An artist’s rendering of new TOTE ships. Image: General Dynamics NASSCO

General Dynamics NASSCO announced today the signing of a historic a contract with TOTE, Inc. calling for the design and construction of up to five 3,100 TEU LNG-powered containerships, the first such ships ever to be constructed in the world.

Once completed, the 764-foot-long containerships are expected to be the largest ships to be primarily powered by liquefied natural gas (LNG). The contract between NASSCO and TOTE Shipholdings, Inc., a subsidiary of TOTE, Inc., calls for two ships and includes options for three more.

The new ships will be constructed at NASSCO’s shipyard in San Diego and designed by DSEC, a subsidiary of Daewoo Shipbuilding & Marine Engineering (DSME) in South Korea. The design will be based on proven containership-design standards and will include DSME’s patented LNG fuel-gas system and a MAN ME-GI dual fuel slow speed engine. NASSCO has successfully partnered with DSEC previously for the design and construction of five State-class product tankers which currently operate in the U.S. Jones Act market.  These new ships will operate between Jacksonville, Fla., and San Juan, P.R.

“This project breaks new ground in green ship technology,” said Fred Harris, president of General Dynamics NASSCO. “It adds to our design and production capabilities and validates our reputation as one of the nation’s leading shipyards for commercial and government new-construction shipbuilding. Securing this contract has been a real team effort and will help sustain the jobs of the talented skilled tradesmen and women in our workforce.”

The double-hulled vessels will operate on either fuel oil or gas derived from LNG, which will significantly decrease emissions while increasing fuel efficiency as compared to conventionally-powered ships.The LNG-powered containerships will also include a ballast water treatment system, making them the greenest ships of their size in the world.

Anthony Chiarello, President and CEO of TOTE, Inc. said, “This investment demonstrates our commitment to the people of Puerto Rico and our environment. These vessels mark a new age of shipping using the best technology in the world.”

Construction of the first containership is scheduled to begin in the first quarter of 2014, with delivery expected by the fourth quarter of 2015. The second ship is expected to be delivered in the first quarter of 2016.

Image (c) severesid/Shutterstock

Sandy-related troubles at the Port of New York and New Jersey are forcing carriers to divert their ships to other ports, disrupting the supply flow for retailers and manufacturers already hurting in the storm’s aftermath.

The third-largest port in the nation said Friday evening that it checked many of its facilities and was opening most of its waterways to limited traffic. However, its terminals still didn’t have power, so it couldn’t test its equipment and systems, including the enormous loading cranes. The storm washed away containers, damaged port terminals and may even have shifted some shipping channels, according to shippers who use the port, adding they expect it will take through the weekend to fully reopen.

Maersk Inc., the world’s largest container-shipping company, has begun diverting its cargo to Halifax, Canada, Baltimore and Philadelphia—but most of its ships are going to the Port of Virginia in Norfolk, the deepest port on the East Coast and one of the largest.

Maersk had three of its own ships, as well as three ships it was co-operating with other carriers, scheduled to come to port in New York when the storm hit. “These vessels off the coast of the northeast, [were] burning fuel, just sitting there,” said Timothy Simpson, spokesman for Maersk Line North America. “We got to the point where there wasn’t any other choice.”

The carrier, based in Copenhagen, is notifying customers about the decision to send material to other ports and telling those customers they will have to pay the additional cost of transporting the shipments to their final destinations. Costs will vary by customer and location, he said.

Meanwhile, Taiwan-based Evergreen Line, the fourth-largest ocean container carrier in the world, confirmed Friday evening it has invoked force majeure clauses in contracts for cargo on three of its ships scheduled to arrive this week or early next week at the New York-New Jersey port, according to a company spokeswoman Barbara Yeninas. The clause is usually invoked when parties can’t fulfill their contractual obligations because of natural disasters.

The carriers’ customers have to factor in the additional time it would take to move the cargo from places like Norfolk to the New York area. The holiday shopping season looms, and it can take days for goods to make it from ship to store shelf. Many companies also maintain lean inventories.

“They’ve got to get this moving by Monday. They have to,” said Pat Moffett, vice president of International Logistics at Voxx International, a consumer-electronics company based in Hauppauge, N.Y.

Mr. Moffett said he had been expecting the arrival of containers filled with DVD players, headsets and speakers on several ships at the port authority’s Port Newark in New Jersey before it was closed Monday.

On Thursday, he learned most of his shipments had been diverted to Norfolk. Voxx has its own distribution center near Norfolk, but Mr. Moffett said getting the goods to retail customers in time for the holidays would be a sprint.

