a price of $120 m). To these It will be the third time in container (assuming of course that the port ship costs must also be added the shipping history that speed reduc- rotation is not changed). extra container costs (since the tions have been applied on a wide- The result is that the average speed containers will also be employed a ranging scale. A first round of speed falls from about 24 knots to 20.5 longer time to carry the same quan- reductions occurred in the after- Bulk carrier rates impact The hike in bulk carrier charter rates has driven conbulkers and rates and containership charter rates. It is the kind of conclusion large multipurpose ships out of the container trades into the bulk that one is entitled to draw at first glance. The truth is different. trades where they can secure better returns. Between August Although hard to quantify, the shift of cargoes from bulk carriers 2006 and January 2008, some 50 conbulkers and un-celled to boxes has been more modest than one might expect when multipurpose units over 600 teu, representing 65,000 teu in looking at the extraordinary divergence between box rates and total, have left the liner trades, according to BRS-Alphaliner bulk rates. Actually, the market structure prevents violent rate data. They were replaced either by cellular tonnage or by alter- native multipurpose ships displaced from other liner services, increases such as we have seen in the bulk market from occur- which were in turn replaced by cellular ships (some of which were ring in the containership market. fitted with stoppers in their holds to accommodate breakbulk Part of the explanation lies in the fact that only spot voyage cargoes previously carried by the uncelled tonnage). charter rates are concerned. Indeed, large quantities of bulk These ships have rejoined the bulk trades, parcel trades or - for commodities are not affected by the voyage charter rates as the smaller ones - project cargo trades. Rates paid for Handy they are carried using ships either controlled by shippers, char- size conbulkers of 25,000 dwt - 50,000 dwt have rendered them tered long term by them, or involved in well established costly to charter for liner services when compared to cellular Contracts of Affreightment. tonnage of comparable teu intake but considerably less dwt. As such, these commodities are immune to sudden movements in The increase in bulk carrier rates also provides an incentive to voyage charter rates, although there is of course an impact when shift containerizable cargoes from bulk carriers to containers. new ships are ordered by shippers (at increased prices), or when Suitable cargos include agroproducts, forest products, steel pro- long term contracts have to be renewed (at increased rates). ducts, and other minor bulks and commodities usually carried in Because of this, commodities usually carried in bulk have flowed bulk carriers. to containers only in a limited way. When they do, it is after a Conventional wisdom would suggest that such a shift should match between box rates and spot bulk rates for spot shipments have resulted in a strong rise in volumes carried on container- of commodities that can be containerized. This is of course true ships, which in turn should have translated into pressure on the other way. A crash in spot bulk rates will drive some boxed containership demand, leading to an equally strong rise in box cargoes back to bulkers. 86 BRS - Shipping and Shipbuilding Markets in 2007
  5. 5. CELLULAR SHIPS: DELIVERIES AND ORDERS Quarterly Source: BRS-Alphaliner teu US$/day 1,600,000 Deliveries Orders 40,000 1,400,000 math of the Yom Kippur War in Daily rate (1,700 teu) October 1973, when crude oil prices doubled. However, speeds of 25 1,200,000 knots were still sustainable. 30,000 A second round of speed reductions 1,000,000 occurred in 1979 when OPEC decided to hike crude oil prices again. Owners 800,000 were even persuaded to convert 20,000 their fuel-thirsty fast steamships into 600,000 more frugal, slower motor vessels. It is also during this period that the slo- west ever 4,000 teu ships were orde- 400,000 10,000 red: the twelve 18-knot units of the ‘Econship’ series. 