World’s Biggest Shipbuilder Sees Mega Ships Leading Global Demand

By Kyunghee Park

(Bloomberg) — Hyundai Heavy Industries Co. expects mega- sized container ships to guide international orders till early subsequent 12 months as transport firms search methods to chop prices.

The firm and its Hyundai Samho Heavy Industries Co. unit may win orders for as many as 11 vessels in July, mentioned Ka Sam Hyun, a senior govt vp accountable for ship gross sales at Hyundai Heavy, the world’s largest shipbuilder. The South Korean firm is in talks with a couple of transport traces that will quickly result in agreements, he mentioned.

“Shipping lines won’t be able to survive if they can’t bring down their unit costs,” Ka mentioned June 26 in an interview in Seoul. “Freight rates have recently fallen a lot, with rates to Europe from Asia at about a sixth of last year’s average. That’s why shipping lines want bigger ships.”

He didn’t determine potential consumers or specify how lots of the orders can be for mega ships.

Shipping traces are ordering ever-larger vessels to attain economies of scale that may decrease prices of shifting a container, together with gasoline and port dealing with charges. Lower bills would cushion the affect of falling transport charges, notably on the Asia-Europe commerce lane, the place charges are close to historic lows.

Weekly spot charges for cargo to Europe from Asia slumped to $205 per 20-foot container on June 19, the bottom because the Shanghai Shipping Exchange began compiling information in 2010. Prices had risen to $548 as of June 26.

Demand Imbalance

Shipping capability is outpacing demand as bigger vessels enter service and spending slows in Europe, the place unemployment stays above 11 p.c.

“Rates continue to be pressured by severe supply-demand imbalances,” Bloomberg Intelligence analysts Lee Klaskow and Talon Custer wrote in a June 26 observe. “Weakness is most prevalent in Asia-Europe lanes.”

Most vessels used now on the Asia-Europe route can match at the very least 14,000 20-foot containers, based on Park Moo Hyun at Hana Daetoo Securities Co. There are greater than 100 of those mega vessels in service, he mentioned.

He declined to touch upon a June 19 Tradewinds report that A.P. Moeller Maersk A/S, the world’s largest container transport firm, signed a letter of intent with Hyundai Heavy for ships price as a lot as $2 billion.

Hyundai Heavy expects to win orders for very giant crude carriers, or VLCCs, Ka mentioned.

Carrying Ore

Brazil’s Vale SA and shipyards in China are in discussions to construct about 50 VLOCs, the Wall Street Journal reported in April.

Officials from Vale visited Hyundai Heavy early this 12 months in relation to VLOCs, Ka mentioned, with out elaborating.

Hyundai Heavy has teamed up with a unit of India’s Larsen & Toubro Ltd. to participate in a bid to construct liquefied pure fuel carriers for Gail India Ltd., Ka mentioned.

It can be competing for the contract in opposition to different Korean shipyards, every with a neighborhood companion: Daewoo Shipbuilding & Marine Engineering Co. is working with Pipavav Defence & Offshore Engineering Co., whereas Samsung Heavy Industries Co. is pairing with Cochin Shipyard Ltd.

Hyundai Heavy, Daewoo Shipbuilding and Samsung Heavy are the world’s largest builders of the fuel carriers.