Good Things Can Still Come In Small Packages

Despite there being a lot of focus on 8,000+ TEU boxship ordering in recent years, there has also been activity at the smaller end of the sector. Whilst contracting in the mid-size boxship (3-8,000 TEU) sector has dropped off significantly, over 50% of boxship orders in the ytd have been sized below 3,000 TEU. This month’s Shipbuilding Focus takes a closer look at newbuilding activity in the smaller boxship sector.
Big Or Little…Size Matters

Boxship contracting has focussed at either end of the size spectrum in recent years with limited interest in the middle size sector. As the line on the Graph of the Month shows, ordering in the 3-8,000 TEU boxship sector was firm during the contracting boom with an average of 161 ships ordered p.a. 2005-07. However, the planned expansion of the Panama Canal, upsizing across the fleet, which has encouraged ordering outside the ‘middle’ size ranges, and the ‘cascading’ of existing boxships into the medium sized arena, have all contributed to falling demand for 3-8,000 TEU boxships (especially for Panamax designs). An average of 27 ships sized 3-8,000 TEU were contracted p.a. 2012-13 and the orderbook is now the smallest it has been since 1998 with 53 units on order.
A ‘Small’ Christmas List

Meanwhile, there has clearly been firmer ordering in the sub-3,000 TEU sector in the past two years. Whilst the collapse of the KG finance system, which historically supported German owners’ ordering for small and medium sized vessels, has meant that contracting levels are lower than in 2005-07, contracts for 91 boxships below 3,000 TEU were placed last year and 67 ships have been ordered in 2014 so far. This contracting has been driven by a number of factors including growth in intra-regional trade, most notably in Asia, the attraction of more fuel efficient designs, and the perception that the cascading of larger ships down the trade lane hierarchy might be finite. Alongside this, firm demolition in the sector in recent years has led to the sub-3,000 TEU boxship fleet shrinking over the past three years and the orderbook to fleet ratio stood at 4% at the start of 2013 in numerical terms, one of the lowest in the fleet. Subsequent ordering has led to a 34% increase in the size of the sub-3,000 TEU boxship orderbook since the start of 2013 to 172 vessels as of the start of December 2014.
Who’s Delivering?

Building activity in the sub-3,000 TEU boxship sector has become increasingly consolidated amongst a few builder nations and yards. In 2005, 73 yards in 13 nations won a containership order below 3,000 TEU. Whilst German shipyards generally won the largest share of contracts across the early 2000s, the majority of contracts are now placed at shipyards in China and, in the ytd 82% of boxship orders below 3,000 TEU have been placed in China.

So, it has been a story of ‘little’ and ‘large’ in the boxship sector in recent years and there has been muted interest in the middle size sector. Sub-3,000 TEU ordering has been focussed exclusively at Asian yards in the ytd. Looking forward, one of the drivers of this ordering, intra-regional trade, is projected to continue to grow and this should support further contracting in coming years.
Source: Clarksons