The containership market in 2004
 

Huge orderbook 
Charter fortunes 
The charter market 
Slot charters follow the trend
Long term charters
The fleet
The operators
The second-hand market

This time, the international trade is sitting on a much larger base than 35 years ago, both in commodity variety and in geographical pattern. One country has however become an essential wheel: China. It is estimated that it is at the origin of one third of the world trade growth last year.

With its economy growing at some 9 % a year and containerised exports reaching a 30 % annual increase, China is itself at the origin of the containership shortage and the concomitant unprecedented levels of charter rates. But China is not alone to fuel the shipping frenzy. First, and it is important, it is inseparable from the purchasing power of the USA and of Europe. Second, there are other countries which are also witnessing high levels of exports, such as India, Thailand, Vietnam and Chile.

The rise of the Euro against the US Dollar and Asian currencies has also implications on the containership demand. It makes Asian products, and especially Chinese ones, cheaper for Europe. All along the year, volumes have soared on the Far East-Europe route, which needs more ships than the Asia-US route because of the longer distances.

Shipowners, liner operators and port operators have been taken by surprise by this surge. They can hardly cope with the volumes. Ships are full to capacity out of Asia and there are not enough of them to scoop up all the boxes that flow out from this continent. The congestion of terminals, especially in Europe and the US, compounds the problem, as they cause delays to busy ships and disrupt the tight schedules of usually well oiled weekly loops. This is a challenge for 2005.

In order to save ships, liner operators have rearranged loops and have cut capacity on the comparatively stagnant transatlantic trade in order to send ships on busiest routes. The optimisation of a number of services has also led to a better overall filling ratio, especially at each end of the loops (even if it means filling with empty boxes, which cannot be discounted as they have to be repositioned in one way or another).

Owners of hired container tonnage are rewarded above all expectations, with charter rates which are 50 % higher than the historical peaks. Leading liner operators have anticipated a further rise in demand for 2005 and beyond by chartering ships for periods much longer than usual and have committed themselves in huge newbuilding programmes.

During the second half 2004, there has been intense chartering activity for ships to be delivered in 2005 so that the pool of ships left available has shrunken fast, which could in turn lead to a further round of charter rate rises once the Chinese New Year festivities (February) end.
 

In early 2005, the cellular ships orderbook stood at 3.9 million teu, representing 53 % of the existing fleet. As big as it is, it does not seem excessive, although it looks like somewhat on the high side, especially for the year 2007. The huge influx of capacity could reasonably be absorbed by the bullish international trade, itself supported by a strong world economic growth.

The world GNP growth has reached around 4-4.5 % in 2004 (against 2-3 % for the long term historical average). Although a slight softening is expected in 2005, the GNP growth should remain above the historical average, and this performance could be repeated in 2006, in the absence of unpredictable events.

As for the international trade, it is estimated to have grown by 7 % in US$ terms during 2004 (against 4-5 % for the long term average). Alas no figures are available in volumes, as it is difficult to assess because of the wide variety of goods.

The observation of long term trends shows that the cellular fleet has grown, roughly, twice as fast as the trade growth. It means that if the bullish trade growth of 7 % recorded for 2004 is to be prolonged during the next two or three years, then it will generate containerised volumes needing to be moved by a fleet growing at 14 % per annum. This is precisely the rate at which the fleet is expected to grow during the next three years, according to BRS-Alphaliner forecast.

Even in case of a softening, the supply-demand ratio of containerships is to remain on the owners side, at least in 2005 and 2006, because of the catch up effect: the shortage which has developed in 2004 must be compensated by deliveries higher than the natural growth.

Given this, the capacity coming on stream should be swiftly absorbed by the transportation demand during the coming months, while a return to a balanced supply-demand ratio could occur in 2006. This should mark a turning point in box rates and charter rates.

