Boom time for ro-ro ships

In-Depth

Booming EV exports are fuelling demand for car carriers and ro-ro vessels. But allegations of ‘unfair trade’ could cause problems.

The demand for electric vehicles (EVs) has soared over the past four years, resulting in an unprecedented demand for ships to transport them, with more than 250 PCTC, PCCs, and general ro-ro ships on order.

A notable feature of the market has been the increasing role of Chinese manufacturers as suppliers of good quality and competitively priced EVs across the world. According to the China Association of Automobile Manufacturers (CAAM), 4.9 million cars were exported in 2023, up 57.9% from the previous year.

While this year will witness a much slower rate of growth, primarily because sales of EVs in major markets such as Europe and the US have slowed, CAAM still expects exports to total 5.5 million units, a rise of more than 12%.

Subsidy alarms

But this could change. There are growing concerns, particularly in the US and EU, that Chinese state-sponsored subsidies have kept the prices of their EVs artificially low, and the import of these cars is threatening local manufacturers.

Additionally, worries that certain technologies in the vehicles could be used to collect sensitive data and even act as spying devices, compromising national and regional security, have mounted. Potentially much higher tariffs, restrictions, and even bans could be imposed by the authorities.

At a recent US Senate Finance Committee hearing, Katherine Tai, a US Trade Representative, said: “The US must take decisive action to protect electric vehicles (EVs) from subsidized Chinese competition. China’s anti-competitive practices, including enormous amounts of state support, had fostered over-production of solar panels a decade ago that devastated US producers. We are now facing a similar situation with EVs and the automotive sector, and leaving Chinese competition unchecked would cause the US to lose the ability to produce those products.”

She added: “So we have to take early action, decisive action, and we have to be really clear about why we’re taking the action. We are looking for a level playing field because the current playing field is not level, for all the talk about free trade.”

In the EU, investigations have been taking place into the use of subsidies by the Chinese Government in the EV sector since October 2023. Some kind of outcome, including the possibility of implementing provisional tariffs on imports of the country’s EVs, is likely by July this year.

Moreover, manufacturers and dealers are facing a dramatic slowdown in the global sales of EVs this year. Several terminals that specialize in processing cars are now resembling car parks as dealers hold back and refuse to take delivery of vehicles to their showrooms.

The problems are particularly acute in Europe, including in the ports of Zeebrugge and Bremerhaven, which house two of the largest car handling facilities in the region. A lack of truck drivers and transporter equipment to move vehicles from the ports has added to the congestion.

Lack of capacity

These recent issues contrast with what had been a lack of ro-ro capacity to transport vehicles out of China, which is now the biggest car exporting nation in the world.

In recent years, specially designed folding racks and/or racking systems for installation in freight containers have been used to supplement the deployment of PCCs and PCTCs. On some of the country’s smaller volume and emerging markets trades, such as South America, this has been the only option for some manufacturers and dealers.

Nonetheless, a record number of large ro-ro and car carrying vessels have been ordered in the past couple of years, with the majority of them contracted with yards in China and a significant number of them earmarked for China-based shipowners (Cosco Shipping and China Merchants) and car manufacturers, including BYD, Chery Automobile, and SAIC Motor Corporation.

The car carrying fleet is tightly controlled with most of the world’s car manufacturers having established long-standing relationships with shipping companies or owning their own fleets, as in the case of Nissan and Toyota.

China’s automotive giants are now moving in a similar direction and seeking to control their distribution chains more closely and effectively. Chery is actually constructing some of its own ships, with eight dual-fuel LNG vessels being built at Samjin Shipbuilding in Weihai (Shandong province), a shipyard the group acquired through its wholly owned subsidiary, Wuhu Shipyard, last year. The 7,000 CEU capacity PCTCs will be delivered in 2025 and 2026.

According to London-based ship consultancy group Veson Nautical, Chinese companies will control the fourth largest car carrying fleet in the world in 2028, controlling an estimated 8.7% of vessels in service. In 2023, China was eighth in the league rankings and owned less than 3% of the world’s car carrying armada.

Deliveries of new generation dual-fuel ships loading up to 8,000 CEU have already started, while even bigger 9,000 CEU capacity vessels have been contracted for delivery between 2025 and 2028 (see Resilient car market fuels carrier boom, WCN March 2024).

Chinese players

BYD and SAIC are among the Chinese car companies that have either taken direct ownership of vessels or exercised long-term charter contracts with shipowners for them this year. BYD has phased into service BYD Explorer No. 1 (7,000 CEU), which is chartered from Zodiac Maritime, and SAIC the 7,600 CEU capacity SAIC Anji Sincerity.

Over the next two years, BYD will add another seven ships to its fleet, raising its carrying capacity to an estimated 60,000 CEU, and more contracts are likely to be negotiated. Moreover, the company has stressed that its ships will be available to carry other car companies’ vehicles, clearly suggesting that BYD is interested in structuring its shipping business as a separate revenue and profit center.

