Archives for posts with tag: TEU

Eight years ago, the onset of the financial crisis following the demise of Lehman Brothers heralded a generally highly challenging time for many of the shipping markets, which today remain under severe pressure. But even within the relatively short period of history since then, different sectors have fared better or worse at various points along the way. This week’s Analysis examines the cumulative impact…

What Was The Best Bet?

So how would a vessel delivered into the eye of the financial storm in late 2008 have fared? The Graph of the Week compares the performance of three standard vessel types. It shows the monthly development of cumulative earnings after OPEX from October 2008 onwards for a Capesize bulkcarrier, an Aframax tanker and a 2,750 TEU containership.

A Capesize trading at average spot earnings would have generated around $37m in total, benefitting from market spikes in 2009-10 and 2013. But with Capesize spot earnings hovering near OPEX in recent times, the cumulative earnings have not increased much since mid-2014. For a hypothetical vessel delivered in October 2008 (and ordered at the average 2006 newbuild price of $63m) those earnings would equate to close to 60% of the contract price (note that if the vessel was sold today, this would result in a net loss of c. $8m, taking into account the earnings after OPEX, newbuild cost and sales income but not finance costs).

Totting Up Tanker Takings

By contrast, Aframax tanker earnings hovered close to OPEX for several years after the downturn, with far fewer spikes than in the bulker sector. However, the 2014-15 rally in the tanker market allowed the Aframax to start playing catch-up, and cumulative Aframax earnings between October 2008 and September 2016 reached around $31m. This represents around 50% of the value of a newbuild delivered in 2008 (with a newbuild price at the 2006 average of $63m), not too far from the ratio for the Capesize.

Bad News For Box Backers

Containerships haven’t really seen similar spikes, with the charter market largely rooted at depressed bottom of the cycle levels since 2008, battling with a huge surplus created by falling consumer demand and box trade in the immediate aftermath of the crash. With earnings close to operating costs for much of the period, a 2,750 TEU unit generated cumulative earnings after OPEX of just $6m from October 2008, around 10% of the average newbuild price in 2006 ($50m). The timecharter nature of the boxship business would also have potentially reduced owners’ upside when improved rates were on offer, and there was an ongoing chunk of capacity idle too.

The Stakes Are Still High

So, despite persisting challenging conditions overall, some of the shipping markets have seen significant ups and downs since 2008. Though boxships have seen limited income, interestingly similarly priced tanker and bulker newbuilds delivered heading into the downturn might have offered roughly comparable accumulated returns on the outlay. With conditions currently weak across most sectors, owners today would surely love to see any form of accumulation again.



Container shipping is 60 years old next week. From its origins in the first seaborne transportation of containers on board Malcolm McLean’s Ideal-X on 26 April 1956, containerized shipment has become the glue that holds together today’s globalised economy. This week’s Analysis takes a look at how the container sector exploded into the centre ground of the world’s shipping business.

Lighting The Candles

The man acknowledged to have been container shipping’s true pioneer, Malcolm McLean, a trucking magnate, used a converted tanker to move the first containerized cargo by sea from New Jersey to Houston, 60 years ago, back in 1956. Four years later, Sea-Land introduced the first Transatlantic service, and in 1969, in the UK, Overseas Container Lines launched its first service. Landmarks indeed, and the benefits have been widely felt ever since. Containerization enabled the standardization of port handling equipment, increased speed of cargo handling, and flexibility of location of stowage and unpacking which all changed the way that manufactured goods are shipped around the world. It also improved cargo security, and facilitated intermodal integration to provide an inter-connected transportation system.

Pass The Parcels

Today, containerized transport links up just about every corner of the world, even if cargo might need to be ‘transhipped’ from one vessel or service to another to reach its final destination. Reflecting this, the ‘liner network’ has seen rapid increases in volumes. Across the last 40 years the compound annual growth rate in global container trade volumes stands at 9%, and this year world box trade is projected to surpass 180m TEU. As the graph shows, following the first 20 years of container shipping history, the next 20, 1977-1996, saw the addition of an estimated 41m TEU of box trade per annum, and the most recent 20 years have seen the addition of a further massive 136m TEU of annual loaded container trade.
The network has also provided cheap ‘per unit’ shipping. With around 400 flat screen TV sets in one box, every $100/TEU of freight cost equates to just $25 cents per unit. Given the type of vessels introduced, per TEU costs of operating ships have dropped too. Across 1976-96, 3m TEU of capacity was delivered, with an average ship size of 1,673 TEU. In 1997-2016, 20m TEU was delivered with an average size of 4,363 TEU, taking today’s fleet capacity to 19.9m TEU

