New investors needed to help finance ships below 3,000 TEU: Drewry

THE collapse of the German KG ship financing system leaves a hole in the small box ship market, which needs to be filled, particularly as smaller vessels need to be more fuel efficient and eco-friendly, says Drewry Maritime Research.

Only four per cent of the existing fleet of ships below 3,000 TEU is on order. Though small, the vessels are the workhorses of intra-regional services and account for 25 per cent of global cellular capacity but carry far more because of shorter transits.

Market conditions are no longer attractive to investors. As one German shipbroker lamented: "The crisis of the last five years has eaten into much of the reserves of these owners who would like to order anti-cycle, but can't since their money is committed to (just maintaining) existing vessels."

Although there is no shortage of capacity today, much of it is neither fuel efficient or environmentally friendly, which is why so much is being scrapped. Last year, as many as 151 vessels (all between 1,600 and 3,000 TEU) with a total capacity of 353,149 TEU were demolished.

New investors must be attracted to the short-sea sector, but they will want more financial security, particularly for fuel-efficient newbuilds. In this respect, it is unlikely that all existing short-sea specialists will be able to match the financial muscle of the top 20 players, particularly as bigger vessels are cascaded out of their deep-sea services, the Drewry report added.