The situation in 2007 and beyond is another matter. Some forecasters say that the world economic and trade growths are to remain sustained for the remaining years of the decade, although not at 2004 levels as a softening is expected. The question is: what amplitude will take this softening ? The supply-demand balance for 2007 is thus difficult to assess. Trade growth should remain however higher than the historical average and it is a reasonable bet.

As for 2008-2009, the orderbook has yet to be filled in. So, orders of containerships for these two years may flow in the coming months. Assuming that a 6 % growth in trade is maintained, almost 1.3 million teu should be delivered in 2008 and 1.45 million teu in 2009 only to maintain the equilibrium.

If the omens for the second half of the decade are good, a number of worries must not be overlooked, which could affect the container shipping market. They are :

• the weakness of the US dollar and uncertainties on exchange rates,
• a possible hard landing of the Chinese economy,
• a slowdown in the US consumption of imported products due to a weak dollar combined with possible interest rate increases.

More immediate and foreseeable, problems will affect container shipping in 2005 :

• the shortage of cellular ships,
• congestion in ports, leading to delays, accentuating the ship shortage,
• strain on inland transportation networks.

Operators are living a strange paradox as they are rivalling to fix ships at peak rates for periods of three or four years, without knowing what the future has in store. Actually, the charter market is not led by demand alone as far as long term expectations are concerned. It is also propelled by skilled operators who play the shortage game, locking up charterers for years against discounts on rates. These discounts remain somewhat limited when one considers the progression of charter rates over the past two years.

With ships sometimes hired at twice their total operating costs (including repayment of capital), owners enjoy an unprecedented situation since container ships started to be offered for charter, some 35 years ago.

Owners of containerships derive profits which are reminiscent of those accumulated by oil tanker owners in the early 1970s (Onassis, Niarchos, YK Pao, CY Tung and a crowd of other more or less known names).

Indeed, a B-170 locked for three years at $ 27,000 per day will raise enough profit to order a brand new ship of the same size!

With this in mind, it is not surprising that charterers look at buying ships. But with exceptional returns expected on hires, sellers' conditions defy gravity and buyers think twice before taking the plunge. Over the last 12 months, prices of second-hand ships have roughly doubled!

Only a few operators have taken steps in order to be less dependent on chartered ships. It concerned mostly MSC and, to lesser extent, CMA CGM. Both have bought second-hand ships as well as existing newbuilding contracts. Far behind, PIL and Simatech have also bought second-hand tonnage. In another deal, Zodiac Maritime has bought eight Panamax containership contracts for assignment to the associated company Zim (which has sold ships as well).

Although there is a trend among operators to order tonnage in their name, they still rely heavily upon non operating owners, which have relentlessly continued to book ships all along the year.

There has been indeed a significant regular drop in the share of chartered ships in the cellular ship orderbook, from 63 % in January 2004 to 52 % January 2005. The lion's share of this reduction concerns the VLCS orderbook: their chartered component has shrunk from 58 % to 36 % (thanks, for a great part, to MSC buying or exercising purchase options on chartered units).

Conversely, existing ships have been sold to non operating owners. P&O Nedlloyd has sold en bloc 14 Panamax, while Zim has sold five 3,000 teu units and Hanjin five 4,000 teu ones. All these ships were sold with charters back to the sellers. However, these deals have more to do with financial engineering than with market play.

These diverging moves led actually to a slight increase in the chartered component of the existing cellular fleet, which stands at 47.4 %, against 47.0 % one year ago. German owners continues to dominate the charter scene, as they control 63 % of the chartered fleet, dwarfing Greek owners (11.5 %) and Japanese owners (7.2 %).

A few operators are however taking advantage of peak charter rates. As strange as it seems, they have been accepting, if not actually welcoming, ever increasing rates for longer and longer periods throughout the year. Maersk Sealand, MSC and CMA CGM have been keen rivals in this race to land as many possible ships, at the expense of others, who are either hesitant or simply do not have a sufficiently strong financial base to follow.