“A one- or two-day shutdown is a problem, but the delay can typically work through the system. But the longer ports shut down—the impacts begin to exponentially increase,” said John Martin, president of Lancaster, Pa.-based Martin Associates, port and maritimeeconomic planning consultants. When ships have to reroute, he said, logistics become more complicated. Delivery costs increase and perishable cargo can be lost, he said.

Mario Moreno, an economist with the Journal of Commerce, said he estimates that cargo will have been delayed in reaching its final destination “between 10 and 14 days if everything goes back to normal by Monday as expected.” East Coast imports are comprised mainly of home goods, along with auto parts and tires, toys and apparel, he said.

The Port of Virginia said Thursday it had received cargo from two vessels diverted from the Port of New York and New Jersey and was braced for much more. “We know we’ll be challenged to keep everything flowing, but we can handle that,” said Rodney W. Oliver, interim executive director of the Virginia Port Authority.

Norfolk port officials said they don’t have an estimate of the amount of cargo that may be diverted to their port, but they are putting additional harbor pilots, tugs, and U.S. Customs staff to work to manage the increase.

Minda Balcius, owner of Carmel, Ind.-based USA InterCargo LLC, which exports cars, auto parts and heavy construction equipment, said he wouldn’t send export shipments now stuck in his New Jersey warehouse to Norfolk because the cost would likely be prohibitive to customers.

Shipping a container full of auto parts to Dubai, with all expenses including duty fees, costs about $3,000 from New York, he said. Commissioning a truck to take the container to Norfolk to be shipped out from there would cost another $1,500 to $2,000, he said. “None of our customers will want this.”

Still, if the port in New York and New Jersey stays closed much longer, Mr. Balcius said he would have to consider it, since he is running out of warehouse space. “Next week will be a very important week for us,” he said. “If the port in Newark is still closed we will have to start rerouting everything.”

The HYUNDAI AMBITION, built at Hyundai Samho Heavy Industries Co. Ltd, has a carrying capacity of 13,100 TEU, is 366 meters long, 48.2 meters wide and has a speed of 24.7 knots. The vessel has already commenced its 12-year time charter with an expected annualized EBITDA run-rate contribution of approximately $18.8 million.

Dr. John Coustas, President and Chief Executive Officer of Danaos, commented:

 ”We are proud to announce the landmark completion of our new-building program that has established Danaos as one of the largest and most reliable containership operating lessors in the world with a 64 vessel fleet and a 363,049 TEU carrying capacity.

Since going public in 2006 we have more than tripled our TEU carrying capacity, which has been growing at a 21% Compounded Annual Growth Rate. Today, Danaos has one of the most modern fleets in the industry that includes some of the largest containerships in the world.

At the same time, our $5.4 billion of contracted revenues for the coming years ensures earnings and cash flow visibility with significant downside protection, safeguarding returns for our shareholders across the economic cycle.

Our ambitious growth strategy, executed to a large extent during one of the most challenging periods in economic history has been transformative for the Company and is proof of the resilience of our business model. This growth will now be translated in bottom line results while we will focus to transform these results into increased value for our shareholders.”

About Danaos Corporation

Danaos Corporation is an international owner of containerships, chartering its vessels to many of the world’s largest liner companies. Their current fleet of 64 containerships, aggregating 363,049 TEUs, ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. Danaos is one of the largest US listed containership companies based on fleet size. The company’s shares trade on the New York Stock Exchange under the symbol “DAC.”

OOCL Hong Kong, image (c) Mac Mackey

International container shipping company, Box Ships Inc., (NYSE: TEU), announced today it has taken delivery of its eighth vessel, the OOCL Hong Kong, a 5,344 TEU Post-Panamax containership built in 1995 at Samsung Heavy Industries in Korea.

The vessel is chartered to Orient Overseas Container Lines Ltd. (OOCL) for a period of thirty-six months plus or minus thirty days at a net daily rate of USD $26,465.  Box Ships has agreed to acquire one additional 5,344 TEU Post-Panamax containership built in 1996, the OOCL China, which is expected to be delivered on or prior to July 14, 2012 and will also be chartered to OOCL for a period of thirty-six months plus or minus thirty days at a net daily rate of US$26,465.

Knud E. Hansen Naval Architects and ABB unveiled a joint project yesterday for a highly efficient 2000 TEU container feeder vessel destined for Thailand.  By incorporating the latest in energy-efficient technology such as counter rotating propellers on azipods, an ABB DC power grid system, and a highly optimized hull form and cargo layout, the engineers have come up with a ship that requires 15 to 25% less power per TEU than similar feeder vessels of this size.

I contacted Knud E. Hansen with a few questions about their design,

Jesper Kanstrup, Senior Naval Architect, got back with us this morning:

To read up more on this design, check out their press release here.

