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China yards dominate in boxship orders

Chinese shipyards hold the lion’s share of container ship orders, with at least half of vessels under construction, followed by 34% for South Korean yards and just 8% for Japanese yards.

The figures, pulled from S&P Global Intelligence’ Sea-web data, also show how the Japanese shipbuilding industry is declining due to cheaper manpower costs in China.

The statistics show that there are currently 876 container ships of 6.88 million TEU on order globally. Of these, 514 vessels of 3.66 million TEU, amounting to 53% of the global total, are being constructed in China. In South Korea, 266 container ships of 2.33 million TEU are being built. Japanese shipyards are building 85 boxships of 581,248 TEU.

The Chinese shipyards leading in the boxship orders are Yangzijiang Shipbuilding (holding orders of 94 ships), Shanghai Waigaoqiao Shipbuilding (34 ships), New Times Shipbuilding (31 ships), Jiangnan Shipyard (21 ships), and Hudong-Zhonghua Shipbuilding (16 ships).

S&P’s data showed that between 2009 and 2020, as the container freight market tanked following the global financial crisis in 2008, boxship newbuildings declined, totalling less than 2 million TEU in October 2020, a 17-year low.

However, the situation was reversed when container freight began rebounding in Q3 2020, due to Covid-19-related logistical bottlenecks, and the momentum has continued, albeit with some corrections.

As liner operators made high profits during the market boom, they gravitated towards vessel owning to manage rising charter costs. The data showed that over 50% of the newbuilding orders are from liner operators and the rest are from tonnage providers. MSC has the highest number of vessels under construction, with over 1.5 million TEU on order.

In 2021, container vessel newbuilding orders exceeded 4 million TEU and the current orderbook for container ships now surpasses that for bulk carriers and tankers, a historical first. This means that the current boxship orderbook is more than trebled from the low levels seen in October 2020.

In terms of vessel size, ships in the 12,000 to 17,000 TEU range are the most in demand, accounting for nearly 50% of all boxships on order.

Source: Container News

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Surge in shipbuilding raises potential oversupply concerns

While some shipyards struggled to stay afloat during the initial outbreak of Covid-19, the post-pandemic environment is predicted to usher in an encouraging era for shipyards’ orderbooks.

In 2020, orders for container ships fell to their lowest number in a decade and dry bulk and tanker orders experienced similar slumps. Both 2021 and 2022 saw an uptick in orders, and shipping analysts now predict that 2023 will again see high levels of orders across all sectors, raising concerns of a potential oversupply. Demand for newbuilds is such that many shipyards are finding it increasingly difficult to accommodate new orders.

Impact on financing

The enormous orderbook predicted for 2023 begs the question: where is the capital coming from to finance all these newbuilds?

The answer may lie in creative financing solutions and the diversification of funding sources. Earlier this year, it was announced that one shipowner secured financing for its dozens of newbuilds through various financing structures. These included a set of export credit agency backed loans, sale and leaseback arrangements, syndicated bank loans, and equity. Other shipowners have been seen to turn exclusively to sale and leaseback financing to fully cover their large newbuild programmes. Still, some continue to rely on traditional equity and debt finance.

It is clear, therefore, that despite this surge in orders, shipowners continue to seek, and find, diverse and alternative sources of ship finance.

Charter rates

Recently, charter rates have reached record-breaking highs, driven largely by the soaring demand for capacity following the post-pandemic boom. This lack of ships has given shipowners the upper hand in charter negotiations, allowing them to achieve higher rates and longer hire periods.

Accordingly, one could posit that this surge of newbuild orders may alleviate carriers’ concerns around the meteoric rise of charter rates. However, long lead times for newbuild orders will likely result in this additional capacity not being felt for some time. It remains to be seen whether charter rates will stabilise to pre-pandemic levels once newbuilds that are currently on order are eventually launched into operation.

A degree of caution should be exercised by owners if the increase in newbuild orders indeed leads to an oversupply of vessels. An increase in capacity will spell a decrease in charter rates. This may impact owners’ ability to pay back their financing obligations and care should be taken when negotiating employment contracts. While adequate protections should always be put in place to ensure timely repayment of loans and interest, concerns around this are likely to be exacerbated by fears of a drop in a vessel’s earning potential.

Source: Container News

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London Medway reports signficant growth in trade as congestion issues plague South East ports

London Medway, part of the Peel Ports Group, has reported a significant increase in unaccompanied freight trade in recent weeks, between the United Kingdom and France amid ongoing delays at the port of Dover.

