Liners on the vertical integration prowl
Capacity tidal wave ahoy!
Smaller containerships uneconomic a year ago are now back in vogue, due to sky-rocketing freight rates across multiple trades.
And with the unit cost barriers on the major tradelanes dismantled and service levels from established container lines at all-time lows, there are opportunities for niche carriers to break the stranglehold of the alliances.
One such is Taiwanese ocean carrier Wan Hai, which has ordered more containerships in the last six months than any other carrier or non-operating owner (NOO), many of 3,000 teu or below.
These sizes have seen some of the highest spikes in hire rates in the charter market, with reports of owners achieving in excess of $100,000 a day, driven by a dearth of tonnage and a decade-long lack of newbuild investment in smaller containerships.
Wan Hai already boasts one of the highest owned-vessel ratios of all of its peers, at 57%, and its orderbook of 63% of its existing fleet is by far the highest.
According to Vesselsvalue data, the niche container line ordered 41 newbuilds in the first half of the year, just ahead of NOO Seaspan Corporation’s 40 and almost double the nearest carriers, Evergreen and CMA CGM, which have each ordered 22.
However, while Seaspan and the liners have focused on ordering large ships, Wan Hai’s 46 ships on order have an average 5,686 teu, compared for example with Seaspan’s average of 15,075 teu and compatriot Evergreen’s 15,818 teu.
Wan Hai’s most recent order, inked at the end of last month, was for a dozen 3,055 teu vessels from Japan’s Nihon Shipyard/Japan Marine United for delivery from July 2023.
The carrier said it was part of its “latest fleet renewal plan” to replace some of its 64 chartered-in ships and boost its 86-strong owned fleet.
Wan Hai’s own ships consist of feedermax units of 1,068 teu, up to post-panamaxes of 7,241 teu, but it has not been tempted to follow the lead of other carriers to operate ever-larger vessels.
As a consequence, Wan Hai was pushed out of some trades, such as Asia-North Europe, due to the lower unit costs of the competition.
However, with freight rates from Asia to North Europe some 700% higher than a year ago, capacity stretched to the limit and schedule reliability at an all-time low, there is speculation in the trade that Wan Hai could be preparing to re-enter the market next year.
Indeed, a shipper contact told The Loadstar recently he had heard the carrier was showing interest in North Europe again. And smaller vessels, should market demand decline again, can be redeployed to other trades, including Wan Hai’s main intra-Asia routes.
Wan Hai’s joint service with PIL from Asia to North Europe was suspended in 2008 and briefly resumed in 2010, however the panamax vessels deployed could not compete on rates with the ULCVs operated by the big carriers.
“They had no chance to match the big boys when rates plunged to $500 per teu,” said the shipper, “but with rates set to stay highly elevated for some time, the opportunity is there.
“Wan Hai has a good reputation in the trade and has always been profitable, so I think it would find a ready and willing market.”