Shipowners turn to smaller vessels as world trade routes reroute away from China
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The shift in global trade away from China and other Asian ports is causing shipowners to move away from ordering larger ships and instead buy smaller vessels.
Six container ships capable of carrying more than 17,000 twenty-foot containers (TEUs in industry parlance) are expected to be delivered in 2025, up from 17 in 2020, according to shipbroker Braemar.
Meanwhile, 83 medium-sized ships of 12,000 TEU to 16,999 TEU are expected to be completed by 2025, almost five times the number five years ago.
“16,000 TEU vessels will become a popular workhorse for liner companies,” said Jonathan Roach, container market analyst at Braemar. He added that “tepid” global trade and a saturation of “larger vessels” had also reduced demand for these vessels. need.
Industry insiders say environmental regulations and the threat of trade disruptions – including attacks on ships in the Red Sea last year – have also hit demand for the largest aircraft carriers.
The chaos is expected to continue as Donald Trump returns to the White House this month. The incoming president has threatened to raise tariffs on Chinese imports.
“We do see an increase in interest in sourcing products exclusively from China,” said Peter Sand, chief analyst at shipping market tracker Xeneta, adding that supply chains are moving to other parts of Asia. Proliferation of small manufacturing centers.
“Only ships make economic sense,” Sand added. [of the largest] Dimensions (if you have goods to fill). If you don’t, you’ll lose money.
Senior executives at one of Asia’s largest container shipping companies echoed Sund’s comments. As manufacturing shifts to India and Vietnam, ‘It may no longer make sense to count on the biggest ships’ [to be] Two to three ports are full, he said.
Shipowners have ordered larger and larger ships for decades as global trade has boomed, a trend that has drawn widespread attention in 2021 when the 220,000-ton, 20,000-TEU Ever Give ship ran aground and blocked the Suez Canal for six days .
While mid-sized ships have surpassed larger ships in popularity, demand for ships above 18,000 TEU is picking up again as container shipping industry profits soar in 2024.
As of early December, 76 ships of this size had been ordered, compared with 45 for the same period in 2023, according to Braemar. Industry leader Mediterranean Shipping Company alone ordered 10 ships with a total capacity of 21,000 TEU in September, according to shipping trade media reports.
Shipowners’ earnings have surged after a series of attacks by Yemen’s Houthi rebel group on ships near the Suez Canal diverted liner shipping and drove up shipping costs amid a dwindling supply of available ships.
But experts say the attacks, intended to show support for Palestinians during the Gaza war, only underscore the growing importance of flexibility in the industry.
Ultra-large ships are mainly used to transport large-scale Asia-Europe trade through the Suez Canal, but have difficulty passing through other important channels such as the Panama Canal.
“The closure of the Suez Canal has had a severe impact on container shipping,” said William MacLachlan, a partner at law firm HFW, which advises clients on shipbuilding. “Smaller ships can more easily respond to macroeconomic events.”
He also pointed out that due to the limited supply of green alternatives, there is great uncertainty about which fuel should be used to build future ships.
Shipowners are also unsure what requirements industry regulator the International Maritime Organization will impose to achieve net-zero emissions targets around 2050.
“I suspect smaller shipowners are thinking: Can I justify this investment? [in an ultra-large ship]? McLachlan said. “The cost of smaller ships is lower, which means people may be less worried.”
