Vehicle Shipping - Container vs RoRo: Capacity Situation
Updated: Oct 10, 2023
In this entry we explore the current capacity situation in both the RoRo sector and the container sector before looking at the vessel order book for the coming 5 years to try to draw some conclusions on how capacity trends will develop over the coming years, and how this will affect global vehicle shipping.
RoRo Capacity
In October 2022 the Association of European Vehicle Logistics – ECG released a briefing paper on the current capacity crisis within the vehicle logistics sector. Back then the RoRo sector was estimated to be operating at 10-15% below required capacity in order to efficiently service global vehicle shippers. An update on this report in March 2023 underline that there is little positive news in the short-term, but that there is a marginal improvement on the horizon as 12 new vessels are being delivered in 2023, and there is currently “ultra-low” demolition activity in the sector.
Major RoRo Players
Some of the major RoRo players are listed below, ranked by fleet size and transport capacity. Some big companies like CLDN and UECC are not included due to lack of available data, and others like Eukor, ACL, Finnlines, etc. are counted as part of their mother companies.
The global RoRo fleet consisted of 782 ships, as of March 2023. The top 7 operators in the world thus control roughly 80% of vessels in the global fleet, and the 11 mentioned in this study control roughly 85%. Out of the top players, Grimaldi is the operator with the biggest confirmed order-book over the coming years, with 28 ships/618,000 DWT to be added to their fleet by 2027. Hoegh Autoliners has the second largest order-book with 12 ships/348,000 DWT, followed by NYK also with 12 ships, but only 243,300 DWT. Hoegh’s new vessels will all be of the Aurora Class which is touted to the worlds largest and most environmentally friendly RoRo vessels, with ability to operate on zero-carbon fuels and capacity to load 9,100 cars. WWL also have an extensive order book, but most of these vessels are still only “options to build” and any significant new capacity will only be delivered in 2026 or later.
New RoRo Vessel Deliveries
Below we look at total new RoRo deliveries from 2020 to 2028 in order go get a grasp of how the global fleet have developed over the past years, and of how it will develop in the coming 5 years. Numbers are based on deadweight tonnage as that is the only metric available in open sources.
From the graph above we can see that significant new capacity will only start to be added to the market in Q4 of 2023. However, these 10 ships/207k DWTs worth of transport capacity will only make up for roughly 1.3% of the global fleet well below the market capacity shortage of 15% as estimated by ECG. Looking at a ship for ship basis, around 117 new vessels to be put into service to alleviate the capacity crisis. Even without factoring in vessel scrapping and the growing global car sales, this will not happen before December 2025. We can therefore assume that the industry will continue operating under capacity up untill the end of 2025.
Potential Deconsolidation Coming
Another interesting point to observe when looking at the order book for the coming 5 years is the seemingly deconsolidation in the industry of new ships delivered. In 2023 the 11 companies we focus on in this research received roughly 72% of all new DWT capacity delivered. In 2024 this is reduced to 43.5%, while in 2025 as low as 37.8%. In 2027 we only find players from among the top 10 global RoRo liners which have already confirmed orders on the book.
Among the “All others” category there are also several ship owners/tonnage providers taking deliveries of RoRo vessels to charter them out to operators, both big and small. The capacity which is listed as “All others” may thus eventually end up being operated by the larger operating companies mentioned by name in this report. The assumptions drawn based on the available data may therefore not be completely accurate. It may however also be a signal that new players are entering the industry and the market is becoming further deconsolidated.
Low RoRo Capacity set to Continue Hamper Global Vehicle Shipping
Gram Car Carriers, a Norwegian tonnage provider, estimated the excess RoRo ships in the global fleet to have been 105 in 2020. However, for each consecutive year after 2020 the market has and will experience significant under-capacity. Even when factoring in newly built vessels to be delivered over the coming years, they estimate the capacity shortage to last at least until 2026.
There is also an ongoing capacity crisis in the short-sea sector. Several smaller sized ships which are usually used for intra-region short-sea vehicle distribution have been put into deep-sea operations to bring cars from Asia to Europe, or on other high demand/high profit lanes. This is especially a problem in Europe where the problem is amplified due to many smaller vessels have also been sold off to Asian operators for use on intra-Asia lanes. ECG reports that 5 or 6 vessels have disappeared over the past year due to this. Gram Car Carriers also report that available vessels in the global fleet of this type and size of RoRo are estimated to be only 2 ships for both 2023 and 2024. With additional capacity added over the coming 2-3 years, some of the smaller vessels currently being used for deep-sea shipping might be able to return to short-sea operations, however there is very little “short-sea specific” ships in the confirmed orderbook for the next 5 years.
