Shipping insiders warn of new capacity as prices rise
(Bloomberg) –Shipowners and financiers should avoid investing money in new container ships despite a global crisis as record orders have pushed prices up, industry insiders say.
Industry players looking to buy new vessels at current prices are likely to find themselves “overburdened,” according to Arjun Batra, managing director of Drewry Shipping Consultants, who spoke at a conference on funding for shipping on Wednesday. ships at Singapore Navy Money Week Asia. Better to invest in maritime technology and decarbonization, he added.
The container shipping market is having one of its best years as a perfect storm in purchase demand due to COVID-19, port congestion and typhoons drive up freight rates. Orders for new shipping capacity have hit a record high of around 3.5 million twenty-foot containers so far this year, surpassing the previous record of 2007, according to Drewry.
“Asset prices have doubled in six months,” Zhao Yang, executive director of CMB Financial Leasing, the lending unit of China Merchants Bank, told the conference. While the firm has carried out several transactions with major shipping companies during the first half of this year, it “no longer sees any possibility of financing new vessels in the last months of the year”.
The comments add to the sentiment expressed within the industry that the increase in global trade driven by consumer demand and exacerbated by supply chain disruptions may start to subside. Germany’s Hapag-LLoyd AG said this week it has decided to stop increasing spot freight rates on routes between Asia and Europe and the United States because it sees the end of the recovery that saw prices hit record highs.
While freight rates may not maintain current levels any longer, they are unlikely to drop, said Steve Saxon, partner at McKinsey & Company, speaking at the same conference. “People are going to keep spending on goods and services, we don’t see it going down,” he said.