200,000 Then, in 1986, crude oil prices col- lapsed and since then 24-25 knots 0 0 2002 2007 2004 2000 2001 2003 2005 1998 1999 2006 2008 2009 has become the standard speed for large containerships. A factor worth noting is that faster speeds are specifically a charateris- EVOLUTION OF THE CELLULAR FLEET 1988-2011 tic of the larger ships as the supple- Year Number Teu Progr. mentary FO financial burden 1988 1,153 1,503,244 brought on by the extra speed can 1989 1,186 1,609,498 7.1 % be spread over a huge quantity of 1990 1,236 1,716,235 6.6 % containers. In other words, opera- tors of large ships are advantaged 1991 1,308 1,855,371 8.1 % in an era of expensive bunkers. 1992 1,395 2,014,578 8.6 % 1993 1,486 2,210,876 9.7 % THE FLEET 1994 1,589 2,394,405 8.3 % 1995 1,735 2,660,629 1 1.1 % During 2007, BRS-Alphaliner has recorded 606 orders of cellular 1996 1,908 2,988,847 12.3 % ships totalling 3,638,000 teu for a 1997 2,103 3,367,133 12.7 % total value of $53.2 bn, breaking by 1998 2,332 3,875,130 15.1 % far all past records. 1999 2,512 4,296,51 1 10.9 % On 1st January 2008, the cellular 2000 2,61 1 4,525,919 5.3 % ship orderbook reached 1,462 ships 2001 2,735 4,936,737 9.1 % for 6.96 million teu, representing 2002 2,892 5,540,085 12.2 % 63.7 % of the existing fleet. Half of 2003 3,033 6,125,493 10.6 % the capacity on order concerned 2004 3,174 6,667,758 8.9 % 328 VLCS of over 8,000 teu. 2005 3,347 7,318,184 9.8 % In the same period, 400 cellular 2006 3,606 8,258,608 12.9 % ships were delivered, equal to 2007 3,943 9,587,306 16.1 % 1.36 million teu. This added 13.9 % 2008 4,318 10,922,710 13.9 % to the existing fleet, to make 4,318 ships of 10.9 million teu. 2009 4,851 12,575,122 15.1 % 2010 5,241 14,259,225 13.4 % The year was marked by an unex- 201 1 5,537 16,038,022 12.5 % pected wave of orders for ships over 12,000 teu. Some 1 14 of these Figures are given at 1st January of each year. leviathans have been contracted - Figures for 2008 to 201 1 are derived from the orderbook Source: BRS-Alphaliner all in Korea- equal to a total capa- The containership market in 2007 - BRS 87
  6. 6. CELLULAR SHIPS: DELIVERIES AND ORDERS - YEAR 2007 Deliveries Orders Size range no. teu $m no. teu $m > 10,000 teu 7 96,124 1,252 134 1,659,092 21,814 7,500 / 9,999 teu 34 300,516 3,054 78 673,778 9,648 6,000 / 7,499 teu 27 181,630 2,134 39 257,014 3,833 network and regional knowhow, 5,250 / 5,999 teu 5 29,1 12 376 9 49,950 855 which allowed it to transfer the management of its existing small- 4,800 / 5,249 teu 36 179,333 2,138 17 84,060 1,289 scale intra Asia operations to the 4,000 / 4,499 teu 29 125,836 1,572 1 13 491,995 7,674 Taipei-based company. 3,500 / 3,999 teu 19 68,034 978 16 57,880 1,020 The purchase of US Lines mean- 3,000 / 3,499 teu 12 40,340 550 9 30,790 504 while allowed CMA CGM to become 2,500 / 2,999 teu 38 102,966 1,629 51 134,553 2,463 a leading carrier on the ANZ-USWC 2,000 / 2,499 teu 5 10,515 216 12 25,912 508 trade (together with ANL, the Aus- 1,750 / 1,999 teu 13 23,683 425 14 25,194 548 tralian CMA CGM division). USL and 1,500 / 1,749 teu 41 69,283 1,329 15 25,729 548 ANL had been already co-operating 1,250 / 1,499 teu 22 29,425 572 59 81,956 1,625 since August 2006. Meanwhile 1,000 / 1,249 teu 50 54,725 984 27 28,362 660 buying state-owned CoMaNav strengthens CMA CGM’s presence in 750 / 999 teu 42 37,796 776 11 10,336 222 the Moroccan market and allows it 500 / 749 teu 20 13,563 270 2 1,396 32 to double its stake in the Tangier TOTAL 400 1,362,881 18,255 606 3,637,997 53,243 Terminal Phase 2 to 40 %. Prices shown at delivery correspond to contractual prices at the time of order Source : BRS-Alphaliner Another important deal was the purchase in November 2007 of the services of Costa Container Lines city of 1,455,000 teu. A total of 106 So, from this perspective, the by Hamburg Süd, sold by the are sized to transit the future ordering of 5,000 teu ships with a Orsero-controlled GF Group. It Panama locks. lbp / beam ratio of 7 makes sense. allows the German carrier to conso- The wave of orders observed in lidate its already dominant position The first orders for Super Pana- 2007 for such ships is partly lin- in the Latin America trades. It also maxes of 12,500 teu came six ked to the planned opening of the brings an intra-Med network which months after the Panama Canal new Panama locks in 2015, which will be useful for Hamburg Sud Authority launched its new Panama will consign the narrow Panamax when it develops Med feeder locks project and confirmed the designs to history. However, new connections for its Latin America, new dimensions