The cross-channel service, which is run by DFDS, has seen a 34% increase in units in the last fortnight as congestion issues continue to plague South East ports, according to a statement, while the rise in demand for the service, between Sheerness and Calais, has seen individual vessels recently carrying more than 200 units and the route has proven extremely popular

“Peel Ports has argued for many years that the solution to the South East congestion is simple. Rather than travel as accompanied freight, cargo that is non-perishable can move on unaccompanied services through more reliable routes such as London Medway,” said Richard Goffin, port director at London Medway.

“Although the sea-leg is longer, routing via regional ports such as London Medway is just as efficient as the existing options through the Dover Straits, as road miles are reduced. These journeys also allow for clearance checks to be completed without the pressure of a 90-minute crossing increasing throughput and capacity,” he added.

The route also experienced a 30% increase in unit volumes between April and June this year compared to the last six months of 2021, during a time when Dover again faced issues with P&O.

The volume increases on the service, which launched in June 2021, have exceeded market expectations and support Peel Ports’ long-term future in delivering a viable and sustainable alternative route for the UK’s supply chain, according to Peel Ports’ statement.

“We’ve become dangerously reliant on Dover and the Channel Tunnel, with 75% of the trailer freight market between north-west Europe and Britain passing through this pinch point. The solution provided by DFDS and London Medway evidently works and it’s fantastic to see such a strong increase in trade, demonstrating the willingness of our supply chain to consider alternative route options that increase efficiency,” concluded Goffin.

Source: Container News

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Box lines continue to reap record profits, HMM reports US$4.6 billion earnings in 2022 H1

Container carriers continue to achieve record financial results in the post-Covid era with HMM announcing outstanding revenue and profits this time.

The South Korean box line achieved a net profit of US$4.6 billion in the first half of the year, reporting an outstanding 1,560% increase compared to the first six months of 2021.

HMM’s revenue also increased by 87% to US$7.6 billion, while operating profit rose 153% to US$4.6 billion in the first half of 2022. At the same time, the operating margin increased to 61% from 45% in H1 2021.

The company said the main reasons for its increased earnings were continuing high freight rates and efficient fleet operations

Additionally, HMM noted that the financial structure remained strong with its debt-to-equity ratio improved to 46% in June 2022, from 73% in December 2021.

The global supply chain is forecast to remain strained in the coming months, according to HMM, which, however, said  that “demand growth is expected to be under downward pressure due to considerable uncertainties mainly related to widespread inflation, rising oil prices and recurrent coronavirus situation, in addition to geopolitical tensions.”

HMM added, “Port congestion in major locations is still pervasive. In particular, growing concern about the logistics situation in North Europe is a major factor that will affect the supply chain.”

In July, the Seoul-headquartered container carrier unveiled a medium to long-term strategy to become a top-rated global shipping and logistics company.

Source: Container News

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Georgia Ports Authority reports 530,800 TEU in July

Georgia Ports Authority (GPA) has announced that the port of Savannah handled 530,800 TEU in July, which represents a 18% increase compared to the same month in 2021.

Since January, GPA has seen 3.4 million TEU, translating to a growth of 231,400 TEU or 7% compared to 2021 same period figures.

“The Port of Savannah has clearly become a preferred East Coast gateway for shippers globally, including cargo diverted from the US West Coast,” said GPA executive director, Griff Lynch, who went on to add, “Our expedited infrastructure projects, extended gate hours and the outstanding work of our employees and partners are key to our ability to move cargo at a record pace.”

GPA has shifted operations to start two hours earlier, with gates now open from 4 a.m. to 9 p.m. (local time) without interruption. Since the new hours were implemented on 1 August, the port has seen strong adoption from drivers, with 3,000 transactions completed in the 4 a.m. to 6 a.m. time block over the past week.

Port of Savannah’s gate operations averaged 15,000 truck movements per weekday in July, including import and export transactions.

Lynch noted that Savannah’s container operation is growing to meet the growing needs of existing and future customers.

GPA has eight new ship-to-shore cranes on order, with the first four arriving in February and the next four arriving by the end of 2023. Also, another large ship berth at the Garden City Terminal is 60% complete, with improvements scheduled to come online in July 2023.