Icing On The Cake

So, whilst growing up, container shipping has been busy connecting the world via the liner network for the movement of goods in a speedy and secure fashion. Whilst partially separating vessel ownership and operation, it has enabled cheap door-to-door transportation of manufactured goods, and the connection of consumers with the lowest cost production locations, facilitating the great outsourcing boom and enabling multi-location processing. Supply chains have been optimised and specialist port infrastructure has been established and connected to the distribution network. All in all, containerization has been one of the greatest facilitators of change in the world economy in the last century. Happy birthday to you, container shipping!


Price indicators can tell market-watchers many things. In the volatile shipping markets they can provide a helpful window on both the health of today’s markets and expectations of future conditions. In the case of the latter, they may not be correct but it’s always interesting to take a look. So, how do price indicators help us gauge the state of play?

The Price Is Right?

In a “normal” market, or at least when owners have the expectation of one, the price of a 5-year-old ship should theoretically be about 75-80% of the price of the newbuilding, reflecting that merchant ships have a 20-25 year economic life and depreciate accordingly, other things being equal. The Graph of the Week shows the 5 year old to newbuild price ratio for a Capesize bulkcarrier, a VLCC tanker and a 2750 TEU containership for the last 10 years.

Bulk Better, Box Bottom

Well, today’s VLCC price ratio is right on the 75% mark, having dropped as low as 58% in late 2011. What does that tell us about expectations? Crude oil trade is a mature business with 1% growth expected in 2014, but VLCC fleet expansion is projected to be sub-2% this year, so that’s a better balance than for a while. On the dry side the Capesize price ratio (which once hit 160% as owners sought to get their hands on tonnage at the height of the boom) is flourishing at 90%. That might be a good representation of expectations, with sentiment seemingly fairly positive, Capesize fleet growth expected to slow to 4% in 2014 and iron ore trade expansion projected to motor on at 10% this year.

The ratio for the 2750 TEU containership is much lower, standing at 51%, almost as low as the 44% seen in 2009 (though it’s higher in some of the larger boxship sizes). Given the size of the surplus generated by the 9% downturn in trade in 2009, the box sector remains a bit further behind the curve than the bulk sectors. And here the difference in potential fuel efficiency between new designs and older ships is starker, pressuring the secondhand asset price further.

Downturn Downtime

So the ratios today seem fairly well aligned with market perceptions. But how have they fared since the onset of the downturn? Since September 2008, the Capesize ratio has spent just 33% of the time below the 75% line. The VLCC ratio has spent 65% of the time below 75% but only 29% of the time below 65%. So, in those sectors the impact on asset pricing could have been worse.

Was It So Bad?

The downturns in the 1970s and 1980s were far harsher on asset prices. In the late 1970s the ratio for both a Panamax bulker and for an Aframax tanker dipped as low as 40%. Interest rates were much higher, and the banks were much quicker to foreclose on “distressed” assets. This time, despite the slump in 2008, the price ratios haven’t suffered so dramatically (in the bulk markets at least) and investor appetite remains. However, part of that is a reflection of today’s expectations and time will tell how well investors have forecast future market developments. Have a nice day.


Last week, we looked at which countries occupy the leading positions in terms of the supply side of shipping: that is, who owns all the ships. This week we follow-up by looking at which countries contribute the most to the demand side of the industry. Which countries account for the largest portions of global demand for shipping? And which countries are punching above their weight?

Key Trade Players

In total, world seaborne trade is estimated to have reached just under 10 billion tonnes in 2013. Bulk cargo trades in dry bulks, liquid bulks and gases represented 85% of this total, or a massive 8.4 billion tonnes. Overall, world trade has grown at an average rate of 3.8% since 2000. The Graphs of the Week show which countries have contributed to this, and now have the largest shares of 2013 bulk trade by sea.