These three carriers have swooped on as much ships as they could (not to mention their unceasing order waves of newbuildings) and are thus in a position to strongly improve their market share.

Actually, with these peak charter rates, we are on the eve of a new era of precipitating the concentration of the fleet in a few hands with a new sort of natural selection. This may explain why there has been no hurry in attempts to take control of other operators last year.

We had speculated in our last annual report that the highest rates observed in 2003 could well represent the average rate for 2004. Not only they did, but they went much higher!

With ships as rare as ever, charter rates have exploded to levels which are 50-60 % above the historical highs observed during the summer 2000. Besides record rates, the year 2004 has been characterised by a lengthening of charter periods and by fixing ships six or twelve months in advance.

These two latter trends have dried up the pool of large ships (both existing and newbuildings) available in 2005. Charterers are now eating into the 2006 available fleet, and a market for sublets has started to emerge.

The rally on the charter market continues and owners are reaping the benefits of the shortage of tonnage. The lack of adequate tonnage to launch new intercontinental loops has thwarted the plans of several carriers.

In December 2004-January 2005, 4,000 teu ships were hired at $ 40-45,000 per day for 12 months period while 2,500 teu ships were valued at $ 35-37,000. Ships of 1,700 teu peaked at $ 27,000 for 4 years periods. 1,000 teu ships were negotiated at $ 18,000 for 6-12 months.

The tonnage scarcity and the high demand on regional and feeder trades have sent rates soaring for smaller ships as well. Cellular ships of 800-850 teu are not cheap, as they reach now the $ 15,000 mark for 12 months (against $ 8,000 end 2003). Modern ships of 500 teu ended the year at $ 9,000 for 12 months (against $ 4,400-4,800 during the three years pre-2004, and for periods of 3 to 6 months).

If top rates are good news for owners, carriers relying only upon chartered tonnage do not share the same enthusiasm. Among them are several niche regional carriers and feeder operators. They use small ships (under 1,500 teu), which until early 2004 could still be hired at fair rates, but have since reached such levels that services will have to be reviewed or cut.
 

A little spoken aspect of the container trades concern slot charter rates. As ship charter rates have soared, so have slot charters. Some slot chartering agreements are referring to charter market conditions, and the slot charter rates are reviewed at regular intervals. Other ones are fixed for the duration of the agreement which is usually not more than two years.

Slot charter rates can be indexed on ship charter rates as well as other operational costs, such as voyage costs, including cost of bunkers, canal tolls or port dues. As the ship charter rates item is the heaviest one, it is then not surprising that slot charter hires have risen strongly, leading even to the non-renewal of some agreements.

In this period of tonnage scarcity, those who run the ships may find quite profitable to fill them at full capacity and may not wish to offer their precious earning space to others (which are after all rivals), unless they pay the price.

Operators are now very careful when it comes to enter slot exchange agreements with other lines, as they evaluate risks of failure of partners, especially in the case of small operators whose financial standing may not be strong enough to survive the high charter hires.

There has been during the past year a number of changes in partnerships and slot buyer participation, which may have been caused by tensions created by space shortage on a background of ship shortage and of peak charter rates. On the other side, several operators are teaming up to launch new services with chartered ships, thus sharing the burden of expensive charter hires while being able to offer the needed weekly frequency. Such a way of doing business is of course not new, but it is exacerbated by current market conditions.
 

Periods of four years and more for 4,000-5,000 teu ships accounted for 86 % of the reported fixtures in 2004, against 49 % in 2003 and 17 % in 2002, according to a BRS-Alphaliner analysis. Smaller ships have also been fixed for much longer periods than the usual 12 months. Periods of 24 to 40 months for 1,500-2,000 teu ships accounted for 46 % of the reported fixtures in 2004, against 7 % in 2003 and only 2 % in 2002. The accompanying table details how the duration of charter periods evolved from 2002 to 2004.
 

