If you are in shipping, you might be wondering how the new build ship orders affect your business. After all, the supply and demand of shipping capacity is one of the key factors that determine the freight rates and the profitability of your company. In this blog post, we will explain why new build ship orders are relevant for both carriers and freight forwarders, and how you can use this information to gain a competitive edge in the market.

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New build ship orders are a measure of the future supply of shipping capacity. They indicate how many ships are being built by shipyards around the world, and when they are expected to be delivered.

According to New Ships Orderbook, a research tool for the maritime industry, there were 1,687 new build ship orders as of October 2021, with a total capacity of 146.8 million deadweight tons (DWT). Of these, 1,063 orders were for container ships, with a capacity of 10.6 million twenty-foot equivalent units (TEU).

New build orders are influenced by several factors, such as the demand for shipping services, the availability and cost of financing, the environmental regulations, and the price and technology of new ships.

In 2021, the demand for shipping services surged due to the recovery of global trade after the COVID-19 pandemic, as well as the disruption of supply chains caused by port congestion, container shortages, and weather events. This led to a spike in freight rates, especially for container shipping, which reached record highs in some routes. As a result, many shipping companies decided to invest in new ships to expand their fleets and take advantage of the favorable market conditions.

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New build ship orders also have an impact on the future demand for shipping services.

This is because new ships tend to be larger and more efficient than older ones, which means they can carry more cargo with less fuel consumption and emissions. Such as the 24.116 TEU MSC Tessa and the world record breaking 24.346 TEU MSC Irina.

Statista stated that China alone received 49% of all shipbuilding orders in 2021, making it a global shipbuilding powerhouse. The ship demolition activity is also centered in South East Asia, with India, Bangladesh, and Pakistan accounting for at least 90% of the global scrapping volume in 2020. Implying that the net increase in shipping capacity will be higher than the gross increase in new build ship orders.

As a consequence, new build ship orders can create an oversupply of shipping capacity in the future. Which can put downward pressure on freight rates and profitability. According to FreightWaves, the price of new build container ships keeps rising, and yet liner operators and ship-owning companies keep placing more orders at Asian yards. This guarantees an ever-larger flood of new vessels in 2023-2025.

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Capacity on order has now reached 27.9% of on-the-water capacity, according to Alphaliner.

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So what does this mean for sales reps in the shipping industry?

It means that you need to be aware of the trends and developments in the new build ship orders market, and how they affect your customers and competitors.

For carriers, it means that you need to plan your fleet expansion carefully, taking into account the demand projections, the operational costs, and the environmental regulations. You also need to differentiate your service offerings from other carriers by providing value-added services, such as digital solutions, end-to-end logistics, and customer loyalty programs.

For freight forwarders, it means that you need to diversify your carrier portfolio and negotiate long-term contracts with favorable terms and conditions. You also need to provide solutions that help your customers optimize their supply chains, such as visibility tools, risk management strategies, and multi modal transportation options.

In conclusion, new build ship orders are a relevant indicator for sales reps in the shipping industry and reflect the speculative expectation as to what the market will look like in the years to follow.

They reflect the current and future supply and demand of shipping capacity, which affects the freight rates and profitability of your company. By staying informed and updated on the new build ship orders market, you can gain a competitive edge in the market and create value for your customers.

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The MSC Irina, a world record breaking vessel: 

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References:

New Ships Orderbook. (n.d.). Shipbuilding projects worldwide search in New Ships Orderbook. Retrieved from https://www.new-ships.com/

Statista. (n.d.). Shipbuilding industry worldwide - statistics & facts | Statista. Retrieved from https://www.statista.com/topics/3712/shipbuilding-industry/

FreightWaves. (2021). Container-ship building spree not over yet; new orders still rising - FreightWaves. Retrieved from https://www.freightwaves.com/news

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