Global container fleet swells to 23m TEU - scrapping slows and demand weakens

So far this year 826,000 TEU of cellular capacity on some 108 vessels has been received by liner operators, raising the total global containership fleet capacity to 23 million TEU, according to Alphaliner data.

However, the newbuilds, mostly consisting of ultra large container vessels (ULCVs), have arrived at a time of weaker demand growth across the world's major tradelanes, which is driving shipping lines to cancel a significant number of headhaul sailings, reported London's Loadstar.

Indeed, 2M partners, Maersk and MSC have just announced that the 'temporary suspension' of their AE2/Swan Asia-North Europe loop would commence one week earlier than planned, with the final schedule sailing from Qingdao on September 25 also being cancelled.

Ocean carriers received 91,000 TEU of newbuild tonnage in the last week alone, including two further MSC Gulsun-series 23,000 TEU+ vessels; the 21,230 TEU Cosco Shipping Planet and the 20,240 TEU Ever Globe.

Most of the new mega ships will be deployed on the Asia-Europe tradelane, triggering a cascading affect that will push the incumbent tonnage to secondary routes which is likely to pull down freight rates in those markets.

The scrapping of older ships has stalled, with only 165,000 TEU reported to have been sold for demolition to date, due to a strong charter market driven by the demand for substitute vessels to cover scrubber installations on the existing fleet.

'Some of the demand increase since June is related to vessel downtime for scrubber installations. A total of 44 ships with an overall capacity of 465,000 TEU are currently undergoing retrofit work at various shipyards,' said Alphaliner.

Brokers in London and Hamburg have confirmed to The Loadstar in recent weeks that open mid-sized container tonnage has become 'very scarce', especially in the panamax and above sectors, and there are anecdotal reports of daily hire rates doubling within six months for the most sought-after ships.

However, this artificial charter market demand, caused by the looming International Maritime Organization's 0.5 per cent sulphur cap regulations on marine fuels, is masking the weakening fundamentals of global trade.

Last week, shipping association Bimco reiterated its expectation for containership scrapping at some 200,000 TEU for the full year but warned that the 'fundamental balance of the container shipping market will worsen this year'.

 

Container shipping’s oligopoly status is helping to stabilise rates

Global container shipping can expect to enjoy less volatility in freight rates, though not necessarily higher rates, in a market marked by slow demand growth and reduced competition for market share amongst liners.

Following a period of deep consolidation that resulted in just three main alliances – namely THE Alliance, Ocean Alliance, and 2M – the boxship market has reached an oligopoly status, especially on the major trade lanes, according to Lars Jensen, ceo and partner of SeaIntelligence Consulting.

“We have seen, over the last few years, the emergence of oligopoly and carriers are finally figuring out how consolidation can stabilise the market,” Jensen told delegates at the Shipping 2030 Asia conference in Singapore, organised by KNect365 Maritime.

“The volatility of freight rates has declined but that does not necessarily mean higher rates – just more stabilised,” he observed.

Jensen added that the market can also expect global demand growth to enter a “new norm” of 2-3%, and container shipping can forget about the multiplier effect linked for each percentage of GDP growth.

Demand growth is expected to be in the range of 1-1.5% this year, following negative growth registered in December 2018, and January-February 2019. Moreover, the demand growth is not evenly distributed, with Europe being a more positive market both for import and export, while North America has been volatile and may experience negative demand growth in the next few years.

“Europe will be the main driver for demand growth this year. The good thing is that the market is now having record low orderbook and the installation of scrubbers is pulling some capacity out of the market,” Jensen said.

“We are looking at 2% capacity growth in 2019 and probably into 2020 as well,” he said.

In addition, carriers have looked into a more structured and systematic approach to blank sailings, contributing to better managing capacity.

And while the sizes of ships are getting bigger, that process has been accompanied by a decline in the number of services as well as the consolidation effect leading to ‘less’ number of shipping lines.

“If we looked back at three to four years ago, carriers were looking at growth via fleet expansion and widening of market share. This has changed. Today, it is about looking at how to manage capacity and the stabilisation of financing,” he said.

Incheon port to install its first cold ironing system

South Korea’s Incheon port is set to welcome its first shore-to-ship power solution in a move to cut emissions, noise and vibrations for passenger vessels at berth.

ABB has secured the contract to install the shore-to-ship system, after a pilot scheme for passenger ships to plug into the local grid received the go-ahead from Incheon Port Authority (IPA).

“As the first agreement covering shore-to-ship power in South Korea, this is a truly significant breakthrough for ABB. We are honoured to be selected by IPA to support their efforts in reducing greenhouse gas emissions from ships, as well as moving towards increasingly sustainable port operations,” said Juha Koskela, managing director, ABB Marine & Ports.

ABB’s shore-to-ship power technology is proven from the performance and reliability point of view, but also in terms of optimising the cost of electricity. It has already been integrated by over 50 ports around the world into strategies that reduce emissions overall and incentivise clean shipping.

An increasing number of ports around the world offer shore power, or cold ironing, for ferries as well as other passenger vessel types.

ABB noted that there is a clear interest to lower pollution in ports, and one way of doing that is to install shore power and have a clean grid feeding to it. 

Intra-Asian and feeder container lines more resilient than their European cousins

Container mainline operators have not taken market share in the fast growing intra-Asian region from shortsea and feeder lines in the way they have in the European market, according to Maritime Strategies International (MSI).