At 1st January 2005, the cellular fleet reached 3,362 ships for 7.29 million teu, in progression of 9.8 % on 12 months, a relatively modest increase as the average annual progression during the past 10 years has reached 10.7 %. The cellular fleet accounts for 89 % of the total fleet deployed on liner trades in teu terms.

The containership fleet counts 49 units of more than 7,500 teu and there are 165 more of these giants on order, some of them reaching the 10,000 teu mark. By the end of 2007, there will be enough of these leviathans to run 15 Asia-Europe and 15 Asia-US loops.

2004 deliveries stood at 175 ships for 645,000 teu (against 177 ships for 575,000 teu in 2003). Orders stood at 464 ships for 1,692,000 teu, which is significantly less than the record 520 ships for 2,123,000 teu ordered in 2003.

The total value of cellular ships ordered in 2004 reached almost $ 22.2 billion (using conversion rates at time of order), a figure similar to 2003, reflecting the steep rise in newbuilding prices ($ 13,150 per teu instead of $ 10,350 per teu in 2003 - raw figures unadjusted for capacity).

The total orderbook reaches 3.9 million teu in early 2005, representing 53 % of the existing fleet. It is dominated by large ships, with ships over 4,000 teu accounting for 74 % of the total orderbook. As for deletions, only five ships for 2,450 teu were sold for scrap last year.

The teu capacity which will enter the market during the three years 2005, 2006 and 2007 corresponds to 47 % of the existing fleet. In other terms, the fleet is to rise by almost 14 % per year, well above the 10 % average observed during the past 15 years. The cellular fleet is expected to reach 10.8 million teu in January 2008 (assuming no scrapping)

From 1st January 2004 to 1st January 2005, the combined fleet of the Top 25 carriers has grown from 5,955,000 teu to 6,640,000 teu (+11.5 %). Its share of the world fleet deployed on liner trades has risen from 79.6 % to 81.3 % in teu terms, confirming the concentration trend.

The five largest carriers alone operate 39 % of the capacity effectively deployed on liner trades.

The total teu capacity deployed on liner trades has grown by 9.1 % in 2004, reaching 8,168,000 teu st at 1st January 2005, against 7,485,000 teu one year earlier. In deadweight terms, the figure stands at 7.5 %, with 120 million dwt at 1st January 2005 against 111.5 million dwt one year earlier.

These figures take into account all the types of ships deployed on liner trades (cellular, multipurpose, ro-ro). The cellular fleet itself amounts to 7,290,000 teu (it represents 89.2 % of the total teu figure deployed on liner trades).

The two largest carriers, APM-Maersk and MSC contributed to 29 % of the fleet growth in teu terms, with 197,000 teu out of the 683,000 teu added (+101,000 teu for MSC and + 96,000 teu for APM-Maersk).

APM-Maersk became last December the first teu millionaire, as its fleet reached 1,016,000 teu on 1st January 2005. APM-Maersk controls Maersk Sealand, Safmarine, Norfolkline and APMSS-MCC. MSC comes at the second position with 637,000 teu.

These two leaders are however not among the top teu gainers in relative terms. MSC grew by 18.9 % and APM-Maersk by 10.4 %. They are distanced by four carriers (within the Top 25) which have logged growths of 28-33 %: CSAV, CSCL, Yang Ming and CMA CGM. Outside the Top 25, the emergence of two Chinese regional companies is worth noting: SYMS (+24.4 %) and SITC (+20.2 %).

On the mergers & acquisition side, no large mergers or takeovers occurred between rival carriers. The most significant one has been the buying by Costa Container Line of its compatriot Gilnavi. It appears that aggressive carriers (read: potential buyers) have found ways to increase market share in securing as many ships as they can, leaving conservative ones with what is left, i.e. not much choice and pricey.

On the other side, some potential targets have protected themselves from raiders, such as NOL-APL or TUI-Hapag-Lloyd, in steering clear of market listing. Despite this, there is still a choice of first class carriers which remain potential targets: CP Ships, Royal P&O Nedlloyd, Hanjin-Senator and Hyundai M.M.