of the waterway. locks or not, there has been a Indian subcontinent and North Series of eight or nine ship orders trend towards ordering wide beam Europe-related services. piled up during the remaining of the 3,500 - 5,000 teu ships for deploy- year in an ordering frenzy partly Within Europe, half a dozen deals ment on north-south routes not explained by the ‘me too’ effect. have been reported. involving a Panama transit. The 2007 was also notable for orders of current orderbook includes 37 In June 2007, Montagu, a UK-based 3,500 to 5,000 teu ships with nor- over-Panamaxes of 3,500 teu to mid-market private equity investor, mal proportions, i.e. not designed to 5,000 teu, all ordered since the acquired Denmark-based Unifee- fit in the narrow mold of the current spring 2007. der, a leading common feeder ope- Panamax gauge (approx. 295 m x rator covering Scandinavia and the 32.26 m). THE OPERATORS Baltic Sea. Today, maxi-Panamaxes have an lbp Icelandic company Samskip acqui- There have been several interesting / beam ratio of 8.8, instead of the red in July the door-to-door busi- M&A deals in 2007, with CMA CGM optimal ratio of around 7 commonly ness unit of Delphis NV-Team Lines. the most active buyer. The Mar- used in merchant ships’ design. This Team Lines covers the whole of seille-based company has pursued unusually high ratio leads to poor Western Europe with services ran- its strategy of buying niche carriers, basic stability, forcing to run them ging from the upper Baltic to Portu- with the purchase of Cheng Lie with thousands of tons of water in gal, including the UK. Samskip Navigation Co (Taiwan), US Lines the double bottoms. This ballast enjoys fixed allocations on Team (USA) and Compagnie Marocaine de water eats into the deadweight Lines vessels thus continuing a Navigation (Morocco). cargo capacity. It is also carried at a strong partnership between the two cost from the viewpoint of fuel Cheng Lie Navigation brought to organizations that began when Del- consumption. CMA CGM a ready-made intra Asia phis was first formed. 88 BRS - Shipping and Shipbuilding Markets in 2007
  7. 7. LINER OPERATORS “TOP 25 “ - AT 1ST JANUARY 2008 Source: BRS-Alphaliner APM-Maersk MSC CMA CGM Group Evergreen Line Hapag-Lloyd In September, Lemissoler Shipping CSCL Ltd, headquartered in Limassol, COSCO Container L. APL agreed to acquire Baltic Container NYK Lines (BCL) from its three co- OOCL owners: Chipolbrok, C Hartwig SA (a Hanjin/Senator Polish forwarder linked to Euroa- MOL K Line frica Shipping Lines) and Polish Zim Ocean Lines (POL). BCL provides Hamburg-Sud Group feeder services between western Yang Ming Line CSAV Group Germany, Denmark, Poland and the Operated fleets Hyundai M. M. Baltic states. BCL supplements the PIL Based on existing fleet at January 1st 2008 teu capacity available on operated ships Germany-Poland feeder services WanHai Lines - All subsidiaries are consolidated - offered by Lemissoler subsidiary UASC Intermarine Container Line (IMCL). MISC Berhad Iris Lines The FESCO Transport Group (Vladi- Grimaldi (Napoli) RCL in '000 teu vostok) and ESF group reached an 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 agreement in June 2007 to create a joint venture, FESCO ESF Limited, EVOLUTION OF MARKET SHARES 2000-2008 in which FESCO holds a 70 % inte- Main carriers rest. The new company owns the 20 % Data based on fleets at 1st January assets of ESF and its affiliates that APM-Maersk Hapag-Lloyd 18 % relate to ESF Euroservices Baltic MSC CSCL feeder network between Continen- 16% CMA CGM Group COSCO Container L. tal Europe and Russia. Evergreen Group Hanjin / Senator 14 % Holland Maas Shipping (HMS) was taken over in May 2007 by undisclo- 12 % sed buyers. MSC is understood to 10 % be behind the purchase. HMS offers services linking NW Europe to the 8% © Alphaliner 1999-2008 Iberian Peninsula. An associated 6% company, HMCL, was also active in the Europe-Caribbean trade and is 4% also believed to have been pre- 2% viously taken over by MSC. 0% The Irish Continental Group (ICG) 2001 2002 2003 2004 2005 2007 2000 2006 2008 was bought by its management in June. ICG offers services linking Ire- land to the UK and to the Continent, Leading trio controls one-third of the liner market with passenger/freight ferries (Irish The combined market share of the three leading their positions. MSC has increased its share Ferries) and – importantly - contai- container lines, Maersk Line, MSC and CMA from 9.8 % to 10.4 %, while CMA CGM grew its ner ships covering the trade bet- CGM, grew from 33.1 % to 34.1 % in terms of teu share from 6.6 % to 7.6 %. ween the Continent, UK and Ireland, capacity during 2007, according to figures pro- MSC and CMA CGM are further boosting their with the following subsidiaries: duced by BRS-Alphaliner. By comparison, at the positions as they continue to take the ships Eucon Shg & Transport Ltd, Euro- start of 2000, the three leading lines at the time that other lines are discharging - or subletting. Feeders Ltd and Feederlink Ship- (Maersk Sealand, Evergreen and P&O Nedlloyd) It looks like the size and coverage extent of ping & Trading B.V. had a combined market share of 23.7 %. these two carriers gives them more confidence Elsewhere, Caja Logistics, a US- However, the growth in 2007 was far from in the future than the smaller carriers, and they being equally shared by the three lines. Maersk are probably in a better position to sustain based logistics company, developed Line still dominated the market with a share of lower rates, thanks to economies of scale and a in mid-2007 services to Mexico with 16.1 % on 1st January 2008 but this was down distinct commercial flair. It will allow them to its own ships, focusing on the Yuca- from 16.8 % a year ago. By contrast, both MSC drain cargo from smaller competitors and to tan Peninsula trade, while a new and CMA CGM have strongly strengthened continue growing faster than the rest. The containership market in 2007 - BRS 89
  8. 8. Demolition prospects A total of 23 cellular ships equal to 26,134 teu and 427,000 dwt By contrast, newbuilding deliveries are expected to reach a total have been deleted in 2007. Of these, 22 units were scrapped of some 919 ships of 3.36 million teu during the years 2008 and (totalling 21,446 teu), while one 4,688 teu ship was lost. 2009. As newcomers are faster than their older counterparts, the imbalance is actually still larger. During the past five years, a total of just 81 cellular ships aggre- gating 89,000 teu were deleted from the world fleet, of which 75 The average speed at which each teu will transit on the ships deli- of 80,300 teu were scrapped (the remaining six were lost at sea). vered in 2007-2008 stands at 23.5 knots (figure weighted for capacity, the average ship speed standing at 21.7 knots). For exis- The deletions represent only 1.8 % of the cellular capacity delive- ting ships of 23 years and above, the weighted speed per teu red over the same five-year period: 1,367 ships of 4.88 million teu. stands at 18.9 knots based on an average ship speed of 17 knots These figures demonstrate how scrapping depends largely on (note: the speed considered in these calculations is the contrac- market health, while age is a secondary factor. With trade boo- tual commercial speed). ming since 2003 and ships having become relatively scarce, rates are high, taking away the incentive to scrap. To the Conversely, it must be emphasized that the older ships will contrary, owners are ready to spend money on steel renewal and remove more deadweight capacity in comparison with the new other heavy repairs to extend the life of their ships. ones. Ships over 23 years offer a dwt per teu ratio of 16 tons, against a ratio of 12.5 tons per teu for the ships to be delivered Historical records show that 27 years is the average age at which in 2007-2008. As a result, taking ships over 27 years as an containerships are scrapped, with 32-33 years regarded as an example, the ratio between newbuilding deliveries and ships deli- extreme (though there are a few exceptions with some ships over vered for scrap stands at 8 in teu terms but stands only at 6 in 35 years still sailing). FO consumption is also a factor in the deci- dwt terms. It makes a notable difference when ships at extreme sion to scrap. ends of the age range are compared. A softer world economy may also lead to a surge in scrappings, Of note, some 50 ships of over 600 teu capacity representing especially given an influx of newbuildings at a rate of an average 65,000 teu (conbulkers, multipurpose ships and cellular ships) 4,500 teu everyday for the next 24 months to come. have left the liner/container trades between mid-2006 and However, scrappings are not expected to reach a sizeable propor- January 2008 to join