tag:blogger.com,1999:blog-6796651338160395539.post9126740834193155389..comments2023-11-05T11:36:14.880+02:00Comments on Amalia Tankers Inc.: Seaspan's China gambitDiran Majarianhttp://www.blogger.com/profile/07818842231575871539noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-6796651338160395539.post-90429896103027255002010-09-08T09:52:59.440+03:002010-09-08T09:52:59.440+03:00Let me add as an afterthought, the issue of slow s...Let me add as an afterthought, the issue of slow steaming that I have discussed in previous articles on the container industry. Demand earlier this year was rebalanced in part artificially by the decision of the major liner companies to put their tonnage on slow steaming to take capacity out of the market. Normally container vessels are designed for speeds of 22 knots. The major liner companies have put their vessels on speeds as low as 14 knots, but on the average the world container fleet is currently operating at 18 knots. This temporary measure greatly assisted in generating rate improvements for the industry. Some major players like Maersk are even suggesting that slow steaming becomes permanent. <br /><br />The slow steaming means that the major liner companies need less units for their service and theoretically impacts negatively non-operating owners, who are totally dependent on the liner companies for the employment of their vessels. This is particularly an acute problem for those companies with a large containership orderbook. The tonnage overhang for the post-Panamax size units is substantial.<br /><br />Seaspan has been relying heavily on COSCO to employ their new buildings. It seems that COSCO is willing to take on additional tonnage in these market conditions. Ostensibly, this defies current market fundamentals. Whether this will prove a sustainable long-term strategy depends on resumption of Chinese export trades. COSCO as a Chinese SOE does not have to observe the same market discipline of a private sector company since it does not carry the same default risk.<br /><br />Many institutional investors and hedge funds are again looking for placements in the container sector for this reason: SOE charterers that remove any market risk from the normal supply-demand restraints. Whether this is healthy investment and productive allocation of resources remains to be seen.Diran Majarianhttps://www.blogger.com/profile/07818842231575871539noreply@blogger.com