Evolving trade routes dampen demand for Ultra Large Container Vessels
SINGAPORE : According to industry data, the demand for Ultra Large Container Vessels (ULCVs) has decreased as shipping companies shift to smaller, more versatile vessels to accommodate changing trade patterns.
The redirection of global trade away from China toward other Asian ports is prompting shipowners to abandon the trend of ordering massive cargo vessels, instead opting for smaller, more versatile ships.
Only six ultra-large container ships, capable of carrying over 17,000 twenty-foot equivalent units (TEUs), are set for delivery in 2025, compared with 17 in 2020, according to shipbroker Braemar.
In contrast, orders for mid-sized vessels, ranging from 12,000 to 16,999 TEUs, have surged, with 83 scheduled for completion in 2025—nearly five times the number delivered five years earlier, Financial Times reported.
The figures are the latest in a long line of indicators that trade routes are decentralising from China, with a growing emphasis on emerging hubs in Vietnam, India and Indonesia – all of which are generally better equipped to handle mid-sized vessels. To that end, we can expect to see an increase in activity at ports in South East Asia and South Asia, especially as supply chains move closer to emerging trade hubs and to end markets.
Changing trade patterns
Peter Sand, chief analyst at shipping market tracker Xeneta, said supply chains are increasingly shifting from China to smaller manufacturing hubs across Asia. “We definitely see increased interest away from sourcing only your products from China,” Sand said, noting that larger ships are only cost-effective when they can be fully loaded.
The trend reverses decades of shipowners favouring ever-larger vessels to meet the demands of booming global trade. The risks associated with such vessels became apparent in 2021 when the 20,000-TEU Ever Given blocked the Suez Canal for six days, disrupting international shipping.
Environmental and geopolitical concerns
New environmental regulations and geopolitical risks, such as recent attacks on ships in the Red Sea, have further cooled interest in ultra-large vessels, industry insiders say.
Donald Trump’s return to the White House this month is expected to amplify trade disruptions, as the president has threatened to escalate tariffs on Chinese imports, Financial Times reported.
“The shutting of the Suez Canal has had a serious impact on container shipping,” said William MacLachlan, a partner at law firm HFW.
“Smaller ships can respond to macroeconomic events more readily.”
Challenges for ultra-large ships
Ultra-large ships dominate Asia-Europe routes via the Suez Canal but face challenges transiting other key waterways, such as the Panama Canal. These limitations, coupled with uncertainty over future fuel standards and the International Maritime Organisation’s net-zero emissions targets by 2050, have made shipowners cautious about investing in the largest vessels.
Shipowners’ earnings spiked after attacks by Yemen’s Houthi militants near the Suez Canal forced liners to reroute, driving up shipping costs as vessel availability dropped. But experts say these disruptions underscore the need for flexibility in fleet composition.
“Smaller ships are a less risky investment,” MacLachlan said, citing lower costs and adaptability to economic and regulatory changes.
Despite the trend, demand for vessels larger than 18,000 TEUs saw a modest rebound in 2024, with 76 such ships on order as of December, up from 45 a year earlier, Braemar data shows. However, industry insiders expect smaller, more agile ships to play an increasingly prominent role as trade routes evolve.