Container shipping leads recovery... "Order volume to triple compared to last year"

Large Container Ships, Expected Orders of 90 Units This Year
More Than Triple the 25 Units from 6 Months Ago
High-Priced Ship Orders Due to Container Freight Rates and Environmental Regulations

In February this year, export and import containers were stacked at Pyeongtaek Port as seen from a Seoul Metropolitan Police Agency helicopter. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Choi Dae-yeol] It is forecasted that new orders for large container ships will significantly increase this year. Until the third quarter of last year, it was expected that the annual order volume in 2020 would not be reached, but the trend has changed within six months.

According to Clarkson Research, a shipbuilding and shipping market analysis firm, as of March this year, the expected order volume for 15,000 TEU (1 TEU equals one 20ft container) class container ships is estimated to reach 90 vessels. This is more than 3.6 times the 25 vessels initially forecasted by the firm in September last year. The order volume for this ship type last year was a total of 32 vessels.

For somewhat smaller 12,000 to 15,000 TEU class container ships, about 40 new orders are expected. This is also an increase of 5 vessels compared to six months ago. Most major ship types, including Very Large Crude Carriers (VLCC, 35 vessels), Very Large Petrochemical Carriers (VLGC, 24 vessels), and Liquefied Natural Gas Carriers (LNGC, 44 vessels), have seen an increase in expected order volumes.

This is interpreted as reflecting the acceleration of vaccination rates mainly in developed countries and the economic recovery expectations due to large-scale stimulus measures. The fact that environmental regulations such as carbon dioxide emissions are being gradually strengthened at the level of international organizations like the International Maritime Organization (IMO) also stimulates new demand. In the past, ships mainly used bunker C fuel oil, but as regulations tighten, more shipowners are seeking dual-fuel (DF) ships that use LNG alongside other fuels. This ship type requires higher technological capabilities, an area where Korean shipbuilders have a relative advantage.

1,3800 TEU-class container ship built by Hyundai Heavy Industries

Daewoo Shipbuilding & Marine Engineering recently stated at a corporate briefing, "Container ships have a higher proportion of fossil fuel usage compared to other ship types, so the need for eco-friendly ship orders is expected to increase." They also noted, "The market conditions for VLCCs do not seem likely to improve easily," but added, "Following the eco-friendly trend, early disposal of aging ships and shipowners' continued interest in LNG-fueled propulsion ships in preparation for stricter regulations could act as a catalyst for improving order sentiment."

Korea Shipbuilding & Offshore Engineering also mentioned at a recent briefing held by a foreign securities firm, "As traffic volume in the Asian region and major routes has increased, major freight rates have continuously risen," and "Demand for large container ships of 12,000 TEU class or above capable of dual-fuel propulsion is expected to increase."

Although there are some differences by ship type, new ship prices, which had gradually recovered after bottoming out in 2016-2017, plummeted last year. This was because ship orders stopped, and the workload at shipyards significantly decreased. From the shipyards' perspective, which must keep their docks constantly filled, they had no choice but to sign contracts without receiving proper prices.

Since the second half of last year, orders have gradually increased, and the order backlog is also steadily growing. In particular, the domestic shipbuilding industry is securing many new orders from global shipping companies by leveraging specialized technological capabilities for each major ship type. When docks are sufficiently filled, shipyards have greater negotiating power, such as selectively accepting orders. This means they can receive proper ship prices. The Clarkson Newbuilding Price Index slightly exceeded 130 at the end of last month, recovering to a level similar to that of 2019.

This content was produced with the assistance of AI translation services.