China Wins, Of Course…

It will come as no surprise to anyone that China is the country with the largest portion of overall seaborne bulk trade, with a 13% share of the total. China’s imports (a massive 1.8 billion tonnes) represented 23% of global imports in 2013, including nearly 800mt of iron ore, 286mt of crude and products and 308mt of coal. Of course, China has a much lower (2%) share of those commodities’ global exports. On the other hand, its containerised exports represent around 25% of global trade in TEU terms.

The ten countries shown on the graph account for just over 50% of the world’s seaborne imports and exports of bulk cargoes, meaning that, given that there are in excess of 250 countries globally, world bulk trade is quite consolidated around a relatively small number of countries. Indeed, the top three countries account for more than 25% of the total.

No EU countries feature in the top 10 countries, demonstrating the impact of the rise of developing Asia. Then again, if considered en bloc, the EU has 14% of world seaborne bulk trade: exceeding even China, although not by much.

Using their Chance?

So, what about those countries punching above their weight? Excluding island microstates, the country with the largest ratio of trade to population is Qatar, with 94 tonnes of trade per capita. Qatar is the world’s largest gas exporter, with 33% of world LNG trade and 16% share in LPG. Other countries high on this ranking include several other Gulf states, and the sparsely-populated raw materials export giant that is Australia. However, in 2nd place is Singapore, which imports more bulk cargoes than it exports, given its status as an oil refining hub. China is just 127th place for trade per capita, while India is 181st.

Overall, the graphs confirm the importance of a list of countries which will be well known to all involved in global shipping. At the heart of world trade are a group of big raw materials exporters, along with the consumption-driven states of the developed world, plus major developing economies. All four of the key BRIC developing countries feature on the graph. Many of the so-called VISTA countries feature in the next 20 countries not shown: could they soon begin to move up the table?


SIW1110In the movie Super Size Me, a film-maker investigated what would happen to him if he ate nothing but fast food for a month, consuming a ‘super-sized’ meal every time. A casual glance at industry headlines over recent years would reflect the fact that shipping is involved in its own super sizing experiment, with news of larger and larger ‘megaships’ hitting the water in many sectors.

Super Sizing

The average vessel size in the world cargo fleet covered by Shipping Intelligence Weekly has increased from 17,470 dwt at the start of 2000 to 28,572 dwt today. Whilst broad ship size ranges are often well established, owners still search for economies of scale, and there can be a tendency for ‘size creep’ with designs increasing incrementally in capacity over time. But in many sectors there have been landmark steps forward to new larger vessel sizes, such as the containerships up to 18,000 TEU in size being delivered today. Demolition of older ships following the downturn has also supported upsizing. In 2013, the average size of a delivered ship was 53,235 dwt, whilst the average size of a unit demolished was 44,238 dwt.

Bigger Than Mac

But upsizing isn’t universal, and the graph illustrates the trends in the three main sectors. The tanker fleet has hardly upsized at all. The average size at the start of 2000 was 85,323 dwt, and today that stands at 86,248 dwt. However, the containership fleet has seen significant upsizing as operators have searched for lower unit costs. In 2000 the average size of a boxship was 24,716 dwt and today that figure is up 71% to 42,496 dwt. Consistent ordering of larger ships has driven this trend, and in TEU terms the average size has risen even more rapidly, by 97% from 1701 TEU to 3367 TEU. The size of the largest ship in the fleet has increased from 9,600 TEU to 18,270 TEU. That’s a long way from the 58 containers loaded onto Malcolm McLean’s Ideal-X which undertook the first container voyage in 1956.

Interestingly, the bulkcarrier upsizing trend has been just as strong. The average bulker size has increased from 50,235 dwt in 2000 to 72,640 dwt today, helped by heavy Capesize deliveries, the introduction of VLOCs, and upsizing into the Supramax (and now Ultramax) and Kamsarmax size ranges. Growth in the average size of 44% is lower than in the container sector, but equivalent to an average rise of 1,590 dwt pa compared to 1,262 dwt for box-ships.

Going Large

So, the shipping industry has had its own bout of supersizing. Yet, although some sectors have definitely ‘gone large’ it hasn’t been universal. In previous eras, upsizing has often found a limit, but today there’s no clear end to the trend yet. The average vessel on order is currently a whopper of 64,370 dwt. With the right amount of seaborne trade, there will hopefully be enough to feed everyone, but upsizing creates additional capacity and shipowners will be hoping they don’t get left with a nasty bout of indigestion.