the bulk or breakbulk trades where they tion of the newbuilding influx. Assuming all ships of 27 years and can obtain higher returns (see insert on ‘impact of bulk carrier over are scrapped in 2008 and 2009, the figure would total 385 rates’). Thus, their departure actually had a greater impact on ships of 420,000 teu. fleet growth than the scrapped ships. The world liner fleet will reach 12 million teu in April 2008 The world liner fleet (see note) passed the 11 million teu mark in > 11 million teu (154 million dwt => 14.02 tons per teu) in June early June 2007, according to BRS-Alphaliner data. The figure 2007 includes all types of ships effectively deployed on liner trades > 12 million teu (165 million dwt => 13.80 tons per teu) in April (in the commonly accepted definition of the term), and compri- 2008 (forecast) ses 5,820 ships of 154 million deadweight. The cellular ships contributed to 92.2 % of this figure. The remaining 7.8 % was Time needed to reach the “next” million teu: shared by non-celled container ships, multipurpose tonnage > 6 million teu to 7 million teu in 21 months and ro-ro ships. We expect that the 12 million teu mark will be > 7 million teu to 8 million teu in 18 months reached in April 2008. > 8 million teu to 9 million teu in 13 months During 2007, the growth rate of the total liner fleet has been slowed by the departure of conbulkers and multipurpose ton- > 9 million teu to 10 million teu in 9 months nage which have rejoined bulk and non-liner trades. > 10 million teu to 11 million teu in 9 months Previous and forecasted “round” million teu capacities stand > 11 million teu to 12 million teu in 9 months (expected) as follows: > 6 million teu (94 million dwt => 15.67 tons per teu) in July 2001 > 7 million teu (106 million dwt => 15.14 tons per teu) in April 2003 Note: This count includes all the ships deployed on liner services in the > 8 million teu (118 million dwt => 14.75 tons per teu) in October common acceptance of the term. Based on this definition, we exclude 2004 a number of specific more-or-less regular services, such as the parcel trades (steel and other neo-bulk products), pure forest product trades, > 9 million teu (130 million dwt => 14.44 tons per teu) in Novem- or pure vehicle carrying services. Given this, the numerous multipur- ber 2005 pose cargo vessels and conbulkers deployed on non-liner trades or on > 10 million teu (143 million dwt => 14.30 tons per teu) in August tramp trades are NOT included in the above figures (even if container 2006 fitted), although they are shown in the Alphaliner database. 90 BRS - Shipping and Shipbuilding Markets in 2007
  9. 9. Panama-based company, Altiplanic London-based Lonrho, a conglome- extraordinary shareholders mee- Shipping Inc, launched in July two rate active in infrastructure, trans- ting on August 31 aimed at harmo- common feeder services connec- portation, support services and nising the names of subsidiaries ting the Panamanian hubs of Man- natural resources in South Africa within the C& Group, which was zanillo and Balboa to Venezuela and acquired in July a 45 % stake in SA known as the Seven Mountain Colombia (Atlantic and Pacific sea- Independent Liner Services (Pty) Group until November 2006. boards). Altiplanic is a division of Ltd (SAILS), which operates a In May, Dubai-based Hull & Hatch the Broom Group, a Chilean com- Europe-Africa container service. Logistics group launched its own pany dealing mainly with transport service connecting the UAE, Red and logistics related to the Andes Other corporate moves included Sea, East Africa and the Indian sub- region and Colombia-Venezuela. the September re-naming of Seoul- continent, and which is operated by The new services are offered in based Dongnama Shipping Co Ltd subsidiary H&H Lines Ltd. ■ partnership with Colombian Group as C& Line Co Ltd. This was pur- Coremar. suant to a decision taken during an The second-hand market for Containerships in 2007 For the containership sector, 2007 CELLULARISED CONTAINERSHIP SALES BY SIZE RANGE was a vintage year with more than 2004 2005 2006 2007 220 sale and purchase deals concluded in the period. Invigorated Under 900 teu 82 49 30 44 by a freight market which saw 900 to 2,000 teu 83 53 36 85 major gains after May and June, 2,000 to 3,000 teu 42 22 24 51 and accompanied by renewed opti- Over 3,000 teu 58 19 43 45 mism among investors, the total