There has been however important initiatives on the corporate side, such as Temasek Holdings, the Singapore state investment vehicle, taking control of NOL, parent company of APL, in what can be seen as a move to keep at home the Singapore historical carrier, until then listed on the local Stock Exchange. Other large deals concerned the purchase by Royal Nedlloyd of the whole stock of P&O Nedlloyd and the takeover of Zim by the Ofer Group.

CSCL made the news with its listing on the Hong Kong Stock Exchange in June, while intentions to list Hapag-Lloyd faded away as parent company TUI changed its mind and preferred to keep the full control of its Hamburg jewel.

There has been numerous smaller deals, which are summed up in the accompanying table.
 

Straight sales & mergers

• Temasek Holdings (Singapore) has taken full control of NOL, parent company of APL.
• Royal Nedlloyd B.V. (Netherlands) has taken 100% control of P&O Nedlloyd Containers Ltd (UK) through the purchase of the 50 % stake held by the Peninsular and Oriental Steam Navigation Co (i.e. P&O Group). The resulting company, Royal P&O Nedlloyd Ltd, is listed on the Amsterdam Stock Exchange.
• The Ofer Group (Israel) has taken control of Zim Navigation, since renamed Zim Integrated Shipping Services Ltd.
• Costa Container Line took over the deep sea liner trades of Gilnavi srl di Navigazione, the liner arm of the Grimaldi-Genoa branch.
• The Carlyle Group has sold Horizon Lines to private equity firm Castle Harlan. - STX Corp. (Korea) has bought 67 % of Pan Ocean Shipping Co (Korea).
• Neptune Orient Lines (NOL - APL parent company), Singapore, agreed to sell its 28.7 % stake in Lorenzo Shipping Corp to National Marine Corp. (both Philippines).
• Neptune Orient Lines Ltd (NOL) has sold Neptune Associated Shipping Pte Ltd (NAS) (tankers & bunkering).
• Eimskip (Iceland) and Faroe Ship (Faeroe Islands) have merged.
• Euro Container Line AS (ECL) (Norwegian company co-owned by Eimskip and Wilson Line) took over Norwegian operator CoNor Line.
• Rickmers Reederei GmbH & Cie KG (Bertram Rickmers Group), has taken over all of the shares in CCNI GmbH (Deutschland) from Compañía Chilena de Navegación Interoceánica SA (Santiago).
• Egyptian company MISR Shipping has been absorbed by its compatriot National Navigation Co (NNC).
• Trailer Bridge Inc. (USA) bought 100 % of Kadampanattu Corp. (K. Corp.) from the Estate of Malcom P. McLean (USA)

Transfers and moves within operating groups

• NYK and its affiliate TSK have decided to spin off their respective domestic liner service operations and related businesses, to set up NYK Line Japan Ltd (effective April 2005).
• China Shipping Container Lines (CSCL) boosted its share in the Shanghai Puhai Shipping Co, Ltd (SPS) from 50 % to 90 % held by other China Shipping units.
• Hamburg-Süd abandoned its trade name Ellerman Line.

New operators of liner services

• Manson Shipping (Taiwan) - services Taiwan-Hong Kong-Vietnam-Philippines.
• Winland Shipping Co, Ltd (China) - services Weihai-Japan.
• Dalian Beiliang Logistics Containers (China) - service Dalian-Weihai-Japan.
• HAL Shipping (Halship) (Canada) - service Halifax-USEC.
• Delphis NV (Belgium) is incorporated (intra Europe services).
• AC Forwarding (ACF) and Hudig Veder & Dammers (HVD) form AC Ireland Line.
• Black Sea Container Shipping Co launches intra Black Sea service.