Container Capacity
Sluggish economic growth and customers trimming their inventories are currently causing a drop in global sea container demand. It was expected that companies around the world would draw down inventory around the middle of the year, thus causing an increase in shipping volume, this has not happened yet. A major European container liner said in a recent company update that they were originally expecting a fall in container volumes of 2.5% this year but had to adjust this up to 4%. Between April and June, the number of containers loaded onto their ships fell by 6% compared to the year before, and average freight rates were halved. There is a coming influx of new container vessels being delivered soon, and the coming 18 months is expected to be difficult for container carriers.
Major Container Liners
The list below shows all container carriers with a total fleet capacity of over 400,000 TEU, the top 11 players in the world, ranked by total TEU capacity their respective fleet can carry:
These 11 companies combined hold 86.2% of the global container fleet, with a combined fleet of 3,667 ships and a loading capacity of 23,639,729 TEU. Out of the top players MSC has the largest orderbook with 123 ships/1,495,155 TEU worth of capacity in the pipeline. Looking at the current orderbook, not considering scrapping, CMA CGM is set to surpass Maersk to take the number 2 spot in terms of capacity over the coming 5 years. Among the top players, Evergreen and ZIM are the two companies expanding their fleet the most in terms of percentage growth, with an additional capacity of 50.2% and 50.4% of the existing fleet to be added over the coming years. Maersk has the lowest percentagewise fleet expansion with only 9.7% of current fleet, or “only” 32 ships/403,000 TEU worth of capacity. This is likely due to the company’s extensive focus on vertical integration over the past 2-3 years.
New Container Ship Deliveries
Below graph shows total new container ship deliveries from the start of 2020 till Q2 in 2028, shown in number of TEU capacity.
Main observation to draw from these data are the low level of new capacity added to the container market during the “Covid years”, with only 131 ships/840,000 TEU delivered in 2020, 144 ships/1,004,000 TEU delivered in 2021, and 173 ships/955,000 TEU delivered in 2022. This was not caused by Covid, but rather by the relatively high capacity and low freight cost & margins in the industry in the years before Covid. However, the initial Covid period where it was wrongly anticipated that shipping volume would be reduced due to the pandemic, surely had an impact on the speed of which new vessel orders have been put in over the past years. 2020 through 2022 stand in stark contract to the next three years, where 2023 sees deliveries of 378 ships/2,516,000 TEU worth of capacity, 2024 is expected to have 403 ships/3,027,000 TEUs delivered, and 2025 have so far registered 171 ships/1,691,000 TEUs in the orderbook.
The cost of Container vessel time charters started to drop in the beginning of 2022 as the tonnage providers understood the market was changing. This was followed by a slow and steady reduction in global container transport prices through 2022, and after peaking in September 2021, prices returned to a similar level as pre-covid in the end of 2022/start of 2023.
When talking about capacity in the container shipping sector, we must also look at the capacity of the containers themselves, not only the ships which carry them. Lack of available containers was one of the main drivers of the sudden price increase during the end of 2020/start of 2021. As the global workforce was out with Covid, containers got stuck in ports, at factories, in depots, without anyone to move them around. The sudden increase in shipping from China to American and European markets also exacerbated this problem. The same incentives are however in place on the container side as are on the ship side. During the extremely profitable years of 2021 and 2022, container scrapping was almost non-existent, and new container builds were through the roof. It is estimated that there is somewhere between 8.5 and 13 million excess TEU in the world as of 2023 due to the big increase in global container fleet during the Covid years, and the swift drop in demand more recently.
In Review
RoRo capacity is significantly down and is currently causing hurdles for global vehicle transportation. Delivery times are long, port congestion is causing trouble, and prices are up significantly. Deliveries of new RoRo vessels are slowly starting to trickle on to the market, but it is expected that the current situation will last until the end of 2025 or start of 2026 before there is any significant improvement to the capacity situation. This considering no demand reduction hits the automotive industry. On the other hand, container capacity is readily available, and compared to the peak Covid months in 2020/21, container shipping prices are now relatively low and available containers are found almost anywhere in the world. New container ships are being delivered as we speak, and the container shipping market is expected to be at over capacity for the foreseeable future.
Cars in containers are growing in popularity, more and more car manufacturers are looking to this as an alternative solution to RoRo, and various large and small-scale projects for shipping cars in containers can be seen around the world.
Follow us in the coming weeks as we continue to explore pricing dynamics in the container and RoRo markets, look at hot trends in the two sectors, and try to make a comparison of the current and future prospect of shipping cars both in containers and by RoRo.