State shipbuilder lands major container vessel deal

China State Shipbuilding Corp received an order for 13 container vessels, valued at more than 10 billion yuan ($1.53 billion), from Geneva-based Mediterranean Shipping Co (MSC).

The deal demonstrates that China's shipbuilding prowess has made breakthroughs via market development, product transformation and upgrades, experts said.

Each vessel has a capacity of 16,000 TEUs (twenty-foot equivalent units). The 13 vessels will be built jointly by Dalian Shipbuilding Industry Co and Guangzhou Shipyard International, Caixin, a business news outlet, reported.

The deal is believed to be the single largest container ship order placed with State-owned conglomerate CSSC, the State-owned Assets Supervision and Administration Commission of the State Council said on its website.

The vessels, about 366 meters long and 51 meters wide each, are designed by the Marine Design &Research Institute of China under China State Shipbuilding Corp. Powered by CSSC's WinGD main engines, the entire order will be delivered in 2023 and 2024, said Zhang Haiying, naval architect at the Marine Design& Research Institute of China.

"The deal has signified the great achievements the group has made following an intragroup restructuring designed to explore the civil shipbuilding market and product transformation. The container vessels can completely satisfy the latest sustainable standards," CSSC said.

"Those ships will truly be green, environmentally friendly and highly efficient in accordance with the latest environmental emission standards," said Zhang, adding that the vessels will be LNG-compatible.

In that sense, the vessels could be equipped with facilities allowing conversion to LNG-fueled operations at a later date. They would be akin to the ultra-large liquefied natural gas-powered container ships that French shipping enterprise CMA CGM Group began taking delivery last year.

The nine-vessel order placed by the French firm with CSSC is to be executed by two Shanghai-based shipyards under CSSC－Hudong-Zhonghua Shipbuilding (Group) Co Ltd and Jiangnan Shipyard (Group)Co Ltd.

The vessels are designed to serve all major water routes, including the Panama Canal, which means they can carry out transportation between China and Europe, Europe and the United States as well as China and the US.

Merely a couple of days ahead of the announcement of the 13-vessel deal, the SASAC confirmed that six 15,500-TEU container ships for Seaspan Corp would be built by CSSC's Hudong-Zhonghua Shipbuilding and Jiangnan Shipyard.

The vessel orders were placed while many major shipping companies announced new orders in the past few months even as freight costs for container ships reached historic highs, said Zhou Dequan, director of the Shanghai International Shipping Institute's domestic shipping research office.

Since the second half of last year, although containers continued to move from Asia to Europe and North America, few sailed in the opposite direction due to COVID-19 restrictions, as well as labor shortages at European and US ports, warehouses and inland logistics.

The asymmetrical operations of containers finally led to low availability of carrying cases for bulk goods transportation and soaring costs for export container transport freight, Zhou said.

The Shanghai International Shipping Institute said rates started to rise since the second half of 2020. Charges for container exports from China rose rapidly, and reached a 12-year high by the end of December.

Experts said the improved container shipping market has encouraged vessel operators to launch new building projects, driving the latest wave of shipbuilding orders.

"As more than 80 percent of container shipping companies believe the empty container shortage will endure for at least three more months, many of them are investing in building new capacity," said Zhou.

In the first quarter alone, deals for 151 vessels were inked, and their combined capacity is hitting same-period record highs, and is 1.6 times the full-year container ship deals reached in 2020, reported Shanghai Securities News, citing data from the economic research center of CSSC.

In addition to the container ship market, there has been a broad recovery in shipbuilding, covering oil tanks, bulk carriers and liquefied petroleum gas ships, experts said.

As for pandemic-related effects, Zhou said the rapid increase of capacity may lead to an oversupply after the normalization of the shipping market, and may pose challenges to shipping costs.

"In recent months, we have witnessed soaring steel prices. Shipbuilders should also be aware of the risks of rising steel costs," said an expert who spoke on condition of anonymity.