Cessations of activity in liner shipping

• CT Navigation (Taiwan) closed its services (Taiwan-Hong Kong-Vietnam-Philippines).
• Hong Kong Ming Wah (HKMW) has closed its only service (Hong Kong-North China), marketed under the Chiu Lun Transportation name.
• SPM Shipping (St Pierre & Miquelon) ceased its activity- service Halifax-USEC.
• Armada Line closes its North Europe-Med service.
• Blue Container Line (Greece) closed its services (Intra Med and Black Sea).

Significant other moves

• China Shipping Container Lines (CSCL) has been listed on Hong Kong Stock Exchange.
• Norwegian shipowner John Fredriksen has bought stakes of 3 to 10% in Hanjin Shipping, Hyundai Merchant Marine, Royal P&O Nedlloyd and NOL.
• EOX Group Bhd has been renamed HubLine Berhad.
• The liner division of Unicorn Lines has been renamed Ocean Africa Container Line (OACL).
• TECO Lines is created by Samskip and Estonian Shipping Co.
• DAL left the West Africa trades.
• Steamers Maritime (Singapore - Keppel Group) has sold its whole fleet of ten containerships.

This frustration is caused by the evident lack of tonnage for sale, even at very high prices. Many owners, due to lack of prompt yard slot availability, preferred to go on the charter market for periods sometimes as much as 3, 4 or 5 years, but who can blame them…

A simple example illustrates the mood that reigned throughout the second half of the year: the owner of the m/v 'Lissy Schulte' (B170 - 1,730 teu, built in 1995) refused an offer of no less than $ 30 million and has finally been fixed firm to P&O for 48 months at level of $ 26,500 per day! According to our calculations the result of this charter is equivalent to about $ 35 million. We now understand why this ship has not been sold even at such a price level.

The other specificity of the second-hand market for containerships in 2004 is, without any doubt, the number of sales in the 500 to 2,000 teu size range, and more precisely from 800 to 1,200 teu. There were no less than 15 to 20 potential buyers who found themselves chasing the rare units being put on the market. There was again this year an outright winner in the person of Mr Aponte (MSC, Geneva), with a total of some thirty ships bought in 2004, to which should be added the purchase of some ten newbuilding contracts initially ordered by German owners.

German owners bought some sixty ships. It is interesting to note in this respect that it is virtually impossible to compete with a German buyer on a modern ship offered on the market when it is controlled by German interests. A good lesson in self-protection!

Also, whilst in the past ships already under long-term charter were gaining popularity amongst buyers, this year ships that were "time-charter free" were by far the most sought after. In the absence of charter free tonnage in 2004, a large number of buyers went after containerships still employed up until the end of 2005.

Despite the high prices paid, buyers had to be patient for several months before they were able to benefit from a chartering market for which they hope it will stay at least as good as today's levels. As to liner operators, purchases of this kind proved to be essential once they had to ensure operating the necessary tonnage on their regular services.

The principal "en-bloc" sales which can be reported this year are:

• 5 x 3,500 teu and 9 x 4,200 teu (14 ships) built in 1991, 92, 93, 94 and 95 from P&O Nedlloyd to MPC Capital for a total of $ 660 million.
• 4 x 2,824 teu Hyundai contracts for delivery between 2005 and 2006 resold by Erck Rickers to CMA CGM for $ 44 million each.
• 8 x 4,250 teu Dalian New contracts for delivery between 2006 and 2007 resold by Bertram Rickmers to Zodiac.
• 7 x 1,538 / 1,658 teu built between 1998 and 2000 by Jiangnan and HDW, from clients of Silver Line (who bought the entire fleet in 2001 for $ 100 million) to MSC for $ 130 million.
• 10 ships of 369 to 1,012 teu, sold by Keppel Group (Steamers) to Interorient for $ 91 million. 
• 4 x 5,050 teu, Hanjin shipyard contracts for delivery in 2006, resold by Rickmers to MSC for $ 63.5 million each.
• 5 x 3,039 teu built between 1990 and 1992 by HDW, sold by Zim to Torvald Klaveness and Icon Capital for $ 35 to $ 38 million each, with a bare-boat charter back to Zim.
• 4 x 2,394 teu (20 knots) built in 1994 in Spain, sold by Zodiac Maritime to MSC for just over $ 30 million each.
• 4 x 2,524 teu built by Kvaerner in 2003 and 2004, sold by an Andreas Ugland-associated company to the bare-boat charterer of the ships, Hamburg-Sud, for $ 35 million each.

