White Elephants On Parade

AXS-Alphaliner, the Paris-based analyst, has stated in its weekly newsletter that the “wind of secrecy sweeping the container shipping world” has made it increasingly more difficult to get information on newbuilds because contracts have become cloaked with privacy clauses. Data nowadays only drips out from listed shipyards or by way of errant press releases.

“The times when carriers (and shipyards) were proud of announcing new orders for big ships are clearly over. This renders difficult the reliable assessment of the future supply, especially for years as far as 2010 or 2011,” AXS said.

The analyst warned that such incomplete and inaccurate reporting will lead to an understatement of future capacity and a consequent supply and demand imbalance.

“Keeping a veil of secrecy on orders will keep forecast figures foggy, probably leading to understatements of future fleet capacity. Since future supply is used in the decision processing in ordering, underestimated figures could lead to more orders than reasonable, with at the end of the day difficult times to fill all the leviathans to come.

“Given the secrecy surrounding orders in today’s competition climate, it cannot be excluded that a few carriers have booked their own series without info leaking. Further, whole series of 12,500-TEU to 13,500-TEU ships are indeed known to be in the pipeline.”

Investment Bank Dresdner Kleinwort said orders for container ships scheduled for delivery in 2009 and 2010 are “daunting” and noted that capacity is already being moved to Asia/European routes because of weakness in the transatlantic and transpacific trades.

According to the bank’s team of shipping analysts, “Looking ahead to 2008, the transpacific trade will need to see an acceleration in volume growth to absorb the capacity increase, while Asia/Europe will need to maintain the current growth rate. A lack of acceleration in U.S. imports or a slowdown in European imports would lead to a deterioration in the fragile supply/demand balance.”

Once again we’re reminded of Tommy Stramer’s concerns with respect to capacity and capability. It was obvious to Tommy, and others, that inefficient terminal operations and delivery methods would be unable to accommodate the large numbers of megaships being ordered by carriers.

“Once all these ships come into play, there are definitely a number of areas that are going to be real issues in accommodating them”, said Rainer Dehe of Hamburg Sud. “Where in the past there would have been a slight delay with these vessels, now there will be more frequently a domino effect.”

But the “lack of acceleration in U.S. imports” is already upon us, and the vessel overcapacity which follows will guarantee that disastrous “domino effect”. Tommy Stramer was right when he predicted that, “… the new ships of 8,000-TEUs-plus will be just another white elephant in the industry.”