Eastern Pacific Shipping has increased its total spending on neo-panamax containerships to more than $1.25bn by ordering another seven large newbuildings.
Shipbuilding sources said the shipowner had contracted Hyundai Samho Heavy Industries to construct its latest batch of 15,000-teu newbuildings, which are part of a fleet-renewal programme at the Idan Ofer-led company.
The deal brings the total number of containerships it has at the South Korean yard to 11, after the outfit inked four containerships last year.
Shipbuilding sources said the seven newbuildings are optional vessels that Eastern Pacific held at the Mokpo-based facility, which is a sister shipyard of Hyundai Heavy Industries.
Staying quiet
The Singapore-based shipowner declined to comment on the order, while officials at HHI refused to discuss the yard’s newbuilding activities, citing contract confidentiality.
Shipbuilding sources said six of Eastern Pacific’s newbuildings would be dual-fuel vessels equipped to run on LNG in order to comply with IMO emissions regulations, which are set to tighten in 2020, while the other five would be fitted with scrubbers.
They estimated that the company will pay around $105m each for the scrubber-fitted containerships and more than $120m for the dual-fuel vessels.
Eastern Pacific is scheduled to take delivery of the scrubber-fitted ships in 2019 and 2020, and the dual-fuel newbuildings between 2020 and 2022.
So why is the shipowner choosing to split its fleet's emissions compliance solutions between LNG and scrubbers?
One source familiar with the company said the LNG market is developing fast, but the infrastructure will not be ready by 2019.
As a result, Eastern Pacific has opted to have the earlier containerships installed with scrubbers, or exhaust gas cleaning systems (EGCS), with the LNG-fuelled vessels rolling out later.
'Economic benefit'
“EGCS provides charterers with two important benefits: the ships can burn [the] widest range of fuel oils available in the market whilst complying with IMO’s 2020 sulphur cap,” the source said.
[Eastern Pacific] is quite confident that it can find a charterer when the delivery dates get nearer
“With bunker prices now above $500 per metric ton, and projected to increase significantly upon shifting to compliant fuel in 2020, it is of significant economic benefit to have the most fuel-efficient ships and having the ability to continue using high-sulphur fuel oil.”
Shipbuilding observers said Eastern Pacific was the first tonnage provider to have ordered large dual-fuel containerships, although liner operator CMA CGM has nine 22,000-teu dual-fuelled newbuildings booked at China’s Hudong Zhonghua Shipbuilding and Jiangnan Changxing Heavy Industries.
Eastern Pacific is said to have sealed a good deal on the neo-panamax containerships as it has ordered them at the low point in newbuilding market.
“[The company] is getting a good deal on these 15,000-teu newbuildings,” one containership source said.
“Based on today’s shipbuilding market, shipyards will be seeking between $110m and $120m for a conventional 15,000-teu ship. Scrubbers will cost an additional $2m to $3m each. If the vessel is dual fuel, it would cost an additional $10m to $20m more, depending on the specifications.”
The most recent comparable deal saw South Korea’s Hyundai Merchant Marine place an order for eight scrubber-fitted, 15,300-teu boxships at HHI for delivery in the second quarter of 2021. The vessels were said to be costing nearly $123m each.
Charter-free vessels
One boxship source familiar with Eastern Pacific said its 15,000-teu newbuildings are still charter free. However, a few liner companies are said to have expressed interest in fixing them out.
“[Eastern Pacific] is quite relaxed that the vessels have yet to secure employment,” the boxship broker said.
“The company is quite confident that it can find a charterer when the delivery dates get nearer. There are some liner companies that would be needing these eco-friendly neo-panamax containerships, especially the dual-fuelled ones, when IMO 2020 comes into force. Right now, there are not many such ships on order.”
Eastern Pacific is a diversified shipping outfit with a fleet of 132 vessels, including newbuildings, which consist of containerships, tankers, car carriers, gas ships and bulkers.
According to VesselsValue, Eastern Pacific sent one panamax and three post-panamax containerships to scrapyards last year.
