The Hindu Business Line : Vessel shortage may box in ship operators

The SCI and other ship operators hoping to handle higher volumes cannot rely on the charter market, which will face a shortage of big box-ships this year.

CONTAINER ship operators seeking extra tonnage to handle increasing volumes over the next two years have been warned not to look to the charter market as, according to industry experts, no vessel of 3,000-plus TEU (twenty-foot equivalent units) capacity will be available for hire in 2005.

Twenty-three vessels of 3000-4000-TEU capacity are likely to be freed from their charter hire during the year but most will be re-hired by the existing charterers. Only in 2006, about 15 ships of 4000-5000-TEU capacity, including new buildings, may be available. With the yards choked with orders, new buildings could be delayed.

All this can be a major cause of concern for India's national carrier, the Shipping Corporation of India, which was forced to blank sailings to the US and Europe in the recent past due to non-availability suitable vessels on hire.

The shipping line does not own vessels above 1600-TEU capacity. It runs services to the US and Europe in partnership with several foreign lines, and with the help of higher capacity vessels acquired on charter.

Last year, there were problems when the vessels had to be freed on expiry of the charter contracts with no other ships becoming available immediately.

Some operators may sublet ships or hire out their vessels to other lines or some other operators can offer slots on charter on third-party services. But all these slots will be expensive.

The charter hire of a 3300-TEU vessel is believed to have jumped from $8,000 to nearly $40,000 a day in the past year or so. This will be an additional burden on the SCI. There could be more blanking of its services.

Interestingly, the short-term problem of non-availability of ships surfaces when there are long-term prospects of surplus capacity. At least two European container majors, also serving the trade from the sub-continent, are understood to have placed orders for ships capable of carrying more than 8,000 TEUs — one for 9,200 capacity and the other for 8,600; also, a number of negotiations are said to be in progress for future deliveries.

With most global carriers rumoured to similar orders and the industry experts expecting the vessel capacity to increase faster than the cargo volumes, the party time in container shipping, it is felt, is going to be over sooner than expected.

For with excess capacities, after 2007/08, the unit cost should come down. Shipping lines with lower capacity vessels, including the national carrier, may find it hard to match the rates offered by mega ship operators, and may be left with only the feeder loops.

Meanwhile, according to the latest forecast released by container data agency, BRS-Alphaliner, the number of container ships worldwide is to grow by about 13.7 per cent between now and 2007 — at the rate of 13.3 per cent in 2005, 14.5 per cent in 2006 and 13.4 per cent in 2007.

sThus by end 2007, the global fleet of containerships is expected to be 4271-strong from 3362 vessels totalling 7.29 million TEUs now.

The statistics also reveal that the trend in newbuilding is for larger vessels and over the next three years, the construction of ships of more than 4,000 TEUs capacity is to rise by more than 21 per cent while that of smaller vessels — less than 4,000 TEUs — by only 7.3 per cent. During the period the number of vessels above the capacity of 7500 TEUs will more than double to 197.

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