Containership values plunge even further after Hanjin’s bankruptcy filing

The valuation provider VesselsValue said that during the past year, the value of a 2016-built Panamax containership with 4,250 TEUs of capacity tumbled 49.57 percent, while the value of a 2016-built ship with 7,000 TEUs of capacity fell 32.27 percent.    Containership values are plunging and other liner companies could write down the value of their container shipping businesses as Japan’s largest carrier, Nippon Yusen Kaisha (NYK), did earlier this week.
   NYK said it is projecting a 100 billion yen (U.S. $957 million) impairment on its container business, as well as an impairment of 85 billion yen for bulk carriers, and 10 billion yen for cargo aircraft.
   The containership write down “exceeds previous impairments recorded by other container carriers by a large margin,” Alphaliner said in its Weekly Review, adding the write down “represents almost a quarter of the total assets of NYK’s liner shipping business, which stood at 419 billion yen at the end of March 2016.”
   Alphaliner said it estimates “the top 18 carriers may need to write off some $35 billion, assuming they were to take a 25 percent impairment loss on the value of their total assets.” However, Alphaliner added, “Total impairment losses would vary depending on the individual carrier’s fleet composition and accounting policies.”
   Another information service, VesselsValue, said during the past year, the value of a 2016-built Panamax containership with 4,250 TEUs of capacity tumbled 49.57 percent, while the value of a 2016-built ship with 7,000 TEUs of capacity fell 32.27 percent.
   VesselsValue did note that much of that decline followed the bankruptcy of Hanjin Shipping. In September alone, the value of a Panamax ship declined 31.1 percent, while the value of a 7,000-TEU ship fell 19.2 percent.
   For older ships, the plunge in value is even more extreme – over 60 percent during the past year for Panamax ships built between 2008 and 2010; and more than 60 percent for 7,000 TEU-ships built between 2003 and 2006.
   “The numbers for containerships are pretty enormous and paint a very bleak picture,” said William Bennett senior cargo shipping analyst at VesselValue. “Oversupply is the primary cause here of which liners like Hanjin are a victim.
   “Values have been affected by the long-term effects of the new Panama Canal marginally, but we see this effect taking hold most in the discount applied to Panamax container vessels as they become more obsolete,” he added.
    However, even the value of “new Panamax” ships with 13,000 TEUs of capacity and ultra large containers vessels (ULCVs) with 18,000 TEUs of capacity are affected. The values of both classes of ships built in 2016 are off more than 13 percent from where they were a year ago.
   To put things into perspective, Bennett said that in the ULCV sector, there are currently about 160 vessels on the water with a combined capacity of around 2.7 million TEUs, and the ULCV orderbook up to 2018 delivery has 123 vessels inked with a combined capacity just shy of 2.1 million TEUs. “This means the fleet size will almost double in two years,” he said. “This kind of growth can only have an adverse effect on the current supply situation.”