Sunday, December 12, 2010

Shipyards plan superlong vessels for Panama Canal

by Kyunghee Park, Bloomberg Businessweek

Daewoo Shipbuilding & Marine Engineering Co. had been gearing up for an order book of average-size vessels for next year. Instead, the company got more and more queries about building ships that are longer than the 1,063-foot-long Eiffel Tower.

"We were totally caught off guard," said Choe Yong Seok, a director at Daewoo in Seoul, the world's third-largest shipyard. "We had to scramble to find information."

Shipyards are assessing how to build vessels able to carry as many as twenty-thousand 20-foot containers, or 20 million flat-panel televisions, as operators seek to pare fuel costs and emissions.

Starting in 2014, larger ships will also be able to sail through a widened Panama Canal to U.S. East Coast ports from Asia, which could save as much as $1,000 per container compared with hauling goods cross-country, according to Mirae Asset Securities Co.

"It's going to be a fight over who can carry the most at lower costs," said Lee Sokje, a Mirae analyst. "South Korean shipyards will have the advantage given their dominance in this sector."

Of the 205 ships worldwide capable of carrying more than 10,000 boxes in service or due to be launched through early 2014, only 12 are from yards outside South Korea, according Um Kyong-A, an analyst at Shinyoung Securities Co.

Daewoo built the world's four biggest container vessels, which are all operated by Mediterranean Shipping Co. and can each carry 14,000 boxes. The shipyard will build another nine as part of the same order.

Hyundai Heavy Industries Co., the world's largest shipbuilder, based in Ulsan, South Korea, opened a new yard with the world's biggest dock in February, 2009.

Demand in the $53 billion shipbuilding industry has returned after an almost two-year drought caused by overcapacity and declining trade. Container-ship orders may rise to $8 billion this year and $19 billion next year, from $1.2 billion in 2009, said Lee Jae Won, a Tong Yang Securities Inc. analyst.

Vessels able to carry more than 8,000 containers made up a record 80 percent of orders by volume for the first 10 months of this year, surpassing the previous peak of 66 percent in 2007, according to Clarkson PLC, the world's largest shipbroker. It doesn't provide a more detailed breakdown of large-ship orders.

Ship orders usually take about three years to execute, so lines are gearing up now to take advantage of the $5.25 billion Panama Canal expansion. Vessels able to carry 12,600 containers, more than double the current limit, will be able to ply the 50-mile waterway once the work is finished.

Neptune Orient Lines Ltd., Singapore's largest container line, ordered two ships capable of carrying 10,700 containers each earlier this year from Daewoo, as part of a $1.2 billion deal.

Orient Overseas International Ltd., Hong Kong's biggest container line, is also considering ordering 13,000-box capacity ships, Director Stephen Ng said this month.

U.S. ports are preparing for big ships. Maersk has readied facilities in New York and Houston, for instance, to handle larger ships using the Panama Canal, said Kim Fejfer, head of its APM Terminals unit.

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