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Falling Confidence Cuts Container Ship Orders

Orders for new container ships have effectively 'hit the floor.'

By John McCloud | Updated on October 15, 2008

In a report with uncomfortable implications for industrial property owners and developers, Clarkson Research Services Ltd. reveals that orders for new container ships have effectively “hit the floor.” The London-based research company, a division of Clarkson, the world’s biggest ship broker, says sharp declines in vessel charter rates, ocean freight rates tumble and volume growth on key liner trade routes have all but curtailed not only new orders but even inquiries about potential orders. “With volumes and earnings stalling, owners’ taste for new builds has slowed right down,” says the report.

According to Containerisation International, the precipitous decline follows five years of historically high deliveries. Clarkson reports only 179 container ships contracted through August, a 49% decrease from the 355 ships put in contract for the same period a year ago. At the current rate, the year’s total would reach only 270 ships, compared to 530 in 2207, 479 in ’06 and a record 566 in ’05. The report says the industry has been experiencing a steep falloff in orders since Q4 ’07, with a single upward spike in June when Maersk posted an order for 70 new vessels.

Clarkson attributes the decline to what it calls “a good old double whammy” of slowing trade volumes and rising shipyard prices. On an annualized basis, global container trade growth this year has dropped below the double-digit level for the first time since ’01, leading to an approximately 20% slide in ocean freight rates and ship charter rates. Containerisation International says a 3,500-TEU gearless Panamax vessel earns $26,000 a day on charter, down from $29,500 a day in June and $38,000 a day in ’06.

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