Shipping lines continue to order new ships in a flat market

Shippers who are worried that the move towards alliances by the big container shipping lines might drive-up rates in the long-run can probably relax for the next few years at least.

The latest graph from Paris based shipping analysts, Alphaliner, shows that the container shipping sector is experiencing what it describes as a “surge” in orders for new large vessels. The order book is now equivalent to 21.5% of the existing container ship capacity. The level of new-building in ship-yards has fallen from the highs seen between 2005 and 2008 which saw orders equivalent to around 60% of the existing fleet but the present levels indicate that the sector will continue to be faced with additional capacity it will struggle to absorb.

The latest big order has been from the United Arab Shipping Company (UASC). Last week it announced it was planning to buy ten new vessels, with half being 18,000 TEU and the rest 14,000 TEU ships to rival Maersk’s E-class.

Drewry shipping consultants calculate that this purchase will increase UASC’s fleet by 60%, potentially propelling it into the ‘top 12’ of container shipping companies. That is until rival firms themselves make further orders. Despite the size of the order, UASC will still only have 2% of the total global fleet once the ships arrive in 2015. In addition Drewry observed that UASC is state-owned as is Coscon, CSCL and APL, with other East Asia carriers benefitting from “soft loans”. This is concerning as it suggests that capital might be being invested on a less commercial basis, something that could compound the long-standing tendency of the shipping sector to over-supply the market.

What does appear very likely is that with demand for container shipping growing much more slowly than the container shipping fleet, prices will remain low. Combined with an aircraft fleet which is also growing steadily and with both ships and aircraft increasingly fuel efficient, low prices will make sure the attractions of inter-continental freight movement will remain strong, possibly strong enough to dilute any trend towards near-sourcing.