By Eric Uhlfelder, Barron’s

Cargo shippers are in the tank, thanks to slowing global economic growth and oversupplies of dry-bulk ships, which transport iron ore, coal and grains, and of tankers, which transport crude oil and petroleum products.

The one segment of ocean-going vessels that remains afloat is container ships. Douglas Mavrinac, who heads the maritime group at Jeffries, the global investment bank, notes that container ships enjoy a far better balance between supply and demand than the other fleet types.

An attractive play in the container group is Hong Kong-based Seaspan, which trades on the New York Stock Exchange under the ticker SSW. Seaspan owns 65 cargo ships, which are fully leased to major shipping lines at fixed rates. The average time remaining on contracts is seven years. The company’s shares, however, have been torpedoed along with the rest of the oceangoing group. They are down 40% from their April high, recently trading at $12.94. The stock could rebound to $18 in a year or two. It yields 5.8%.

Like all big ship owners, six-year-old Seaspan has financed its growth with debt—$3.0 billion as of June 30. Sales and Ebitda (earnings before interest, taxes, depreciation and amortization) have grown apace. This year Seaspan is expected to generate $409 million in Ebitda—rising to $514 million in 2012—on $563 million in sales. Analysts forecast net income at $64.7 million, or $1.08 a share.

What distinguishes container ships from the rest of the industry is that orders are based on the demand expectations of the liner companies. Long-term container-ship demand has grown at an average annual rate of 9%, with only one down year, 2009. New builds of tankers and dry bulk ships, by contrast, are based on speculation about commodity demand, which is far more volatile.

Seaspan owns a young fleet of the very largest container ships, the sweet spot of client demand. The firm has another seven new vessels slated to come online by 2014, all of which are already leased at durations of 10 to 12 years.

One potential risk is that giant Chinese shipper Cosco accounts for nearly 52% of sales. While acknowledging concentration risk, Wells Fargo shipping analyst Michael Webber sees a plus in this strategic long-term partnership. “While counterparty risk in the sector continues to rise, we continue to view Cosco as a preferred customer,” he says.

Merrill Lynch’s Ken Hoexter expects Seaspan to trade flat over the near term. While he thinks supply and demand of container ships will stay in balance, he’s worried about slowing “global GDP growth, weakening box rates.”

Negative trading sentiment has pushed share prices to 7.2 times 2012 enterprise value/Ebitda, well below its average of 13.5. At a multiple of 10, the stock would be worth $18, though that could take a while to play out.

Investors are also concerned about the soundness of Seaspan’s dividend. During the 2008-2009 credit crisis, the company cut the payout by more than 75% to preserve cash for expansion. Since then, management has diversified its capital structure to include preferred stock, debt and lease facilities. And in March, the company announced a $5 billion joint venture with the Carlyle Group, which is building its own fleet. Economies of scale between the two firms could drive down costs for building new ships.

With its financing now more secure, the company says it intends to push the dividend back up. Wells Fargo’s Webber expects the annual disbursement to rise next year to $1 from 75 cents, which would push the yield to 7.7%, based on the current price.

INVESTORS LOOKING FOR YIELD might also consider Seaspan’s 9.5% cumulative preferred C shares, which are traded on the New York Stock Exchange under the ticker SSW PR C. The shares recently traded at $25.79, a slight premium to their par value of $25. The current yield is 9.2%.

The preferred dividend, like the common, is taxable at 15%, at least for now, and the cumulative status means the company must pay all missed dividends before paying a dividend on the common. The issue is callable at par in January 2016. The yield to call is 9.2%.

- Dow Jones & Company

“Daewoo Shipbuilding (& Marine Engineering) will deliver the container ships by December 31 2014,” a company spokesman said by telephone.

All the vessels will have a capacity of 13,100 twenty-foot equivalent units.

-By Kyong-Ae Choi, Dow Jones Newswires

Charleston, SC – South Carolina welcomed the largest container ship to ever call the Port of Charleston when the MSC BRUXELLES docked at the Wando Welch Terminal on Wednesday.

The 109,000-ton ship is more than 1,100 feet long and 150 feet wide.  It can carry the equivalent of nearly 9,200 twenty-foot long shipping containers and has a maximum depth of 49 feet.

Jim Newsome, President & CEO of the South Carolina Ports Authority, said this latest record-setting vessel demonstrates what is happening in the shipping industry now and into the future.

“Big ships are here today, and more are coming,” said Newsome.  “Based on the attractive economics, carriers will continue to deploy larger ships in ports with the infrastructure to efficiently handle them.  With deep channels and a $1.3-billion capital plan — including a new terminal — Charleston will continue to strengthen its capabilities to handle big ships.”

