T WO S H I PPI N G I N DUSTRY analysts warn
pending ship orders could reignite a battle for
market share among the world's major con-
tainer lines, particularly if CMA CGM follows
through on rumored orders of nine 22,000-
TEU ships. The orders threaten the industry's
fragile return to profitability, warns Dre-
wry Shipping Consultants, which currently
expects $5 billion in industry profits for 2017,
while the make-up of the order book of Cosco
and Evergreen Line leaves them little choice
but to pursue cargo to keep ships employed,
according to SeaIntel. The CMA CGM orders
would be the first order of ships between
10,000 and 25,000 TEU in 2017, according
to IHS Markit, but 20 ships of that size had
been delivered as of June, and such ships are
entering the Asia-Europe trade at a pace of one
per week. There are 58 ships in the 10,000 to
25,000 TEU range under construction this
year, with that figure to jump to 73 next year,
IHS Markit data show. The uptick follows
the lowest annual container ship fleet capac-
ity growth ever recorded as ship scrapping
spiked, making 2016 the first year that more
vessels left service than entered it. "Even if a
positive view of demand is adopted assuming
stronger growth on the head-haul east-west
trades, it is exceedingly unlikely that this is
sufficient to match the capacity injection by
the Ocean Alliance, especially if the new CMA
CGM order of nine 22,000-TEU vessels is con-
firmed," SeaIntel CEO Alan Murphy said. The
French carrier is said to be close to signing a
deal for the 22,000-TEU container ships, over-
taking the current largest vessel afloat, the
21,413-TEU OOCL Hong Kong, which is to be
joined by five sister ships still on order. CMA
CGM was not available for comment, The
order is said to be valued at $1.4 billion with
either Korea's Hyundai Heavy Industries or
China's Shanghai Waigaoqiao Shipbuilding.
CHINA WASTEPAPER BAN
IMPACT SOLIDIFIES
ALTHOUGH ABOUT 16 percent of US wastepaper
exports to China could be lost due to China's
latest ban on imports of scrap commodities,
the estimated 160,000 TEU represented by
mixed scrap paper will be far less damaging
than if China had targeted the more volumi
-
nous cardboard and newspaper sectors. This
latest environmental initiative by China, pub-
lished on July 18, is scheduled to take effect at
the end of the year. Because wastepaper is the
top US containerized export, the ban is chilling
for scrap paper exporters, ports, and especially
carriers in the westbound Pacific. According to
PIERS, a sister company of The Journal of Com-
merce within IHS Markit, scrap paper exports
to China in 2016 totaled 1.03 million TEU. The
Chinese government's "Reform and Implemen-
tation Plan to Enhance Solid Waste Import
Management System by Prohibiting the Entry
of Foreign Waste" could carry more threaten-
ing, longer-term consequences for exports
of
recyclables if it leads to an assault on other
scrap products. The General Office of the State
Council said the goal by the end of 2019 is to
"gradually halt the importation of solid waste
that can be replaced with domestic resources."
China appears to be moving toward domestically
procured recyclables that it can better control.
This is the latest Chinese government effort to
SHIP ORDERS JEOPARDIZE CARRIER PROFITABILITY
Spotlight
6 THE JOURNAL OF COMMERCE www.joc.com AUGUST 21.2017 6 THE JOURNAL OF COMMERCE www.joc.com
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