Meanwhile, SAIC, which exported over 1.2M vehicles in 2023, is planning to add up to 14 PCTCs with capacities ranging between 7,000 CEU and 9,000 CEU to its fleet by the end of 2027, by which time its exports could exceed 1.6M vehicles a year.

In March, construction commenced at Jinling Shipbuilding (Nanjing) Co. Ltd on the company’s first 9,000 CEU methanol-ready ship. It is scheduled to be delivered in 2025 and will feature a length of 228m, beam of 37.8m, and draught of 9.1m. The vessel will have a maximum service speed of 18.3 knots.

Boom time for ro-ro ships

Established shipowners of roro vessels are also expanding their fleets, with Wallenius Wilhelmsen and Höegh Autoliners having ships on order, with the focus on introducing more environmentally friendly tonnage to service. There is also a determination on their part to sign longer-term and broader service contracts with their customers.

Ammonia ready

Höegh’s ambition is to power at least some of its new Aurora-class vessels, of which 12 of the 9,100 CEU capacity units are on order, with ammonia. The company recently secured NOK146M (US$14M) in funding from Enova SF – an organization controlled by the Norwegian Government’s Ministry of Climate and Environment – to help with the cost of installing engines designed to run on ammonia and additional fuel tanks. The remaining 10 ships will feature engines able to run on LNG and low sulfur fuel, but with ‘ammonia ready’ certification from the classification society DNV.

“At Höegh Autoliners, we take leadership by actively collaborating with a wide range of highly qualified and dedicated suppliers to make clean ammonia viable as a zero-emission shipping fuel,” said Andreas Enger, CEO.

“We believe it is important for shipping companies to send a clear signal to the rest of the value chain that the technology can be realized in a short time and that there will be demand for carbon-neutral fuel.” The company’s goal is to be net zero emissions by 2040.

Meanwhile, Höegh Autoliners recently signed a four-year contract with a major East Asian car producer for the transport of mainly electronic vehicles (EVs) from Asia to Europe.

“We are happy to have been chosen as the preferred shipping partner for another world-leading car producer. We take pride in the trust given to us for bringing their prestigious brands to their end users in Europe in the upcoming years,” said Enger.

Wallenius has also been active. It recently concluded a three-year contract with what it described as “a leading global player in the premium car segment”. Interestingly, the deal, which is worth in excess of US$1B, involves Wallenius Wilhelmsen providing the car company with a full suite of shipping and logistics services while committing to the use of biofuel. It has a two-year extension clause.

“We see manufacturers shifting priorities and increasingly looking for solutions which provide predictability in their supply chains,” said Lasse Kristoffersen, president and CEO at Wallenius Wilhelmsen. “In this case, it means longer-term contracts encompassing both logistics and shipping services. This goes hand in hand with Wallenius Wilhelmsen’s goal of being a total solution provider in finished vehicle logistics.”

This latest deal follows multi-year contracts signed in January with one of the world’s biggest manufacturers of construction and mining equipment and a leading distributor of automobiles in the US. Respectively signed for three- and two-year periods, Wallenius Wilhelmsen said the deals were worth US$1B and US$200M over the lifetime of the contracts and based on anticipated cargo volumes.

It also stressed that both of the agreements included “direct support for Wallenius Wilhelmsen’s decarbonization initiatives, such as the use of biofuel, technical and operational improvements to the existing fleet, and the development of new technologies”.

“Continuing our positive start to 2024, these two separate, significant multi-year contracts further strengthen our existing partnerships with key customers in the high and heavy and automotive segments, extending predictability for both the customer and Wallenius Wilhelmsen,” explained Pia Synnerman, chief customer officer at Wallenius Wilhelmsen.

Driving efficiencies

Car carrying companies are also looking at ways of improving their operating efficiencies as a means of cutting costs and speeding up operations, particularly when it comes to loading vehicles when multiple ports of call are involved.

Working closely with the Japan Cargo Tally Corporation (JCTC), which has developed the J-CARPS system, Mitsui OSK Lines (MOL) has been the first to implement it in Japan. It involves cars being counted and checked by JCTC at the loading port and a cargo loading plan prepared for the next one.

Previously, information related to the location and volume of cars to be moved was handled separately by MOL and JCTC, with this information then shared by email. The J-CARPS system allows data to be centralized into a unified system and in a standardized format, while its file attachment function and simple message sending function streamline the process.

This means stakeholders, including shipping companies, stevedores, and JCTC, are able to communicate and collaborate seamlessly within the system and also access and update loading plans and performance data in real-time. MOL believes J-CARPS will speed up the car loading process in Japan and help car carriers achieve further operating efficiencies.

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