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Ordering spree unlikely

World Maritime News
Wednesday, November 01, 2017

On the heels of the two orders by containership majors CMA CGM and MSC for 22,000 TEU ships, the market fears there is a risk other carriers might follow suit further distorting demand-supply balance, which is already suffering from tonnage oversupply.

To remind, Mediterranean Shipping Company has opted for Daewoo Shipbuilding and Marine Engineering (DSME) to build 11 22,000 TEU containerships for the company.

On the other hand, French liner CMA CGM has ordered nine 22,000 TEU containerships which will be built by Chinese shipyards Hudong-Zhonghua Shipbuilding and Shanghai Waigaoqiao Shipbuilding (SWS).

Shipping consultancy Drewry believes that the ordering spree for more megaships is unlikely due to a combination of financing constraints, latent market overcapacity and the size of the existing orderbook.

Namely, banks have reduced their financing of the highly volatile shipping sector amid regulatory pressures to increase impairments associated with shipping loans.

This has, in turn, resulted in shipping companies having to resort to alternative financing means which are rather scarce.

Furthermore, Drewry doesn't believe that a new generation of much larger vessels will emerge in the long term.

This is attributed to the diminishing economies and the fact that unit cost savings at sea are countered by higher costs at port.

As a result, this is expected to reduce the incentive to invest in ever larger vessels and act as a break on over ordering and excess capacity.

The port sector has already been faced with growing pressure from ever-larger ships as ports had to invest considerably in infrastructure so as to be able to accommodate these giants of the seas.








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