In ocean shipping, present success often breeds future failure. Across the decades, freight-rate spikes have spurred newbuilding sprees, wiping out freight rates. Which brings us to today: Container freight rates are spiking and container-ship newbuild orders are surging at yards in China, South Korea and Japan. Is the ending of this story inevitable?

Not necessarily. There have been a very large number of orders in Q4 2020 and Q1 2021. Yet container shipping’s orderbook was historically low before this new wave of contracts hit.

What happens next will be important to watch. Not only for investors in container shipping, but for tanker and dry bulk investors, as well.

It has long been argued that shipowners are abstaining from orders because they fear future decarbonization rules won’t grandfather in today’s carbon-emitting newbuild designs. What’s happening now in container shipping implies that owners can overcome this fear if returns look high enough.

“Turns out, when things are good, people will still order even if they are concerned what type of fuel to use,” wrote Stifel analyst Ben Nolan.

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