[201216.EN.BIZ] IHS Commentary Doubts Oversupply Will End as Soon as Maersk Says It Will

HOWEVER foolish it may be for global shipping to order new ships in today's over-supplied market, it may be the only way for smaller shipping lines to survive.

That's the view taken by an IHS Media commentary discussing Maersk group CEO Soren Skou "rosy view" expressed during the company's capital markets day that today's supply and demand crisis would end by 2022.

"That far-away horizon allows for any number of scenarios to derail the largest container line's time frame: new carriers entering the market, new ship orders, worse than expected trade growth, and political events, to name just a few," said the IHS commentary.

"The newest entrant, Korea Line has signalled it might be open to ordering new ships because shipbuilding prices are low. The South Korean government also is eager to prop up its ailing shipping industry, having proposed a state-supported ship financing vehicle with initial capital of KRW1 trillion won (US$851 million)," it said.

"That's something Hyundai Merchant Marine could draw on as its successful restructuring made it eligible for state aid to order new mega-ships, and Korea Line outbid it for now-defunct Hanjin Shipping's transpacific networks," said the commentary, later noting Iran's IRISL's plans to order new ships.

Said Korea Line chairman Woo Oh-hyeon: "In the past, building a new ship cost KRW50 billion. Now, you just need KRW10 billion to build a ship with a lifespan of up to 17 years."

To this, the IHS commentary said: "By offering freight rates 10 per cent lower than transpacific competitors, Korea Line envisions grabbing market share with the 21 ships it plans to deploy on the trade lane in early 2017."

Source : HKSG.