Capacities are tight, and for once money is not, so shipowners are ordering new container ships. The shipyards in Asia are happy about the orders. But when the new freighters are seaworthy in a few years, there could be too many ships. “Economy from Above” is a collaboration with LiveEO.
In December, the restraint came to an end. For years, shipowners had hardly ordered any new container ships. Then Hapag-Lloyd, the first of the major shipping companies, ventured forward and announced a new order: six ships, with a capacity of over 23,000 standard containers. That is the maximum size engineers are capable of building today. Cost: around one billion dollars.
Some nine months later, the deal is just one of many. In the meantime, almost all the major providers have ordered new freighters – the shipping line MSC alone has 51 ships in its order book. Even Hapag-Lloyd has added another six ships to its December order. They are to be built by the South Korean shipbuilder Daewoo. Daewoo’s shipyard can be seen in the exclusive satellite image from LiveEO below and seems to have been busy as early as June.
It is a shopping spree that is second to none. According to data from the industry association BIMCO, 619 container ships were on order at the end of August – 381 of which have been ordered this year. This means that the number of ship orders has more than doubled in one year. The freighters now on the order books could carry more than five million containers.
The boom in orders is likely to please the shipyards in particular. Their production docks have been occupied for years, and many shipyards are no longer even issuing cost estimates for new buildings, according to industry sources. Shipyards in Asia, in particular, are benefiting: South Korea, Japan and especially China are considered the largest shipbuilders in the world. The exclusive satellite images from LiveEO show insights into some of the shipyards in these countries.
However, it is unclear how long shipowners will be able to enjoy their orders. The new shopping spree could have far-reaching consequences: In the past, the industry had already ordered more ships than actually needed. As recently as 2010, ships with around 30 percent of the capacity of the existing fleets were still on the order books, as the service provider Clarkson Research Services calculated. As the financial crisis spread, the global economy suffered and demand for ship transport also collapsed, shipowners also found themselves in distress. Prices – known as rates in the shipping industry – sank to lows and remained there for years.
Meanwhile, the situation has reversed. During the Corona crisis, many people spent their money on renovations instead of travel, on exercise bikes instead of the gym. As a result, demand for consumer goods produced in Asia increased, as did shipments. At the same time, factories and ports have had to slow down their pace of work because of the protective measures against the coronavirus, so chaos now reigns. There is a shortage of containers, ships are overbooked and also delayed, thousands of goods are waiting in ports, and companies worldwide are suffering from bottlenecks and from freight rates, which have often increased tenfold since the start of the pandemic.
This had a positive effect on the finances of shipowners: This year, profits in the industry could reach the 100 billion dollar mark, the industry service Drewry recently predicted. For the first time in years, the shipping companies’ coffers are well filled. They are now spending the money on ships.
These are to be larger than ever before: Many of the orders have a capacity of up to 24,000 standard containers. Ships with a size of 13,000 standard containers are also in demand.
However, it may be some time before the ships leave the shipyards. Delivery times are two to three years. It is questionable whether demand for ship transport will still be so high then. Thus, the shopping spree could herald the next phase of the hog cycle with new overcapacities.
Rolf Habben Jansen, CEO of Germany’s largest shipping company Hapag-Lloyd, is relaxed: “It’s not so bad if we have a little play in the system,” he said recently at a public Q&A session for customers. Because stricter environmental regulations will soon apply to shipping as well, many old ships would disappear from the market. “We should not forget that scrapping is very low right now,” he said.
But even when it comes to newbuilds, the industry is in a dilemma when it comes to environmental friendliness. According to the plans of the UN Organization for Maritime Affairs (IMO), greenhouse gas emissions from shipping are to be reduced by 40% by 2030, and to at least 50% by 2050 compared to the amount emitted in 2008. However, it is still unclear what technology the industry can use to achieve these goals. The only thing is that shipping companies are running out of time: Container ships normally remain in service for at least twenty years – so they will still be sailing in 2030.
Many shipping companies are now relying on liquefied natural gas, LNG. Hapag-Lloyd’s new ships will also be able to run on both marine diesel and LNG. However, environmental groups criticize that the industry will hardly be able to achieve its goals with LNG alone. LNG is seen more as a transitional technology until other forms of propulsion are more mature.
The world’s largest shipping company Maersk has therefore held back for a long time. The Danish group had not ordered any ships since 2015. Now, in August, the shipping company surprised with a large order for eight ships. Their special feature is that the ships will be able to run on both marine diesel and methanol. The move is a bold one, as methanol-powered ships have hardly been tested to date. Each of the ships has a capacity of 16,000 containers and costs $175 million. This makes the ships about 10% more expensive than others, Maersk itself estimates.
The shipping company hopes that this will enable it to overtake the competition in terms of environmental friendliness. But to do so, the shipping company first needs enough green methanol, i.e. methanol produced with the help of renewable energies. So far, this has not been widely available. The shipping company is therefore investing diligently. Together with partners, Maersk wants to produce ethanol by hydrolysis with the help of solar farms. Maersk has also invested in a start-up that wants to convert waste into methanol. Maersk still has some time left: The large methanol ships are not scheduled to leave the shipyard in South Korea until 2024.