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Cosco places order for 11 new ships

By Moshood Aliyu, with agency report
16 September 2015   |   1:24 am
CHINA COSCO Holdings Company Limited has placed an order for construction of eleven 19,000 TEU container ships worth $1.5. Billion.

shipCHINA COSCO Holdings Company Limited has placed an order for construction of eleven 19,000 TEU container ships worth $1.5. Billion.

Under the deal,  six box ships will be built by Dalian Cosco KHI Ship Engineering (DACKS) and Nantong Cosco KHI Ship Engineering (NACKS), Waigaoqiao Shipbuilding will be in charge of building three boxships, and the remaining two will be built by Dalian Shipbuilding Industry, COSCO said in a filing to Shanghai stock exchange.

COSCO added that it would finance the deal from internal sources and bank loans.
The ultra-large container carriers (ULCC) are expected to be delivered in 2018 within the framework of the shipping company’s fleet renewal plan.

As World Maritime News reported earlier, the order was being agreed upon as early as April this year and it has been triggered by the growing pressure from the competition despite the overall overcapacity in the sector and declining freight rates.

COSCO is the latest shipping major to join the ULCC race that includes Maersk Line’s order for 11 container vessels with a capacity of 19,630 TEU each at Daewoo Shipbuilding & Marine Engineering (DSME), OOCL’s order for six mega containerships that will feature 21,100 TEU units, as announced by their builder, South Korean Samsung Heavy Industries (SHI), along with Japanese Mitsui O.S.K. Lines, Ltd. which has six 20, 000 TEU boxhips on order and French liner company CMA CGM which has ordered three 20,600 TEU boxships at Hanjin Heavy Industries.

Meanwhile, the increase in the size of containerships and the formation of mega shipping alliances has created challenges for terminals operators worldwide, said London’s Drewry Maritime Research.

According to Drewry’s 2015 Global Container Operators Annual Report, the rising port demands of mega ships is the driver for terminal operators to make significant investments,
Drewry predicts that global port demand will grow at an average of 4.5 per cent a year through to 2019, equating to an additional 168 million TEU.

This would bring the annual global total to almost 850 million TEU and make Asia the star performer accounting for more than 60 per cent of box growth during the period.

The response from the major international operators is to make big investments in additional capacity over the next five years, says Drewry.

It notes that port operators are often units of shipping lines themselves, that “have little or no expansion plans”. Indeed, some ocean carriers have sold terminal assets to raise cash to prop up under-pressure balance sheets.

One of the report’s authors, analyst Neil Davidson, according to worldmaritime news owns and operating international container terminals remained a profitable business despite the “significant challenges ahead”.

Operating profit for international terminal operators remains in the range from 20-45 per cent and the 2014 financial results were much in line with previous years, he said.

This illustrate the consistency and reliability of container terminal operators’ profitability,” he said. “However, maintaining these margins will become increasingly challenging in the face of the demands created by bigger ships and alliances.”

APM Terminals and DP World are the most active terminal operators in terms of the number of new projects scheduled, but Singapore’s PSA International is adding the most capacity, particularly in its homeport, says the report.

Hutchison, CMA CGM, TIL and ICTSI also have significant plans, with the latter’s expansion representing a 40 per cent increase over the current capacity of its portfolio, said the report.
Also, pace of new mega-ship deliveries is expected to pick up in 2017. All are to be deployed on the Asia-Europe trades.

Already, 37 ships of 13,800-20,000 Twenty-foot Equivalent Units (TEU) have been delivered so far this year.

A further 13 ships within this size range are due to be delivered by December, again all are bound for the same tradelane, reports Alphaliner.

Next year deliveries of ships of this size will drop to 37, including thirteen 19,000- to 20,000-TEU vessels, 11 of which are to be taken in charge by Italian-Swiss Mediterranean Shipping Company (MSC).

The large number of mega-ship deliveries this year has resulted in a 2.3 per cent hike in total weekly capacity provided year-to-date on the Asia-North Europe tradelane, compared to the same period last year.