Astonishing amounts of money have been spent on vehicle carrier newbuilds in recent weeks, driving asset prices through the roof with a total of $4.4bn, including options, having been agreed year to date, new data from online pricing portal VesselsValue shows.
Splash has reported on big volume orders from Eastern Pacific and Zodiac recently helping pushing this year’s car carrier order intake past the previous six years combined.
Increasingly full shipyards have jacked up prices a great deal this year. Japanese shipyards, for instance, have raised tariffs to $100m for dual fuel LNG 7000 ceu, up by $10m compared to last year, according to VesselsValue. Chinese yards have followed but maintain a healthy discount, quoting $88m for an equivalent spec.
All 56 vehicle carriers confirmed this year including options are dual fuel LNG powered.
The fundamental imbalance driven by low supply versus recovered demand is unlikely to change in the midterm
Secondhand sales prices exploded in Q2 as operators battled to secure tonnage. For example, the 22-year-old 6,400 ceu Asian King went for $23m in June. A similar age and size ship sold for $13.8m just two months earlier.
“Such price inflation has inevitably led to talks of a super cycle buoyed by a hot charter market,” VesselsValue stated in a release today.
Firmed rates of $30,000 per day for mid-sized 5,000 ceu ships, and $35,000 per day for 6500 ceu vessels are earning owners $8m to $10m per annum in EBITDA after opex, according to VesselsValue estimates.
Battery electric vehicle (BEV) demand is accelerating across the developed world and is likely to have a positive net impact on global cargo miles for vehicle carriers, something Splash has reported on earlier this year.
Biden’s recent executive order pushing for half of all US auto sales to be battery electric by 2030 was seen by many as an industry defining moment. Canada went a step further mandating 100% compliance for all light vehicles and trucks by 2035, promising $1bn of initiatives to encourage take up. Similar packages have been launched elsewhere in Europe including in the UK where zero emission car sales have increased by 73% this year.
BEV trade growth has the potential to significantly impact voyage earnings for a major share of the current car carrying fleet VesselsValue pointed out today, because electric cars weigh 20% more than conventional diesel/petrol equivalent models. This means less cars can be loaded onboard a typical PCTC whenever there is a high volume of BEV bookings, because the average density per car unit has increased, eating into deadweight capacity. Essentially, PCTCs with low deck strengths will be disadvantaged as BEVs start to dominate over time, diminishing the earning opportunity of the asset. Whilst modern PCTCs and LCTCs equipped with stronger decks from 0.3t/m2 upwards, will hold more value due to the higher earnings opportunity derived from the better stowage factor. Vessels trading to used car markets such as Africa are less exposed to this headwind. However, this is already an issue for ships operating on major East West liner routes delivering finished new cars to European and North American markets with long term ramifications for fleet development.
“Logically, demand for stronger decked ships will increase. Cargo miles will also receive a credit in the short to midterm, as more capacity is required to carry the same volume of seaborne cars around the world. This is assuming global demand remains relatively static, whilst BEVs continue to take share in sales and exports,” VesselsValue predicted today.
Toyota has been forced to cut global production by 40% for September because of the chip dip crisis, leading to a slump in their share price which spread to Nissan and Honda. US retail sales figures also turned negative in July weighing on sentiment.
“It’s possible we will see some softening in cargo mile demand in Q4. However, the fundamental imbalance driven by low supply versus recovered demand is unlikely to change in the midterm,” VesselsValue argued today.