  Containerships under 900 teu

Together with the normal flow of activity this year, we have seen a search by certain buyers for ships smaller than what they originally needed. Prices for some ships have occasionally doubled between mid-2003 and end 2004. Even ships that can hardly been classified as "suitable" on this market, such as a slow-speed vessels or those with gears unable to perform a standard loading/unloading rate, have found buyers at more than favourable conditions for their owners.

Buyers based in the Far East, Germany and Greece were, in this order, the most active within this size category.

Interorient's deal of buying the feeder fleet of the Keppel Group for $ 91 million fairly well reflects the mood of the market this year. A fleet which has been on the market throughout the whole year 2003 and which was finally sold at the beginning of 2004. Since then, one can estimate the theoretical gain in the value of each ship to be at about 50 to 60 %.

Containerships of 900 to 2,000 teu

This has been by far the most active sector of the second-hand containership market! A cascade of sales, dozens of buyers, ships sometimes for sale, sometimes withdrawn, escalating negotiations with the seller rising his price at each stage of the negotiation….. in short a happy shambles within the context of euphoric freight rates and second-hand prices.

This situation is particularly true since the summer of 2004. At that time buyers were struggling with the steady disappearance of charter-free ships. The few units still available in 2004 and 2005 will become targets for owners such as MSC, Zim or CMA CGM…

Containerships of 2,000 to 3,000 teu

This sector saw only a small progression this year with some fifteen more ships sold compared to last year. At the end of the year owners of newbuilding contracts for delivery in 2005 did not hesitate to ask for € 45 million ($ 60 million) for a gearless ship of 2,700 teu. In short, the lack of tonnage explains some excess in ship's valuations.

Containerships of 3,000 teu and more

Fifty percent of the 58 deals done this year were newbuilding contract resales. This segment of the market was dominated by Zodiac, MSC and above all the German KGs, always very keen about ships of this size, which combine several favourable factors to investors: 

• a market predominately stable and secure,
• a popular size and already well-known in Germany, thus a relatively good market knowledge by investors,
• a satisfactory "liquidity" of the assets and reliable charterers.

One of the rare pure second-hand operation done this year was the one involving the 3 ships of 3,187 teu controlled by Talcar, Israel, built respectively in 1986, 1986, and 1988 at a price of $ 80 million en-bloc with delivery in 2005 to MSC.
 

Out of the 52 ships demolished in this category, only 5 were pure containerships, the latter totalling a mere 2,450 teu. The others were either multipurpose or conventional cargo ships. This low scrapping level is a direct consequence of the firmness in the freight market. Scrap metal price levels have been hovering in the region of $ 400 per lightweight ton
 

The world cellular fleet has increased this year by 9.8 % to reach 3,362 ships (7,290,000 teu). This evolution is in line with the annual average growth of the past 15 years. However we already know by now that the shipyards will deliver a capacity of 47 % of the existing fleet in the course of the next 3 years. This represents a growth of about 14 % per year!

The demolition market usually hits ships of 27 years or more on average, which in the best case will only shrink the world fleet by 3.2 % of its current capacity.

The question is therefore: will Asia, and especially China whose strong export industry has continued to expand, be able to absorb this additional tonnage? A large number of players, both on the industrial as well as the shipping side, believe that it will. It is however a very complex exercise to predict the strength of such a market. As we all know, to simply maintain it at its present levels, it depends upon China and its neighbours, whose growth in turn seems to be in their own hands.