ECONOMY

Change of course for container ships

The container ship market is set for a major overhaul as the new and stricter regulations concerning the security of maritime transport of the International Maritime Organization (IMO) will come into force in August 2007. The main change is that fuel tanks will have to be removed from the bottom of container ships so as to reduce the risk of pollution of the sea by leaks. Therefore, new ship design specifications will be determined so that tanks can carry the same amount of fuel as today, which will affect the shipping capacity of new vessels. Analysts suggest that the cost of such a new vessel will grow by 1 percent for ships with a capacity of 4,250 20-foot equivalent units (teu), which today are priced at about $60 million. Similarly, the construction of a panamax container ship may cost $3 million more, which should increase orders by shipping companies before the new measures are applied. Any new ships ordered after August 1, 2007 will have to comply with the new regulations, which will also apply to any ships delivered after August 1, 2010. Nevertheless, major problems are feared as most shipyards will struggle to find the launching cradles required to meet the increasing demand. Already a large part of South Korea’s shipyard capacity is booked for the building of tankers and liquefied natural gas (LNG) vessels. Industry publication TradeWinds suggests that more than 40 percent of the cradles available for container ships have been taken up by other types of vessels. Shipowners are pressing for delivery before August 2010, which not all shipyards can guarantee. They must also consider other factors, such as the fact that the new ships will be able to carry fewer containers, due to the fuel tank change and the double-hull construction. This is an additional incentive for owners to turn to bigger container ships so that they can renew their fleets before the new rules are applied. Still, there are some shipowners who do not worry as much because they will have new ships delivered by 2008 due to previous orders, which has kept them from placing any new ones in recent months. Consequently, ships set for delivery in 2009 will have a combined capacity of 500,000 teu, against 1.4 million teu in 2007 and 2008. The vessels to be affected the most are large container ships. All vessels in excess of 500 tons will have to either be double-hulled or include hydrostatic-pressure protection in their fuel tanks. This would minimize the risk of spillage at sea even in the case of two ships colliding. Shipowners therefore have to safeguard their interests under huge time pressure as the market is changing. For instance, many Japanese shipyards say their boat yards have been booked until mid-2010. However, as some market analysts suggest, more than 50 percent of the total ship construction capacity for delivery in 2009 remains available. They add that shipyards often tend to exaggerate their booking rates in order to maintain high prices, though they usually manage to miraculously find some free cradles at the last minute by changing the structure of their construction schedule. It is true, though, that cradles for bigger vessels will soon be fully booked, especially if the same order rate for tankers continues.