Four vessels costing 4 billion yuan! This new shipowner dares to build large vessels against the trend.

2022-06-25 09:00

Despite the continuous decline in spot freight rates, the "frenzy" in the container shipping market continues. Last year, Boya International Shipping, a newly emerging Chinese shipping company that had just entered the trans-Pacific route, officially joined the shipbuilding industry.

According to sources, Boya International Shipping has signed an agreement with Jiangnan Shipyard to order 2+2 14,000TEU new Panamax container ships. The new ships will operate on traditional fuel, with each costing US$140 million to US$150 million. The total contract value is close to US$600 million (approximately RMB 4.018 billion), including the cost of desulfurization devices.

Boya International Shipping (BAL) is headquartered in Qingdao, Shandong, and belongs to LeCang Group. It has opened routes to Japan, South Korea, Southeast Asia, India, and the Middle East through self-operated routes and joint ventures with other liner companies. LeCang Group was founded in 2002. Its predecessor was Qingdao Boan Container Co., Ltd., whose main business covers route operation, supply chain management, container leasing, and shipping e-commerce platforms. In 2016, LeCang.com, the shipping e-commerce platform under LeCang Group, was listed on the NEEQ, known as the "first shipping e-commerce stock".

Boya International Shipping mainly engages in international container shipping, ship operation, and container operation, and is a core business segment of the group. The company was established in Hong Kong, China in August 2012, with its headquarters in Shanghai. The company holds an international liner transport operation license certified by the Ministry of Transport and is a Class A freight forwarding enterprise authorized by the Ministry of Foreign Economic Relations and Trade. It has formed a characteristic regional route focusing on Japan, South Korea, and Southeast Asia, and occupies an important position in the industry.

Last year, Boya International Shipping entered the trans-Pacific and Asia-Europe shipping markets. In May last year, it opened a China-US West Coast route and chartered multiple container ships at record rental levels. Official website information shows that Boya International Shipping currently operates 12 container ships, the largest of which is the 5075TEU container ship "CSL ATLANTIC". As of February 2022, the company's fleet had a container capacity of 32,083TEU, ranking 39th globally and 8th in China according to Alphaliner.

If the Jiangnan Shipyard order is confirmed, this will be the first batch of 10,000-TEU ships in Boya International Shipping's fleet. With the addition of the newly ordered two 14,000TEU container ships, the size of Boya International Shipping's fleet will almost double.

According to Clarksons' data, 12,000-16,999TEU new Panamax container ships are one of the hottest ship types in this round of ordering boom, with current outstanding orders as high as 227, far exceeding 8,000-11,999TEU new Panamax container ships (35) and 17,000TEU+ ultra-Panamax container ships (66). This type of ship can be deployed on almost all trade routes, making it very popular with container shipping companies.

According to International Ship Network, Jiangnan Shipyard is one of the main builders in this ship type market. Clarksons' data shows that Jiangnan Shipyard currently has a total of 15 outstanding orders for 12,000-16,999TEU container ships, ranking sixth globally, second only to Samsung Heavy Industries (43), Hyundai Heavy Industries (42), Daewoo Shipbuilding (26), Yangzijiang Shipbuilding (17), and Hyundai Mipo Dockyard (16) in South Korea.

In March this year, Jiangnan Shipyard just received an order for four 14,000TEU dual-fuel container ships from Singapore's Pacific International Lines. These four new ships were independently researched and designed by Jiangnan Shipyard, with complete independent intellectual property rights, and are expected to be delivered in the second half of 2024 to the first half of 2025.

It is understood that the Shanghai Containerized Freight Index (SCFI), which reflects spot market prices, has fallen for 17 consecutive weeks. As of June 17, the SCFI was 4221.96 points, down more than 17% year-to-date.

Due to the booming container shipping industry, shipping companies have actively placed orders for shipbuilding in recent years, and the outstanding order capacity has reached 20% of the existing capacity. The first batch of new ships will be delivered next year. Even if there are new environmental regulations next year restricting ship carbon emissions, which will help some ships to reduce speed or eliminate older ships, the overall capacity will still increase, and it is possible that the freight index will decrease by 30% next year.

The market is worried that the peak season in the third quarter of the container shipping market will not be strong. Moreover, the overall delivery of new ships will increase significantly next year, coupled with the adjustment of supply chain outsourcing after the epidemic, which may lead to a decline in the long-term global trade demand for container shipping capacity.

Søren Skou, CEO of Maersk Group, recently stated that the factors that previously drove the container shipping market during the first wave of the COVID-19 pandemic may reverse significantly after August, resulting in a "bullwhip effect" of shrinking demand and increased supply, impacting the container shipping market.

On June 22, Citigroup released its latest report analyzing the Asian shipping industry, believing that there is a risk of a demand recession in 2023. The Citigroup report pointed out that the two-year bull market cycle for container shipping may peak in September this year, as port congestion eases, demand may decrease, and capacity supply will begin to recover from March 2023.

Citigroup also warned that rising inflation may pressure consumer demand. Looking back at the cost-push inflation of 2007-08 and 2011-13, container demand will also weaken.

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