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Friday, 16 March 2018

Unwrapping The Containership Delivery Schedule

At the start of 2018, the boxship orderbook stood equivalent to 13% of the fleet in capacity terms, close to the lowest level on record. Despite this, a still significant 1.7m TEU of capacity was scheduled for delivery in 2018. As a key driver of supply side growth, the resulting rate of boxship deliveries this year will be important to the development of fundamentals in the containership sector.

Checking The Schedule
Following the record 1.7m TEU of boxship capacity delivered in 2015, deliveries were more subdued in 2016 and 2017. In fact, 2016 saw 0.9m TEU of capacity delivered, the lowest level in more than a decade, while deliveries in 2017 totalled 1.2m TEU. However, the 1.7m TEU of capacity scheduled for delivery in 2018 has brought tracking deliveries and the rate of fleet growth this year to the fore.

Peeling Back The Layers
Since the financial crisis, 'non-delivery' of the scheduled orderbook (through slippage or cancellation) has been prevalent across the ship types. This has reflected a range of financial and commercial pressures on owners and yards, as well as technical factors. In the boxship sector, non-delivery has been prominent in recent years, averaging 27% of the start year orderbook from 2009 to 2017. Non-delivery stood at over 30% in 2016 and 2017, and was most pronounced for vessels on order at Chinese yards in the sub#12,000 TEU size ranges, reaching almost 50% for these vessels in 2017.

Better Late Or Never
Should all 1.7m TEU of capacity scheduled for delivery in 2018 be delivered on time, it would theoretically lead to a record year for deliveries, as illustrated on the graph. However, a more realistic scenario includes the effects of continued non-delivery. The base case projection (scenario 2 on the graph) is for non-delivery to remain prominent in 2018, but ease slightly alongside improving market conditions, with 27% of the start year orderbook currently projected to slip into subsequent years (or be cancelled). In this scenario, boxship deliveries in full year 2018 are forecast at 1.2m TEU, slightly higher than 2017 but still subdued compared to 2013-15. With the currently projected 0.33m TEU of demolition, this would drive fleet growth of 4.3% in 2018.

However, there are clearly a range of scenarios. A lower rate of non-delivery of 20% (scenario 1) would equate to 1.3m TEU of deliveries in the full year (leading to 4.8% fleet growth on the same basis). Alternatively, an increase in non-delivery to 40% (scenario 3) would lead to deliveries of 1.0m TEU (3.2% fleet growth).

The Gift That Keeps On Giving
Overall, boxship deliveries are currently projected to remain manageable in 2018, while still sensitive to non-delivery trends. Non-delivery in 2018 would have to halve to 16% (well below the average of the previous nine years) before fleet growth would outstrip growth in demand, basis current demolition and trade forecasts. Additionally, even if non-delivery were to fall, this would only serve to reduce expected deliveries in 2019. So, while the rate of non-delivery is important to watch in 2018, the limited overall orderbook should help to control supply side pressure as a whole in the coming years.

March 2, 2018 by HellenicShippingNews


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