TOTAL 265 143 133 225 number of deals was very respecta- ble when compared to the 130 sales in 2006 and 140 in 2005. terms) taking the exchange rate and tion of the financial vehicle, Global the inflation rate into account. Ship Lease, which purchased a part Prices also increased during 2007 of the company’s fleet under sale compared to the previous two years, Some would say that this is not and charterback agreements. Glo- though they still remain below 2004 significant as most of the owners bal Ship Lease intends to go public levels. However if we integrate the remain in the “dollar area”, either in the long term. The initiative is exchange rate into the valuation, we when they buy or operate the ship. interesting as it blurs the lines bet- can observe that the price diffe- This has been true so far, but for ween a pure operator of maritime rence is not so great. The evolution how long? services, and a financial product in of the euro and the dollar in 2007 That said, we are delighted that the direct competition with the mari- (going from $1.29 to $1.47 per euro big players made a come-back this time investment companies. over the course of the year) accoun- year. CMA CGM, MSC and Allocean ted for a 12.2 % in the rise of face These investment companies usual- all returned, and had close to 40 values. Then if one can observe a ly operate ships on charters of transactions to their credit in 2007. 25 % evolution of ships’ values in varying lengths with operators such 2007, the real one is only of about In the case of CMA CGM, the new as CMA CGM, Evergreen, Hapag- 10 % in euro terms (16 % in SDR activity was due mainly to its crea- Lloyd and others. The containership market in 2007 - BRS 91
  10. 10. MAIN PLAYERS IN THE MARKET IN 2007 Notable sale: Buyers nb Sellers nb ◆ Arctic Fox and Arctic Ocean, Seanergy 10 A.P. Moller 8 665 teu, gearless, built in 1995, sold Global (CMA CGM) 17 CMA CGM 14 in June for $1 1,9 m each. Allocean 12 B. Schulte 12 Containerships Eastwind 10 C. Rehder 5 of 900 teu to 2,000 teu MSC 10 Thien & Heyenga 6 This was the busiest sector of the Germans’ share 41 Germans’ share 111 containership market, with 85 ves- sels sold, nearly 50 more than in For these investors the latter, THE SECOND-HAND SALE 2006! In addition, prices during the although also shipowners, repre- AND PURCHASE MARKET year reached almost the record sent almost their only source of BY SIZE OF VESSEL levels seen in 2004. We saw several earnings. Thus widespread growth re-sales of 1,700 teu ships with of this phenomenon could spell, in Containerships prompt delivery at between $45 m of less than 900 teu the long term, the end for these to $47 m. These prices seem opti- investment companies. And when In 2007 the negative trend of the mistic, given rates hardly exceeded one considers that the investment last two years was reversed, and $17,000 to $17,500 per day at the structures represent more than there were 44 sales of container- end of the year. 5.4 million teu out of the 1 1.0 mil- ships in this category, compared to lion teu currently operated by the 30 in 2006 and 49 in 2005. However Generally, however, market forces shipping lines, the upheaval would the result was still far below the 82 prevailed. S&P prices appreciated be considerable. ships sold in 2004, a logical develop- approximately 30 %, closely com- ment given the level of freight rates. parable to the increase in freight It may turn out however that a com- rates (+26 % for the 1,000 teu ves- pany of this type, created by a ship- In contrast to the larger ship sizes, sels, and +36 % for the 1,700 teu ping line, does not have the same there remains a certain balance in ships). appeal for independent investors or this sector. For example one can the public as it comprises ships observe the gradual disappearance Some notable sales: belonging to only one charterer (in of sales of ships with speeds lower ◆ Stadt Montreal and Stadt Hali- fact the liner operator concerned). than 15 knots. fax, 1,740 teu, geared, delivery Investors prefer, in general, a certain 2008, sold en bloc in October for Some of these ships even have a ser- spread of risk. Thus it remains to be $44,5 m each vice speed of 21.5 knots. This was the seen if the new vehicles will continue case this year for three reefer- ◆ Wa Mei Shan and Fa Mei Shan, alone, or join other liner shipping container vessels sold by