Today, Charleston routinely handles post-Panamax ships actually drawing up to 48 feet, with the benefit of the tides.  This year the port expects more than 200 post-Panamax vessels, or ships too big for the existing Panama Canal, and the Corps of Engineers recently started the next phase of a future deepening project.  Even more big ships are expected on the U.S. East Coast following completion of the Panama Canal expansion project in 2014.

The BRUXELLES is operated by Mediterranean Shipping Co. (MSC), the world’s second-largest container shipping line and a major employer in the Port of Charleston.  The ship is deployed on MSC’s “Golden Gate Service” between the U.S. East Coast and China, Southeast Asia and the Middle East.

The vessel arrived from Norfolk and sails to Freeport before heading back through the Suez Canal.

Source: SC State Ports Authority

The Seaspan container ship hull lines have been optimised for a speed range of 18-22 knots. In this range, the fuel consumption has been reduced by 16-27% compared to contemporary similar-size ship series presently operated by the industry.

Compared to current 10,000 TEU container vessels in operation or presently being built, the improvements due to new design features are substantial. The cargo capacity is increased by 10% while the fuel consumption is reduced by 20%. The new hull design enables the vessels to carry minimum amounts of ballast water while in operation. The vessels are designed to reduce the emissions to air by approximately 20% in order to meet the future regulatory emission requirements. This follows Seaspan’s three-year SAVER (Seaspan Action on Vessel Energy Reduction) programme aimed at improving cargo uplift, reducing fuel consumption and improving operational performance.

“The SAVER 10,000 TEU vessels embody Seaspan’s long-term focus on and philosophy of providing the market with increasingly efficient vessels and retaining Seaspan’s leadership in this area. We were leaders in introducing post-8,000 TEU vessels, we promoted slow steaming back in 2006 and we are now presenting a next-generation product that provides for a paradigm shift in the performance of the larger-size container ships,” says Peter Curtis, Vice President of Seaspan Ship Management Ltd.

“In this economic climate, where it really is a buyer’s market, the time is ripe to push for technological improvements. We are fortunate to have found a like-minded shipyard and design partners in Maric and DNV,” says Mr Curtis.

Optimised speed range
The ship hull lines have been optimised for a speed range of 18-22 knots. In this range, the fuel consumption has been reduced by 16-27% compared to contemporary similar-size ship series presently operated by the industry. The new SAVER design is also capable of reaching 25 knots as the focus on schedule reliability is expected to increase.

The new trend reflects the operational profile of the liner companies. Slow steaming will continue, depending on the market situation and the value of goods carried on board. Most container vessels will operate at a range of speeds and must do so using as little fuel as possible.

“These new container vessels have exciting new features that make them efficient, cost effective and more environmentally friendly. We’re proud to have been involved in developing this new generation of container vessels,” says Remi Eriksen, Head of DNV’s Division Asia, Pacific and the Middle East. He adds that DNV will do its utmost to provide quality and professional class services to this project.

The new 10,000 TEU container vessels have been developed in close cooperation between the Yangzijiang Shipbuilding Group, the Marine Design and Research Institute of China (MARIC), the owner Seaspan and DNV.

About Seaspan
Seaspan is a leading independent charter owner of container vessels, which it charters primarily pursuant to long-term fixed-rate time charters to major container liner companies. Seaspan’s contracted fleet of 69 container vessels consists of 60 vessels in operation and nine container vessels scheduled for delivery by March 2012. Seaspan’s operating fleet of 60 vessels has an average age of approximately five years and an average remaining charter period of some seven years.

About Yangzijiang Shipbuilding Group Ltd
The Yangzijiang Shipbuilding Group is one of the largest private shipyard groups in China, with four shipyards and a number of non-shipbuilding subsidiaries. The Group is listed in Singapore and Taiwan and ranks first in economic efficiency in the Chinese shipbuilding industry.

About DNV
DNV is a global provider of risk management services with the purpose of safeguarding life, property and the environment. Organised as an independent, autonomous foundation, DNV balances the needs of business and society, based on its independence and integrity. DNV serves a range of high-risk industries, with a special focus on the maritime and energy sectors. Established in 1864, the company has a global presence with a network of 300 offices in 100 countries.

The new vessels will be built in South Korea with 10 14,000 TEU vessels to be built by Hyundai Samho Heavy Industries. Co. Ltd (011760.SE) and two 9,200 TEU vessels to be built by Daewoo Shipbuilding & Marine Engineering Co. (042660.SE).

NOL also said it is increasing the capacity of 10 ships ordered from Daewoo in 2010 to 9,200-TEU from 8,400-TEU.

The ships are scheduled to be delivered in 2013 and 2014.

-By Sam Holmes, Dow Jones Newswires