The recovery of the international trade and transportation industries after the pandemic has revitalized the global shipbuilding and ship trading sectors. In this post-pandemic era, seizing opportunities and purchasing the right container ship has become a top priority for many shipping and trading companies.
This guide explores how to purchase a container ship from different perspectives:
1. Where to Buy Container Ships?
To answer this question, let’s take a look at the history of the global shipbuilding industry.
In the 1970s, Japan became the world leader in shipbuilding due to its high-quality manufacturing. For two decades, Japan’s shipbuilding industry thrived, dominating the global market. However, by the 1990s, South Korea emerged as a strong competitor, leveraging lower labor costs to produce ships at more competitive prices. This enabled South Korea to surpass Japan and become the largest shipbuilding nation.
Fast forward to 2010, China’s "Reform and Opening Up" policy, along with 40 years of industrial growth, propelled it to become the world’s largest manufacturing power. To support its booming exports, China made significant advancements in shipbuilding technology and production. The cost of building ships in China became significantly lower—often half the price of similar ships built in Japan or South Korea—while the quality rapidly improved to match that of its competitors.
Today, China is the undisputed leader in shipbuilding. For buyers seeking new container ships, China offers the best combination of quality and price.
2. What Kind of Container Ship Should You Buy?
The type and size of the container ship you purchase depend on your operational needs, capital investment, and expected returns.
Small-Scale Needs: For small transportation companies or regional trade, a container ship with a capacity of less than 20,000 tons (able to carry 500-800 TEU containers) is sufficient.
Medium-Scale Needs: For intercontinental trade, ships with a capacity of 20,000-50,000 tons are ideal.
Large-Scale Needs: Global shipping companies often collaborate with shipyards to build massive ships with a capacity of 50,000-100,000 tons or more. For example, in June 2023, China built the world's largest container ship.
Cost and Payback Analysis
To decide if a ship is worth the investment, calculate its payback period. For instance:
A 24,000-ton container ship costs approximately $143 million.
Over a lifespan of 25 years, the annual depreciation is around $4.5 million.
On the popular Shanghai-to-Los Angeles route, shipping one container costs $15,000. Even if the ship’s capacity is 24,000 TEU, operational conditions typically allow for carrying 20,000 containers, generating approximately $300 million in revenue per trip.
Operating Costs
Fuel: The ship consumes around 220 tons of fuel per day, with heavy oil priced at $420/ton. For a 13-day trip, fuel costs total $1.2 million.
Crew Wages: With wages of $3,000 per person, personnel costs for 13 days amount to $50,000.
Miscellaneous Fees: Port fees, agency fees, and other charges come to about $200,000.
Profitability
After deducting expenses, a single trip on this route generates gross profits of $298 million, with a net profit of around $50 million. This means the ship can recover its costs relatively quickly. However, profitability varies depending on the route and frequency of trips—the more frequent the voyages, the higher the returns.
3. Should You Buy a New or Used Container Ship?
One of the most common dilemmas buyers face is choosing between a new and a used ship. The decision largely depends on your budget and business goals.
New Container Ships
Ideal for Large Companies: Large shipping companies and businesses with sufficient cash flow often prefer to build new ships. The costs of building a ship are tied to steel prices, so companies can strategically time their orders to save on manufacturing costs.
Long-Term Investment: New ships provide better reliability, efficiency, and lower maintenance costs over a long period.
Used Container Ships
Best for SMEs and Individual Investors: For small and medium-sized enterprises (SMEs) or investors with limited budgets, buying a second-hand ship is a practical choice.
Cost Advantage:
A 10-year-old used ship is often priced at half the cost of a new one.
In cases where sellers are in urgent need of cash, you might acquire the ship for as little as one-third of its original cost.
Resale Value: Well-maintained used ships can retain their value or even appreciate due to rising steel prices. This makes them a profitable investment, as the income generated during ownership is essentially pure profit.
Opportunities in China's Second-Hand Market
China’s ship trading market offers significant opportunities for buying used ships. After three years of the pandemic, many small businesses and individual investors have been forced to sell their ships at reduced prices to address financial pressures. Buyers can take advantage of these low prices to secure good deals.
For SMEs and individual investors, finding a reliable second-hand ship trading platform is crucial. A well-maintained used ship can provide excellent returns, making it an attractive option for those looking to enter the shipping industry with a smaller initial investment.
Conclusion
To successfully purchase a container ship, you need to evaluate:
Where to Buy: China currently leads the global shipbuilding industry, offering high-quality and cost-effective options.
What to Buy: Determine the ship size and capacity based on your operational requirements and financial goals.
New vs. Used: For long-term investments, new ships are ideal, while used ships are better suited for SMEs and budget-conscious buyers.
By carefully considering these factors, you can make a well-informed decision and seize the opportunities in the post-pandemic global shipping market.