The improved berth will add 1.4 million TEU of berth capacity, while the Garden City Terminal West project will add another 1 million TEU of container yard capacity in phases during 2023 and 2024.

Georgia Ports Authority will increase annual berth capacity from 6 million to 7.5 million TEU by next year and 9 million TEU by 2025. The GPA plans to spend US$4.5 billion over the next 12 years to expand its container handling capabilities.

“While the global logistics network has been challenged over the past two years, our message to customers is that at GPA, we’re continuing to build and expand,” said GPA chairman Joel Wooten.

“We’re moving forward with an aggressive plan to enhance our terminal operations and improve the rail connectivity to major commercial and manufacturing centers,” he pointed out.

Source: Container News

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Chittagong depots to raise charges by 42.5% amid diesel price hike

As the fuel oil price in Bangladesh saw a record hike on 5 August, the inland container depots in Chittagong have moved to raise diesel-linked service charges by 42.5% to meet up the costs arising.

The Chittagong inland container depots provide at least five types of services which are dependent on the use of diesel.

The depot owners informed the shipping agents and freight forwarders that they want to raise the charges for services like empty container haulage/ transportation, empty container lift-on/lift-off, export goods and container handling, export container verified gross mass (VGM) and package charge.

According to some depot owners, with the proposed rate hike, the depot charges for an import container will increase by nearly US$48/TEU and US$55/FEU.

On the other hand, export stuffing package charge for a TEU will increase by US$25 and for an FEU by US$33.

Nurul Qayyum Khan, president of Bangladesh Inland Container Depot Association (BICDA), said depots have no other option but to raise the charges as the fuel oil prices skyrocketed.

“We will hike the charges only those services which have links with diesel use,” he told Container News.

He noted the depot owners have individually informed the development to their customers. BICDA members will sit together soon and also have a meeting with the Bangladesh Shipping Agents Association to discuss the issue.

The last time BICDA raised charges by 23% was when the government increased fuel oil prices in November 2021.

Syed Mohammad Arif, chairman of Bangladesh Shipping Agents Association (BSAA), said under the 2016 ICD policy there was a committee of the ministry of shipping which had to oversee any kind of charge hike in the shipping sector.

However, the National Board of Revenue (NBR) created another ICD policy in 2021, which did not keep the committee looking after the charge hike issues.

Arif said he has unofficially requested a BICDA vice president not to raise charges on overall cost rather to enhance charge on actual cost hike.

Bangladeshi apparel shippers say the depot charge hike will come as another big blow to their trade as transportation charge is also rising.

Shahidullah Azim, acting president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Container News that BICDA last time increased charges on their will without discussion with the depot users.

“I will soon talk to the BICDA leadership on this issue,” he pointed out and added both the import and export costs will go up due to the charge hike lowering Bangladesh’s apparel sector’s competitiveness.

Source: Container News

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MSC commences new West Africa regional service

Mediterranean Shipping Company (MSC) has announced the launch of a new service to Bissau, the capital city of Guinea-Bissau, on the coast of West Africa, with connections via Las Palmas, the capital of Gran Canaria, one of Spain’s Canary Islands.

“This fortnightly service will enable import and export to/from Guinea Bissau via our transshipment hub Las Palmas in the Canary Islands, offering connections with the country’s main trade partners in Asia, Europe and South America East Coast,” said MSC in a statement.

The company believes that the new service, which is expected to start soon, will enhance its presence in the region, where MSC has already had a network of direct and feeder services connecting West Africa to the rest of the world.

Source: Container News

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Traffic restrictions cause congestion concerns for carriers at Nhava Sheva

Maersk Line has reported a slowdown in truck flows in/out of India’s Nhava Sheva Port/JNPT as a result of new traffic restrictions imposed by local authorities.

“Traffic Police have issued a notice on movements of heavy vehicles from Nhava Sheva CFS [container freight station]/yard,” the carrier said in a customer advisory. “Heavy vehicle movement from JNPT area is, therefore, leading to traffic congestion. All these restrictions are beyond our control and this may lead to delays.”

The carrier has called on cargo interests to plan their shipments in advance to avert cargo gate-in delays/roll-overs.

Historically, the bulk of containerised freight passing through terminals in Nhava Sheva is handled by road.

The port saw its highest monthly volume in the current fiscal year last month, handling some 503,500 TEU, up 16% year over year, according to the latest data.

