Containership orders could be on the up early next year

A rapidly depleting orderbook and an improved trade outlook could lead to the return of major new orders for containerships by the first quarter of 2011, based on Alphaliner’s analysis of historical ordering activity. The containership orderbook has been dropping for 22 consecutive months since July 2008, in the longest slump for the industry. The orderbook as at 1 May 2010 stands at 655 ships for 4.16 Mteu, which represents 31% of the existing cellular fleet. It has fallen from the peak recorded at 7.02 Mteu in July 2008 or 60% of the fleet at that time. As a percentage of the fleet, the orderbook had peaked at 64% in November 2007. Based on current delivery projections and assuming no fresh orders are placed between now until the end of the year, the orderbook will fall to 3.14 Mteu or 22% of the fleet by December 2010.
If the present drought of orders continued for another 12 months, the orderbook could fall to a record low of 9.8% by December 2011. During the last industry slump in 2002, consequence of the dot-com crisis combined with ripple effects of the 1997 Asian crisis, the orderbook dropped to 17.6% before a recovery that saw sustained ordering activity which lasted six years. Going back further to the previous slump in 1999 (aftermaths of the Asian financial crisis), the orderbook to fleet ratio touched 14.6% at its lowest point.
Alphaliner expects owners and operators to begin to seriously consider placing fresh orders for containerships once the orderbook ratio goes below 20%, which is expected to be reached by the first quarter of 2011. There are already signs that some owners are considering the
placement of new orders during this year, while prices are still competitive and while yards are more receptive towards new designs.
However, the orderbook-to-existing-fleet ratios vary widely with ship sizes. The orderbook for ships over 4,000 teu represents 47% of the existing fleet against only 7.3% for ships under 4,000 teu. There has always been a bias for high orderbook ratios of large ships, as such
ships are generally ordered several months ahead of smaller ships for a same delivery date. But this time, the difference is much wider than normal, due to the under-investment in small ships during the 2007 and 2008 boom, in comparison to the deluge of orders for ships of
4,000-14,000 teu.
Given this, the logic would be that orders start to flow for small ships, at least of feeder size (1,000-2,000 teu) as there is a glut of 2,000-3,500 teu ships which may take time to absorb. Paradoxically, the large ships over 5,000 teu are to be all employed this summer. However,
given the flow of expected deliveries of VLCS, there is less urgency to order large ships than to order ships of feeder sizes.
Amongst the operators, Evergreen has already stated its intention to rebuild its fleet through new orders which could approach 100 vessels. The Taiwanese carrier’s plans for new ships include orders for 32 vessels of a new design with a capacity of about 8,000 teu, 20 ‘S’
Class (7,024 teu) ships, 20 ‘U’ Class (5,364 or 5,652 teu) ships and for 20 or more units of about 2,000 teu of a new design which are to be used for employment on intra-regional services.