Chinese shipyards win again! This shipping giant has placed a high-priced order for 12 car carriers.

The decline in car carrier freight rates has not weakened shipowners' willingness to continue investing in and ordering new vessels. Singapore shipping giant Eastern Pacific Shipping (EPS) has made its first major investment in medium-sized vessels, signing a large order for 12 new vessels at two Chinese shipyards.

According to TradeWinds, EPS has signed orders for a total of 12 5,500-car capacity LNG dual-fuel car carriers with China Merchants Industry Nanjing Jinling and Mawei Shipbuilding, with Mawei Shipbuilding receiving 4+4 vessels and Nanjing Jinling receiving 2+2 vessels. Each of these new vessels costs approximately US$80 million, and the total amount will reach US$960 million (approximately RMB 6.953 billion) after all optional orders are confirmed and take effect.

Some of the new vessels will be chartered to Spanish RoRo car carrier operator Suardiaz Shipping Lines, with the specific lease term and daily charter rate yet to be announced.

Last week, Mawei Shipbuilding just announced that it had joined forces with Xiamen Shipbuilding Industry Co., Ltd. to sign a contract with EPS for 4+4 5,500-car dual-fuel car carriers. Clarkson's data shows that these four new vessels will be built by Xiamen Shipbuilding Industry Co., Ltd., with delivery scheduled for 2027.

According to the introduction, this series of 5,500-car dual-fuel car carriers are designed by SDARI, with an overall length of 190 meters, a width of 35.6 meters, a depth of 14.10 meters, a design draft of 8.3 meters, a maximum draft of 9.5 meters, a deadweight of approximately 7,800 tons, and a speed of no less than 18 knots. The vessel adopts an electric RORO system, with a total of 11 decks, of which 4, 6, and 8 are movable decks, used for unlimited navigation areas (except polar waters), capable of transporting passenger cars, vans, buses, trucks, container trailers and other high and heavy RoRo cargo, as well as new energy vehicles and dangerous goods packaged within the IMDG regulations.

EPS's new order is the largest investment in the medium-sized car carrier construction sector in recent years. Although new orders for car carriers have remained high since 2021, the ordered vessel types have mainly concentrated in the large vessel market of 6,000 car spaces and above, while orders in the small and medium-sized vessel sector have been few and far between.

Clarkson's data shows that the current global backlog of car carriers totals 205 vessels, but in the medium-sized vessel sector of 4,000-5,999 car spaces, the backlog is only 8 vessels, including 4 4,200-car capacity car carriers ordered by Neptune Shipping from Mawei Shipbuilding in September last year and early this year, and 4 from EPS's latest order at Mawei Shipbuilding and Xiamen Shipbuilding Industry Co., Ltd.; in addition, there are 2 3,000-car capacity and 1 2,450-car capacity car carrier, with the remaining 194 vessels all being large vessels of 6,500-10,800 car spaces.

Industry insiders believe that these medium-sized car carriers ordered by EPS will likely be deployed on routes between China and Japan, the United States, Oceania, or within Europe. Considering that not all ports can accommodate large vessels of 9,000-10,000 car spaces, ordering such medium-sized vessels is necessary.

Experts point out that the purpose of ordering 5,500-car capacity medium-sized vessels is to renew the fleet for regional trade. Unlike large vessels, the backlog of medium-sized car carriers is very low. It is expected that after 2026, with the full implementation of carbon intensity indicators and EU FuelEU Maritime regulations, the medium-sized car carrier sector will usher in a new wave of orders.

However, shipowners may face challenges in getting shipyards to build medium-sized car carriers, as these medium-sized vessels occupy the same dock space as large 9,000-10,500 car capacity car carriers.

It is worth mentioning that as one of the most active shipowners in the car carrier order boom in the past few years, EPS's previous orders were all for 7,000-car capacity large vessels.

It is understood that since 2021, EPS has successively ordered 18 7,000-car capacity LNG dual-fuel car carriers, including 12 from Nanjing Jinling and 6 from China Merchants Industry Weihai Jinling, with an average price of approximately US$83 million per vessel, almost the same as the US$80 million per vessel for the company's latest order of 5,500-car capacity medium-sized vessels.

EPS is a well-known company with a 60-year history of excellence in the shipping industry, renowned for its commitment to green energy and at the forefront of integrating innovative technologies to drive its development and improve operational efficiency. Currently, EPS has 6,000 employees and manages a diversified fleet of over 270 vessels, including four core areas: container ships, dry bulk carriers, liquefied gas carriers, and tankers, with a total capacity of 28 million deadweight tons.

After four consecutive years of increases, car carrier freight rates fell for the first time since April this year. Clarkson's data shows that the one-year daily charter rates for 6,500-car capacity and 5,000-car capacity car carriers fell by US$5,000 in April to US$110,000 and US$90,000 respectively, and continued to fall by US$5,000 in May to US$105,000 and US$85,000 respectively.

Although the decline is not large, for the car carrier market, which has remained high for a long time, this is undoubtedly an important signal. Looking back over the past few years, the car carrier market has experienced significant fluctuations. According to Clarkson's data, the freight rates for these two types of vessels rose steadily after reaching their bottom in May 2020, reaching a historical high of US$115,000 and US$95,000 in October 2023, and this rental level was maintained until March this year.

The booming car carrier market is mainly due to the surge in China's car exports. According to statistics, China exported 4.91 million vehicles in 2023, a year-on-year increase of 57.9%, ranking first in the world for the first time. At the same time, 1.203 million new energy vehicles were exported in 2023, a year-on-year increase of 77.6%, accounting for nearly 1/4 of total car exports. In addition, suppressed demand after the COVID-19 pandemic and the increase in heavy industrial goods on board also provided impetus for market recovery.

At the same time, the new car carrier market has also been quite active in recent years. According to Clarkson's data, a total of 39 new car carrier orders were placed in 2021, exceeding the total orders of the past six years; in 2022, new orders increased to 77, and in 2023, they reached a record high of 85 vessels with 710,000 car spaces.

As of now this year, a total of 28 new car carrier orders have been placed. Except for the two 7,580-car capacity car carriers undertaken by Hyundai Mipo Dockyard (formerly Hyundai Mipo Dockyard) in South Korea, the remaining 26 orders have all been undertaken by Chinese shipbuilders. In this vessel type sector, Chinese shipbuilders continue to hold an absolute leading position.

Clarkson's data shows that the top eight shipyards with the largest car carrier order backlogs are all Chinese shipyards: Guangzhou Shipyard International (34 vessels), China Merchants Industry Nanjing Jinling (34 vessels), China Merchants Heavy Industry (Jiangsu) (29 vessels), CIMC Raffles (16 vessels), Waigaoqiao Shipbuilding (16 vessels), Xiamen Shipbuilding Industry Co., Ltd. (13 vessels), Mawei Shipbuilding (9 vessels), and China Merchants Industry Weihai Jinling (9 vessels).