As volumes expand, terminal stakeholders are showing greater interest in opening new rail connections. PSA Mumbai, also known as Bharat Mumbai Container Terminals (BMCT), recently secured two dedicated freight trains from a private rail operator for round-trip operations between Nhava Sheva and ICD Faridabad [inland container depot], targeting newsprint cargo that had traditionally moved via Mundra Port.

PSA has also added final-mile delivery service to the designated warehouse under this arrangement, contracted on a merchant haulage basis, versus liner haulage at Mundra.

According to port sources, average transit times from Nhava Sheva to North India are pegged at two days, versus four days from Mundra.

With a round-trip solution, sources noted that importers have an opportunity to reposition empty boxes back to storage yards in Nhava Sheva. This type of cargo is generally handled through direct port delivery (DPD) bookings, a fast-track clearance mode meant to improve dwell time levels.

“It’s a long-term business and a sustainable solution for the major newsprint importer,” an official told Container News. “We are also in discussions with other newsprint customers.”

Stakeholders are also hoping to see greater truck-to-train freight conversions with the soon-to-be completed dedicated freight corridor (DFC) connectivity.  The Western DFC is a 1,504-kilometer broad-gauge freight only network between Dadri ICD, a busy inland location in Uttar Pradesh, and Nhava Sheva.

The port has also begun operating freight trains loaded with “dwarf containers,” albeit on a limited schedule, to expand the intermodal leg in the supply chain. Dwarf containers are relatively shorter than conventional standard equipment, thereby helping attain higher payloads and consequent inland cost advantages for cargo owners.

Source: Container News

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Supply chains backed up on US East Coast, but free flowing pockets remain

Several major container ports on the US East Coast are experiencing elevated levels of congestion, but a few remain relatively free flowing and uncongested.

As container lines reposition services away from the US West Coast, where waiting times hit once in a generation levels over the global Covid-19 pandemic, the strain on East Coast logistics has increased considerably. Of the top ten US East Coast Container terminals, four currently exhibit long waiting times. These are New York and Elizabeth APM Terminals (both part of the Port of New York) and Garden City and Savannah Terminal (both Port of Savannah). As shown in the following figure, average waiting times at the Port of New York have oscillated between 20 and 50 hours for most of this year. This is far higher than last year’s levels, which rarely exceeded 20 hours, and the three average, which rarely exceeded 10 hours.

However, six of the top ten continue to function normally and exhibit relatively short waiting times. These are Norfolk International and Virginia International Gateway Terminals (both Port of Norfolk), Maher and Port Newark Terminals (both Port of New York), Packer Avenue Terminal (Port of Philadelphia) and Wando Welch Terminal (Port of Charleston). As shown in the following figure, average waiting times for container ships at Norfolk have rarely exceeded 6 hours in recent history and are currently almost nothing.

The four congested terminals are among the busiest on the US East Coast and handle bigger ships, including the biggest type, Ultra Large Container Vessels (ULCVs). However, of the six less congested terminals, Virginia International Gateway and Wando Welch have also handled ULCVs this year, so easier and faster transit for the biggest ships is still possible.

Shippers and Lines that have any flexibility in their schedules should consider alternative routes into key markets, such as the US East Coast.

Below, VesselsValue has noted the average waiting hours for container vessels at major ports on the West Coast of the United States and Houston.

Source: Container News

 

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First Russian ship arrives in Bangladesh since start of Ukraine war

A Russian ship reached Bangladesh’s Mongla seaport carrying equipment for Ruppur nuclear power plant on 1 August. This is the first Russian ship that arrived in Bangladesh since the Russian invasion of Ukraine in late February.

The heavy load carrier/general cargo carrier, Kamilla began a journey on 28 June from Russian Tamaruk Port carrying 3,328 tonnes of machinery for the power plant.

Mongla Port Authority chairman Rear Admiral Mohammad Musa said the arrival of vessels from Russia had remained suspended during the last couple of months due to the ongoing war. He believes that after Kamilla, more ships will follow the same route, as Bangladesh and Russia have good commercial relations.

Bangladesh’s major exports to Russia include apparel items, jute, frozen foods, tea, leather, home textiles and ceramic products to Russia. On the other hand, Bangladesh’s major imports from Russia are cereals, minerals, chemical products, plastic products, metal, machinery and mechanical equipment.

The two countries have a US$1 billion annual bilateral trade with Dhaka exports to Moscow worth US$547 million, while Russian exports to Bangladesh worth US$481 million.

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