“The mainline operator share of the intra-Europe, shortsea and feeder capacity has increased substantially over the last six years,” David Jordan, regional director, Asia for MSI, told Global Liner Shipping Asia conference in Singapore, organised by KNect365 Maritime, earlier this week.

The mainline operators dominate the intra-European market and have seen their share rise from 59% to 66% of the market.

“In contrast shortsea and feeder operators have lost market share dipping from around 41% in January 2013 to just around a third in August this year.”

Jordan said this had been caused by a combination of some shortsea players losing market share and others closing down altogether.

But it’s a different story in the fast growing intra-Asian market where while the mainlines have grown their market share the intra-regional and feeder operators have maintained a majority of the market.

Jordan said that the intra-Asian market had seen a 40% growth in capacity over the last six years to around 2m teu.

“Mainline operator share has increased from 32% to 38%, which is a relatively modest increase and is largely due to the shortsea and feeder operators on the intra-Asia market really maintaining their share of capacity,” he explained.

“There has been a lot more resiliency for smaller owner/operators in the intra-Asia market.”

Panama and Singapore ink agreement to strengthen maritime relations

A high-level delegation from Singapore, led by Lam Pin Min, Senior Minister of State for Transport and Senior Minister of State for Health visited Panama, meeting for the first time with officials of Panama’s new government.

He was accompanied by Mary Seet-Cheng, Non-Resident Ambassador of Singapore to Panama, as well as officials from the Ministry of Transport, Ministry of Foreign Affairs, the Maritime and Port Authority of Singapore (MPA) and Enterprise Singapore.

During the visit, Quah Ley Hoon, chief executive of the Maritime Port Authority (MPA) of Singapore and Noriel Araúz, Minister of Maritime Affairs and Administrator of the Panama Maritime Authority (AMP) signed a Memorandum of Understanding (MoU) to strengthen maritime relations between both countries.

Under this MoU, the maritime authorities of Panama and Singapore will co-operate on maritime matters including the promotion of the use and acceptance of ship’s electronic certificates to facilitate port state inspections, the exercise of port state control (PSC) inspections by both countries, as well as personnel exchange.

Vessels registered with either Panama or Singapore calling at each other’s ports will benefit from faster checks and clearances. The use of electronic certificates and cooperation on PSC reduces administrative burden of issuing, sending and keeping hard-copy certificates on board, facilitates regulatory oversight and enforcement action by the authorities and expedites port clearances.

“The Singapore and Panama ship registries are among the largest in the world. This cooperation will strengthen maritime relations between our two countries. It will also yield significant benefits through speedier port clearances for vessels registered with our two countries calling at our ports,” said Minister Lam.

“Panama’s and Singapore’s maritime sectors have always had excellent relations but this MoU between our countries will address important technical issues for both Ship Registries. We are pleased to cooperate and bring to our customers and ship owners the most advanced technologies to alleviate the administrative burden and facilitate access to port state inspections, port state control inspections, and port clearances. It will be of great benefit for Singapore and Panama Ship Registries,” said Araúz, who was designated Minister of Maritime Affairs and head of AMP in July 2019 by President Laurentino Cortizo.

After the hype – Blockchain in shipping needs a change in mindset: SAP

As the hype around blockchain in shipping dies down software provider SAP believes there are still exciting opportunities to digitise paper processes, but will take time as it requires a change in mindset across all parties in the supply chain.

Speaking at the Shipping 2030 Asia conference in Singapore Stefan Sauer, industry business unit travel & transportation cargo transportation for SAP, noted that blockchain now appeared somewhere between the peak and the trough in the Gartner Hype Cycle.

From the initial excitement of possibilities of blockchain many who looked at it to solve problems, but were not really sure what problem it was they wanted to be solved, are now somewhat disillusioned.

A use case for blockchain

“Blockchain is a technology and you need to come up with a use case that makes use of that technology to transform a process,” Sauer said. “From a software vendor perspective we want to build use cases that make sense and bring your industry forward and who is the best one to understand what brings an industry forward than the industry itself.”

While there is a business case for digitising the Bill of Lading, which Sauer noted probably travels more miles than the container which it documents, it is yet to gain wide-scale acceptance or use. TradeLens – the venture founded by Maersk and IBM being the possible exception.

“But why, apart from TradeLens, is this technology not used?” Sauer asked at the conference organised by KNect365 Maritime.

Concert ticket journey

He likened what needs to happen now to how, for example, concert tickets have gone from paper tickets; to paper tickets with a barcode; to using the barcode rather than tearing the ticket stub; to finally a digital ticket in the form of a QR Code. “That is the journey shipping needs to make – the digitisation of those pieces of paper.”

But unlike the concert promotor and ticket buyer relationship there are many more parties involved making shipping’s journey to digitise the Bill of Lading much more complex.

“There has to be a journey not only from a technology point of view but most importantly our mindset point of view. We have the ports, the customer, the consignee, the ports, the shipper, the port authority, the banks, the insurers need to change their minds to appreciate and accept a bill of lading doesn’t have to be a piece of paper in an envelope that is mailed from the other side of the world,” Sauer explained.

Changing mindset

Certain parties in this chain could prove more difficult in changing their mindset than others, with customs and import/export ports highlighted.
So for shipping to get to the destination of fully digital paper processes he believes “baby steps” are necessary slicing the chain into individual sections. For example a shipping line that also owns terminals could starting using digital documentation between the two. Over time it could be expanded to other parts of the chain as it gains acceptance.

“We can’t expect blockchain to be the holy grail in a year. It will take time,” he concluded.

(Source: World maritime news; Seatrade maritime; American Shipper; VN Customs News)