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Container ships are cargo ships that carry their entire load in truck-size intermodal containers, in a technique called containerization. They form a common means of commercial Container ships are designed so that no space is wasted. Capacity is measured in (TEU), the number of standard 20-foot containers measuring 20 × 8.0 × 8.5 meters) a vessel can carry. Up to a certain vessel size, the ships have their own cranes to load/unload the containers. Larger ships have to rely on the port loading/unloading systems.
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Container Market |
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Container trade has taken a beating in view of the global economic downturn. The US demand for containerized goods has reduced and this has been reflected in the container throughputs in Pacific ports. Trans-Pacific container volumes in 2009 are down almost by 25% as compared to 2008. Overall traffic in 2009 is expected to be 8 to 9 % lower than in 2008.
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The Howe Robinson Containership Charter Hire Index is an indicator of the health of the container shipping market. The decline in the market started well before the recession due to overcapacity. The index peaked at about 2000 points in the middle of 2005 and has been declining steadily.
The index was at 1335 at the beginning of 2008. Until April the index improved slightly to 1,382 points. Since then, the index has been dropping continuously. The index value published on December 3rd 2008 was 545 points, with which the index reached its low for the year so far. Compared with the beginning of the year, the index thus fell by almost 60 %. |
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Container Ship Fleet Profile |
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The container fleet consists of over 4770 vessels equivalent to about 165 million DWT. The fleet is quite young with an average age of 10.7 years. However, about 17% of the fleet by number is older than 20 years and is likely to head for the demolition beaches. The top 10 container ship companies have nearly 60% of the market share by fleet capacity. The top companies are APM - Maersk, Mediterranean Shipping Ltd., CMA CGM Group, Evergreen Line, etc.
There are 18 cellular containers amounting to 270,000 DWT, with an average age of 19 years and 3 container ships amounting to 126,000 DWT, two of which were bought in 2008 by SCI and one in 1995 by Gati Ltd. in the Indian register. All of them are used in overseas trade. The leading containership owning companies in India are Shipping Corporation of India (SCI), Shreyas Shipping Ltd., Jindal Waterways Ltd., etc.
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In 2008, around 60 container ships with a combined capacity of almost 100,000 TEU were scrapped, and demolition increased substantially in the fourth quarter of the year, i.e. after the recession hit. This escalating scrapping coincided with the first major downturn in global box trade growth since 2001. Over full year 2008, global box trade is estimated to have grown by just 4.5%, thanks to the high growth during the first half of 2008.
It seems 2009 will see a much higher amount of demolitions with the first three months of the year witnessing 36 ships amounting to 57,000 TEU being sold for scrap. With a predicted 3.0% contraction in global box trade in 2009, more than 200,000 TEU of fully cellular capacity is now projected to be scrapped.
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Future Outlook |
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With a young fleet, low charter rates, large orderbook and increasing bunker prices, the near term future does not look good. Following are some of the ways in which the situation can be improved:
Demolitions: About 17% of the containership is older than 20 years old, scrapping these will reduce some of the existing tonnage.
Order Cancellations/Delays: More than 40% of the current fleet by volume is on the order book. Cancellations of part of these orders, or even a delay in the deliveries will prevent rise in excess tonnage. This is very likely given the current credit crunch.
Lay ups: Laying up of excess tonnage is another option being considered. As per some estimates, more than 650 ships could be laid up by 2011.
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Slow Steaming: In view of rising oil prices, companies like Maersk are considering intentionaly plying container ships at lower speed. They claim to reduce CO2 emissions, save fuel and deliver the same cargo, provided an extra ship is used in a loop of 8. If oil prices keep rising, this may be a viable option, which will utilize some of the excess tonnage.
In the long term, there is cause for optimism as there is a vast untapped potential for containerized cargo in developing economies like India. JNPT is adding a 4th container terminal to its existing facilities, Mundra port which specializes in container cargo is also expanding facilities. Several Indian port operators are acquiring Inland Container Depots (ICDs). Containerized trade is just picking up in India, and this will provide a big new market in the future.
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