15-07-2021 Specter of overcapacity reappears as containership orders breach $21.5bn, By Ian Lewis, TradeWinds
A surge in newbuilding orders to one-in-five of the boxship fleet has again raised the prospect of structural overcapacity. It comes as the value of containerships ordered in the first half of the year rose to levels nearly three times greater than any corresponding period in the past 20 years. Some 286 vessels of 2.5m teu have been ordered in the year to date with a value of $21.52bn, according to VesselsValue estimates. That breaks the previous record of 99 ships ordered in the first half of 2011 with a value of $9.2bn.
The value this year is expected to grow with pending orders anticipated from carriers including Ocean Network Express, Maersk, Yang Ming Marine and Cosco Shipping and its affiliate Orient Overseas Container Line (OOCL). Alphaliner puts the tally of orders in the first half at over 300 vessels of 2.88m teu. It estimates these helped take a rather anemic container ship orderbook from a low point of 2.29m teu a year ago to 4.94m teu as per 30 June. But orders penned or expected in the second half of this year could help lift that tally by another million teu slots to around 6m teu. The orderbook-to-fleet ratio would then reach about 24% of today’s liner fleet when it expects owners may need to show restraint, the analyst said.
“Anything approaching or even passing the 25% mark, could however raise the specter of structural overcapacity a few years down the line,” Alphaliner added. The orderbook-to-fleet ratio has already risen from 9.4% a year ago to 19.9% at present, it said. Boxship newbuilding orders in the first half of the year were almost triple their previous half-year highs. The vast majority were in the neo-panamax sector where 112 vessels were ordered with a value of $13bn, according to VesselsValue. That follows a paltry 32 ships ordered for $1.97bn in 2020.
“The ordering market for containerships is at historic highs,” said Olivia Watkins, head cargo analyst at VesselsValue. Orders are up 790% in the first half compared with the same period last year. The $21.52bn orderbook so far compared with 120 containerships of $8.8bn in 2020 and 106 vessels worth $6.8bn in 2019. “The current container market has increased owners and operator’s confidence which has led to an ordering spree across the sector,” she said.
Tonnage provider Seaspan Corp dominated the list with 40 ships of 603,000 teu, with a value of $3.95bn. Liner operator Evergreen is next with 22 ships of $2.82bn, followed by rival carriers CMA CGM, Wan Hai Line and HMM.
The proportion of ships on order to fleet size varies between different sizes, Alphaliner notes. The orderbook-to-fleet ratio stands at 50% for 11,000-teu to 25,000-teu vessels and 8% for vessels in the 1,000-teu to 7,500-teu range, the analyst said.
The corresponding figure in the 7,500-teu to 11,000-teu segment, where there are no orders, is zero.