Market Overview

Seaspan: Containership Demand Cushioning Trade War Impact

Share:
Seaspan: Containership Demand Cushioning Trade War Impact

Bing Chen, the president and chief executive officer of Seaspan Corp., (NYSE: SSW) says he does not expect his company, the largest independent owner and charterer of containerships, to be impacted if additional tariffs are placed on $300 billion of Chinese goods on Sept. 1 as President Trump has threatened.

High demand for containerships has shielded his company from the U.S.-China trade war, he said. "This is evidenced by the fact that since June we have zero idle for our entire fleet of 112 vessels."

For the industry as a whole, he said, there would be some negative impact, but noted if volumes decrease in the transpacific, they may increase on other routes. He said growth in traffic on north-south routes will "offset the negative impact from the trade war." He said demand for Panamax-size containerships (with capacity of about 4,500 to 5,000 TEUs) is so high around the world that there are no ships of that size that are idle.

Chen also noted that tariffs last year resulted in many retailers and manufacturers moving cargo early and that there could be a similar "acceleration" this year.

Seaspan, which charters its vessels to major liner companies, reported operating earnings of $110.4 million in the second quarter of 2019 compared with $119.4 million in the same 2018 period. Revenue was $275.4 million in the second quarter of this year compared to $281.7 million in the second quarter of 2018.

The company said, "The decrease in revenue for the three months ended June 30, 2019, was primarily due to the changes in the daily charter hire rates of seven rechartered vessels."

Net earnings in the second quarter of 2019 were nearly $40 million or 10 cents per share, diluted, compared with $68 million or 34 cents per share, diluted.

Fuel prices are expected to increase later this year and in 2020 as the requirement by the International Maritime Organization that ships use low-sulfur fuel comes into effect.

Peter Curtis, executive vice president and chief commercial and technical officer for Seaspan, said he expects some shipowners to continue to retrofit ships with scrubbers, which will reduce the supply of ships when vessels are in shipyards having the scrubbers installed.

Seaspan also expects some shipowners will reduce the speed of their ships to reduce costs and meet environmental goals. This will further tighten the supply of ships, he said.

"Our larger vessels are operating just below 19 knots on average and the smaller vessels are operating just above 19 knots on average," he said, adding there are predictions of about a 0.5 knot speed reduction, which he said would have a meaningful effect on fuel reduction and therefore carbon footprint reduction. 

Speaking with securities analysts, Chen said he was not surprised by the low level of orders for new containerships, saying the industry is moving "toward healthier supply-demand dynamics."

He said the lack of ordering has been compensated by the creation of alliances by liner carriers that share space on ships and create efficiency.

Image sourced from Pixabay

Posted-In: Freight Freightwaves Logistics Supply Chain US-China Trade WarNews Markets General

 

Related Articles (SSW)

View Comments and Join the Discussion!

Dye Set To Deliver Container Availability Recommendations

Today's Pickup: Britain's Food Industry Warns Of Brexit Shortages