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Carriers head to yards for ULC orders

After a long hiatus, yards prepare for another swathe of large ship orders. Both Evergreen and Hapag-Lloyd are believed to be looking for new vessels

Mid-range carriers look to upsize their fleets to stay competitive

EVERGREEN and Hapag-Lloyd are believed to be pondering orders for super-sized containerships, as the two carriers are compelled to follow the bigger players and remain competitive

The Taiwanese and German shipping lines have reached out to yards in Asia separately, in quest of up to 15 newbuilding 23,000 teu vessels with a combined value of about $2.2bn, according to a Wall Street Journal report

Evergreen was seeking eight to nine ships, while Hapag Lloyd was looking for six units.

A major yard in China has been approached by the two carriers for tenders, an executive confirmed, adding the quality of the Chinese-made vessels were now very close to those made in South Korea, with a price advantage of 5%-10%.

But he noted the South Korean yards have become more aggressive on pricing in recent years, with a less sufficient backlog. “The South Korean yards are hungrier than us.”

The executive added the owners this time are open to dual-fuel designs, although they appeared more inclined to build ships with just conventional engine systems that burn fuel oils.

In response to questions, Evergreen said in statement that it “continues monitoring market development and customer demand, adopts advanced shipbuilding technologies to introduce the most suitable vessel types in line with the line’s stringent eco-friendly criteria for fleet renewal”.

“After the negotiations with tonnage suppliers are completed, information about our newbuilding programmes or charter parties will be announced as required by authorities concerned.”

A spokesman for Hapag-Lloyd said: “We are always looking at the potential of bringing new ships into the fleet. We regularly do this, but there will be no short-term decision on anything.”

Hapag-Lloyd, which has seen its fleet grow to 1.7m teu through its merger with United Arab Shipping, currently has no new ships on order.

Previously, the German carrier has indicated a cautious approach to fleet expansion. In its latest annual report, it said that at the end of 2018 the average age of its fleet was just 7.9 years, and the average size of its vessels was 7,240 teu.

Speaking at the launch of its Strategy 2023 programme last year, chief executive Rolf Habben Jansen indicated he would only order more ships when market conditions allowed.

“Everyone knows that if you do not have a strong track record today and you are starting to invest a lot, the risk that you do not survive in another crisis is relatively high,” he said.

“At Hapag-Lloyd, we are more cautious. In the future, the next few years will not look so bad, and when it is needed again, we'll be ready and able to invest without risking the whole business.”

Nevertheless, Hapag-Lloyd has ordered no new ships since 2015, and Mr Habben Jansen’s reticence has always been in the short to medium term. After a four-year hiatus, it will require new, larger ships if it is to remain competitive with its rivals and maintain its position as the fifth-largest carrier by capacity.

Jason Chiang, director of Ocean Shipping Consultants, described Evergreen and Hapag-Lloyd as the “middle of the pack” of container shipping lines that are not small enough to compete in the feeder services segment. 

“They have the opportunity now to tap a softer shipbuilding market to get better newbuilding prices compared to those previously offered to their larger rivals,” he said. “Mid-sized container shipping lines face the risk of having to fold if they do not invest in new, larger boxships that can compete in the market.

“If Hapag-Lloyd and Evergreen proceed with the newbuilding orders, it is likely they will retire existing tonnage that may no longer be competitive in the near future.”

Financiers in China have also smelled the opportunities.

One executive from a major shipping leasing house said the company is interested in funding the deals, although discussions about the orders were still at an early stage.

Another Chinese lessor said the ordering interest from Evergreen and Hapag-Lloyd was more of a defensive move, as the leading carriers have already equipped with a large amount of modern 20,000 teu-class ships.

“They are just followers. If they do not follow, they will drop out.”

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