The global containership orderbook has sunk to its lowest level in two decades,prompting a handful of New York-listed tonnage providers to adopt a rosier market outlook.

Boxship owners Danaos and Global Ship Lease (GSL) have expressed “cautious optimism” after the orderbook dropped to less than 10% of the global fleet.

“The orderbook is currently in single digits as a ­percentage of the world fleet for the first time in 20 years,” Danaos chief executive John Coustas told ­analysts on an earnings call last week.

Environmental initiatives

“Combined with an anticipated reduction in speeds due to the various environmental initiatives, the ­supply-side outlook is healthy. Tighter supply will help to accelerate the recovery in the container market.”

The containership orderbook-to-fleet ratio is estimated at 9.4%, or 2.21m teu, analyst Alphaliner said.

That amounts to about 322 units of 2.1m teu, according to Clarksons Research’s market report for July — the lowest level in close to 17 years in teu terms, compared with a peak of nearly 7m teu in July 2008, when the orderbook neared 60% of fleet capacity.

Shipowners have cited the shrinking orderbook as evidence that today’s market contrasts sharply with the one they faced after the 2008 financial crisis.

“Unlike prior downturns, the eventual post-Covid-19 demand recovery is set to take place against a supply-­side backdrop marked by a tiny orderbook, particularly in the size segments in which we operate,” GSL executive chairman George Youroukos told analysts last week.

Concerns around fuel and technology

Global Ship Lease executive chairman George Youroukos. Photo: Marine Money

His company owns 32 panamax and post-­panamax containerships, and around 10 smaller vessels.

Analysts predict that events in the boxship market will play out differently from a decade ago, when newbuilding orders remained in the pipeline for several years. Back then, shipowners and liner operators expected the market to recover and attempted to invest anti-cyclically to take advantage of attractive newbuilding prices.

That optimism has since waned and the orderbook has declined from 3.55m teu in July 2016 to today’s historic low.

“The fact that the decline already began four years ago means that the ongoing Covid-19 scare and its knock-on effects on the global economy and the liner trades are not solely to blame for the recent dry spell,” Alphaliner said.

We have a good market balance right now ... But do not underestimate how quickly this balance can change if you see a drop in demand

Jerry Kalogiratos:

However, Covid-19 has slowed ordering further.

Clarksons indicated a 37% year-on-year drop in the teu contracted from the start of the year to mid-July — down 75% on 2018 levels.

It believes the downward trend has been amplified by concerns around fuel and technology risks.

Moreover, the containership orderbook has fallen sharply in relation to other sectors, dropping by 10.3% in the past 12 months, according to Bimco.

“The significantly lower orderbook we see today is a product of disciplined ordering in recent years, partly driven by constrained access to capital,” GSL chief commercial officer Thomas Lister told analysts.

He said negligible or negative net fleet growth, combined with a minimal pipeline of new orders, “provide the foundation for an earnings rebound for mid-sized and smaller container ships when the recovery takes hold”.

'Manageable' level

Jerry Kalogiratos, CEO of Capital Product Partners. Photo: Marine Money

Clarksons argued that the orderbook is now at a “manageable” level. “This may help facilitate a swifter recovery in earnings once Covid-19 containership demand impacts ease,” it added.

Capital Product Partners chief executive Jerry Kalogiratos conceded at the end of July that the container orderbook is a “fraction” of what it was a decade ago.

He noted that container supply growth for 2020 has been revised downwards to 1.3% from 3.1% at the beginning of the year. A similar level is expected for 2021.

That trend will be helped by slippage in delivery, cancellation of newbuilding contracts and an uptick in demolition, Kalogiratos said.

But that attitude is tempered by a recognition that things could rapidly change.

“We have a good market balance right now, and we are trying to take advantage of that,” he said.

“But do not underestimate how quickly this balance can change also toward the other direction if you see a drop in demand, given that we now have [Covid-19] outbreaks in many parts of the world.”

The containership orderbook is skewed towards larger sizes. Vessels of 8,000 teu and greater account for more than 80% of total capacity, Clarksons said.