BUOYANT LINERS ADD RECORD NUMBERS OF NEWBUILDS

Capacity ordered in the first quarter of 2021 has already reached 1,398,000 teu, a six-year-high compared to previous full years.

Written by Sam Chambers                                                   08/04/2021

March saw a stunning 866,060 teu of new tonnage ordered, almost the same as was contracted throughout the whole of 2020, as the cash-rich sector starts spending some of its recent gains.

According to data from shipowning organisation BIMCO, 45 ultra-large containerships with capacities in excess of 15,000 teu were placed last month as well as 27 smaller sized ships.

“The turnaround for the container shipping sector offers a glimpse of the level of confidence currently seen in the business on behalf of owners as well as investors,” BIMCO stated in an update yesterday.

In all of 2020, a total 995,000 teu of container shipping capacity was ordered. Capacity ordered in the first quarter of 2021 has already reached 1,398,000 teu, a six-year-high compared to previous full years. The orderbook to extant fleet ratio – in single digits for most of last year – has leapt to above 15% in recent days.

“Ultra-large containerships are the preferred choice of weapon in the arms race of the container shipping industry seeking to improve long-term profitability,” commented Peter Sand, BIMCO’s chief shipping analyst

In terms of profits, liners are basking in record territory. The bottom line for the container shipping industry in the final quarter of 2020 was net income of $9.1bn, according to a recent report from Blue Alpha Capital, a $9.1bn improvement from the year ago breakeven quarter result. The fourth quarter profit was a $4bn sequential gain from the $5.1bn earned in the third quarter. Typically the fourth quarter is a falloff from third quarter performance that is traditionally the strongest owing to retailer shipments for the holiday season.

“In almost all measures, the 4Q20 results were the best actual quarterly performance by the container shipping industry in its history,” Blue Alpha Capital stated.

The fourth quarter results brought the full year 2020 net income to $15.2bn for the liner industry, which is the best industry annual result since at least before the financial crisis.

Looking at the container shipping operations of the nine leading carriers reporting public numbers Alphaliner noted this week the results follow an average operating margin of 24.5% in the last quarter of 2020 based on a non-weighted average, with six lines either close to or above margins of 30%, something unheard of in liner history.

Liners are widely expected to report stunning results for Q1. For example, Cosco Shipping, the world’s fourth largest liner, on Tuesday said it expected this year’s first quarter net profit to total RMB15.41bn ($2.3bn), hugely up from the $44m for the first three months of 2020.

“Momentum and current conditions indicate strong positive bottom line comparisons for at least the next two quarters,” Blue Alpha Capital stated on overall liner prospects. Blue Alpha Capital is led by American liner veteran, John McCown

A new shipping report from investment bank Jefferies points out that container rates are currently near all-time highs with the Shanghai Containerised Freight Index (SCFI) at around $2,600 per teu, down 10% from the highs seen in mid-January, but still 190% higher year-on-year, and 253% higher than the trailing five-year average for the first week of April.

“The SCFI averaged a record high last year of $1,234, and we expect 2021 to be much better as market conditions related to high demand for goods persists,” Jefferies predicted, suggesting that shippers are paying around 25% for their annual contracts being signed this month.

Jefferies expects containership fleet growth of 2.9% in 2021 and 2.4% in 2022.

Source: Splash247.com