March's order book is the highest monthly figure in 10 years, and the first quarter order book is higher than the annual figure for the past six years ...... Bullish on the future market coupled with unprecedented windfall profits drive the shipping giants to "frantically" order ships to expand the " The arms race" seems to be far from over.
New ship orders hit 10-year high
Baltic International Shipping Association (BIMCO) statistics show that in March 2021, the total number of new container ship orders for 72 ships about 866,000 TEU, a record high in the past decade, almost close to the total number of orders for the year 2020. This figure is also much larger than the previous record high of 50 vessels totalling approximately 570,000 TEU in June 2011.
It is worth noting that as many as 45 of the container ship orders in March were for mega vessels of 15,000 TEU and above, compared to 27 orders for small and medium-sized vessels. March's order intake was the highest monthly in 10 years and the order intake in the first quarter was higher than the annual figure for the past six years. ...... is bullish on the future of the market and The "arms race" in which the shipping giants have been "frantically" ordering ships for expansion seems to be far from over.
New ship orders hit a 10-year high
Baltic International Shipping Association (BIMCO) statistics show that in March 2021, the total number of new container ship orders for 72 ships about 866,000 TEU, a record high in the past decade, almost close to the total number of orders for the year 2020. This figure is also much larger than the previous record high of 50 vessels totalling approximately 570,000 TEU in June 2011.
It is worth mentioning that as many as 45 of the container ship orders in March were for very large container ships of 15,000 TEU and above, while the number of orders for small and medium-sized ships was only 27.
In the first quarter of this year, containership orders have reached 1,398,000 TEU, which not only exceeds the annual order book of 995,000 TEU for 2020, but is even higher than the annual order book level over the past six years. The proportion of containership orders in hand as a percentage of the existing fleet has now jumped to more than 15%, after remaining in single digits for most of last year.
According to BIMCO, between October and December last year, almost all new containership orders were for the largest size 23,000-24,000 TEU vessels, with only four of the 23 mega containership orders not of this size. And so far in 2021, of as many as 81 new orders for containerships of 11,800 TEU and above, only four are of a size exceeding 15,500 TEU.
Record earnings for container lines
Behind the record-breaking "frenzy" of bookings by consolidators is an equally record-breaking performance. In the fourth quarter of last year, the shipping industry delivered its best ever "results", and the first quarter of this year is set to be even better.
In a recently released report, US consultancy Blue Alpha Capital said that the 11 major shipping companies that reported profits in the fourth quarter of last year totalled US$5.8 billion in net profit. Assuming similar results from other non-reporting carriers such as Mediterranean Shipping Company (MSC), it is estimated that the cumulative net profit of the major carriers in the fourth quarter would have been a staggering US$9 billion.
Blue Alpha Capital noted, "By almost every measure, the fourth quarter 2020 results were the best quarterly actual performance in the history of the container shipping industry."
According to Blue Alpha Capital's estimates, the 11 consolidators with reported earnings for the full year 2020 had net profits totalling US$10.2 billion, with an estimated total of US$15.8 billion for all major consolidators for the year, which is the industry's best annual performance since at least the financial crisis. This figure is almost more than double the total profit of around US$7 billion achieved by the major consolidators over the previous five years, a period in which a number of consolidators posted year-on-year losses.
With the surge in spot rates, coupled with higher contracted rates, consolidators are likely to be more profitable for at least the first two quarters of the year. Earlier, COSCO Marine Holdings, a listed platform for COSCO Shipping Group's container shipping services supply chain, released a forecast of its first quarter results this year, with net profit expected to reach 15.450 billion yuan, which is not only a 50-fold increase over the 292 million yuan net profit achieved in the same period last year, but also more than the 9.927 billion yuan total profit for the whole of 2020.
Container shipping market sentiment expected to last until 2024
In fact, the results for 2020 for consolidators completely reversed expectations prior to the outbreak. alphaliner said, "The final performance for 2020 is in line with the pessimistic forecasts made mid-year when there were concerns from analysts that the consolidation industry would post a net loss of up to $10 billion in 2020."
John McCown, founder of Blue Alpha Capital, attributed the recovery in the consolidation industry to the unexpectedly excessive cuts in capacity availability by many consolidators at the beginning of the outbreak. "The consolidators took immediate and aggressive action to reduce capacity by cutting sailings." The industry consolidation in the form of alliances "made this easier to achieve logistically" and "the over-correction of capacity on many routes proved to be a significant excess of demand over supply".
The latest shipping report from investment bank Jefferies notes that container freight rates are currently near record levels, with the Shanghai Export Container Freight Index (SCFI) at around US$2,600/TEU, which, while down 10% from its mid-January high, is still 190% higher than a year ago and 25.3% higher than the average for the first week of April over the past five years.
Jefferies said, "The average SCFI price reached a record $1,234 last year and we expect things to be much better in 2021 as high market demand for cargoes persists."
Torsten Holst Pedersen, chief operating officer of Seaspan, the world's largest independent containership owner, recently said he was very confident in the current containership market, which is the main reason why the company has accumulated 37 large containerships on order since the second half of last year. Since the end of last year, the company has been on an order spree in the newbuilding market, with a total of 37 mega containerships ordered so far and a number of containerships acquired.
Seaspan believes that the fundamentals of the container shipping market will remain strong for the next few years, and Torsten Holst Pedersen says that the boom in the market may continue into 2023-2024. This is not only because of the good market in unusual conditions brought about by the new crown epidemic, but also because of a major reason based on the long-term development of the market - the low number of new ship orders.
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