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Aug.21, 2017

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T WO S H I PPI N G I N DUSTRY analysts warn pending ship orders could reignite a battle for market share among the world's major con- tainer lines, particularly if CMA CGM follows through on rumored orders of nine 22,000- TEU ships. The orders threaten the industry's fragile return to profitability, warns Dre- wry Shipping Consultants, which currently expects $5 billion in industry profits for 2017, while the make-up of the order book of Cosco and Evergreen Line leaves them little choice but to pursue cargo to keep ships employed, according to SeaIntel. The CMA CGM orders would be the first order of ships between 10,000 and 25,000 TEU in 2017, according to IHS Markit, but 20 ships of that size had been delivered as of June, and such ships are entering the Asia-Europe trade at a pace of one per week. There are 58 ships in the 10,000 to 25,000 TEU range under construction this year, with that figure to jump to 73 next year, IHS Markit data show. The uptick follows the lowest annual container ship fleet capac- ity growth ever recorded as ship scrapping spiked, making 2016 the first year that more vessels left service than entered it. "Even if a positive view of demand is adopted assuming stronger growth on the head-haul east-west trades, it is exceedingly unlikely that this is sufficient to match the capacity injection by the Ocean Alliance, especially if the new CMA CGM order of nine 22,000-TEU vessels is con- firmed," SeaIntel CEO Alan Murphy said. The French carrier is said to be close to signing a deal for the 22,000-TEU container ships, over- taking the current largest vessel afloat, the 21,413-TEU OOCL Hong Kong, which is to be joined by five sister ships still on order. CMA CGM was not available for comment, The order is said to be valued at $1.4 billion with either Korea's Hyundai Heavy Industries or China's Shanghai Waigaoqiao Shipbuilding. CHINA WASTEPAPER BAN IMPACT SOLIDIFIES ALTHOUGH ABOUT 16 percent of US wastepaper exports to China could be lost due to China's latest ban on imports of scrap commodities, the estimated 160,000 TEU represented by mixed scrap paper will be far less damaging than if China had targeted the more volumi - nous cardboard and newspaper sectors. This latest environmental initiative by China, pub- lished on July 18, is scheduled to take effect at the end of the year. Because wastepaper is the top US containerized export, the ban is chilling for scrap paper exporters, ports, and especially carriers in the westbound Pacific. According to PIERS, a sister company of The Journal of Com- merce within IHS Markit, scrap paper exports to China in 2016 totaled 1.03 million TEU. The Chinese government's "Reform and Implemen- tation Plan to Enhance Solid Waste Import Management System by Prohibiting the Entry of Foreign Waste" could carry more threaten- ing, longer-term consequences for exports of recyclables if it leads to an assault on other scrap products. The General Office of the State Council said the goal by the end of 2019 is to "gradually halt the importation of solid waste that can be replaced with domestic resources." China appears to be moving toward domestically procured recyclables that it can better control. This is the latest Chinese government effort to SHIP ORDERS JEOPARDIZE CARRIER PROFITABILITY Spotlight 6 THE JOURNAL OF COMMERCE AUGUST 21.2017 6 THE JOURNAL OF COMMERCE Corine van Kapel /

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