the Great 1,1 18 teu, geared, built in 2006, sold companies in order to create a com- White Fleet (USA) to the Eastwind in November for $28,5 m each mon ‘fishpond’. Achieving such grou- Marine/NYKLauritzenCool consor- pings would at least require long- Containerships tium with a 7-year time-charter back. term agreements between various of 2,000 teu to 3,000 teu shipowners in the areas of financial In spite of the relatively small parti- and technical management… which cipation by Chinese ships in this If the number of newbuilding orders is far from straightforward! sector, it is also interesting to note has been decreasing in the smaller the significant number of re-sale sectors (-27 % for less than 900 teu The reappearance of the container- deals involving 300 teu and and -9 % for the 900-2,000 teu), ship Majors in the second-hand 600 teu vessels under construction then the trend was reversed for the market was also accompanied by a in China. These ships were built by larger ships (2,000 – 3,000 teu) return of the German investors. The the shipyards on own account with which rose 3.5 %, despite a record latter participated in more than 150 the specific aim of selling them on. number of orders in recent years. transactions (more than 1 10 ships controlled in Germany were sold, This is a new trend which progressi- Meanwhile in terms of prices, the ave- and 41 bought). This underlines vely introduced more competition rage figure for a gearless 2,700 teu once again the dominant role for the European vessels, but which ship grew from $35/$36 million, to played by our neighbours in this has had a limited impact on the approximately $45 million, a near sector of the industry. market so far. 20 % increase. 92 BRS - Shipping and Shipbuilding Markets in 2007
  11. 11. This category of containership, compared to 2006, the tone has amusing to note that when it comes which was previously ignored by been set for this sector. Admittedly to banking matters, good news is investors, seems to have become this percentage drops to below released quickly, sometimes even the main area of interest for "asset 20 % for ships between 3,000 and before the event, but the calcula- players" more commonly active in 8,000 teu, but the figure remains tion of losses always takes several bigger ships. considerable. months… to do with the calculation of bonuses perhaps? Some 51 ships were sold in this Values in the sector increased in category in 2007. And investors virtually the same way as the smal- That said, activity in the last quar- reaped the benefits, as there was a ler categories (approx. 20-21 % in ter 2007 showed a notable ‘mar- clear improvement in the daily 2007). Average prices rose from king of time’, with the main western revenues of these vessels during $42 million for a ten-year-old gear- banks enforcing a partial freeze on 2007 (approximately +17 %). less ship of 3,500 teu at the begin- funds for shipping. Meanwhile the ning of year, to approximately increasingly detailed reports of an Some notable sales: $51/$52 million by the end of the American recession, and persistent ◆ HS Magellan, 2,846 teu, built in year. Meanwhile in spite of the scar- concerns out of the Middle East, will 2007, sold in July for $57.5 millions city of available ships, there were inevitably have an impact on what with a charter back for seven years nearly 45 sales of Panamax and previously appeared to be unstop- to the seller at $22,500 per day. post-Panamax ships recorded in pable growth for the global contai- ◆ Sea-Land Defender and Sea- 2007. ner trade. ■ Land Independence, 2,800 teu, Some notable sales: built in 1980, geared, sold in June for $10.5 million each. A further five ◆ Regina Mærsk, Katrine Mærsk, vessels, ex-Sea-Land and built in Kirsten Mærsk, 7,048 teu, built in 1980, were sold by AP Møller during 1996 and 1997 (the first ever ves- the year to different buyers at simi- sels of more than 6,000 teu) sold in December for $93 million each. lar prices. ◆ Agnes Schulte and Astrid Containerships Schulte, 6,966 teu, delivery in of 3,000 teu and higher 2009, sold in May for a total $1 13 m. With new orders for the largest size Looking forward, the true extent of of containership (8,000 teu and the damages caused by the ‘sub- over) up more than 100 % in 2007 prime’ crisis remains unknown. It is © BARRY ROGLIANO SALLES 2008 The containership market in 2007 - BRS 93