The car carrier market, also known as the Pure Car and Truck Carrier (PCTC) market, has been experiencing unprecedented growth, with daily rates soaring into six-digit figures for several months. According to AXS RoRo, a newly launched monthly publication by the creators of Alphaliner, the market is poised for even greater expansion, with projections indicating a 40% increase in size over the next few years.
In its inaugural article, AXS RoRo highlighted the remarkable state of the PCTC market, noting that the current orderbook for newbuildings has reached historic levels. Clarksons data supports this, showing that the ratio of the current PCTC fleet to the orderbook stands at an impressive 35%. Only the LNG sector surpasses this figure, with a record 55% ratio.
The financial performance of the PCTC market has been equally impressive. Clarksons data reveals that one-year time charters for 6,500 car equivalent unit (ceu) ships are fetching around $105,000 per day. This marks a significant increase from the previous peak in 2008, when rates barely exceeded $50,000 per day. This surge has positioned car carriers as one of the most profitable segments in the shipping industry during the 2020s.
So far this year, close to 40 car carriers have been contracted, with many of these being the largest ever ordered. Last year, 88 units were firmed up, predominantly in Chinese shipyards and mainly for larger vessels. This trend is expected to continue as the demand for car carriers shows no signs of abating.
New players are also entering the market. AXS RoRo pointed out companies like Seaspan Corporation, H-Line Shipping, and Greece’s Atlas Maritime, which is set to receive its first PCTC, the 7,000 ceu Electric Star, in October. Additionally, global shipping giants such as HMM and CMA CGM have ventured into the sector, alongside Chinese automotive brands. Notably, MSC’s $700 million bid for Oslo-listed Gram Car Carriers (GCC) is anticipated to finalize soon, signaling further consolidation and investment in the sector.
The surge in car carrier rates can be attributed to changing trade patterns, with vehicles being shipped over greater distances. This shift has been driven by a significant increase in long-haul Chinese exports, especially to Europe, including larger and heavier electric vehicles. The situation has been compounded by the Red Sea shipping crisis, which has forced car carriers to take the longer route to Europe via the Cape of Good Hope.
Chinese electric vehicle exports have become a focal point for Western politicians. Both the US and the European Union are contemplating tariffs this year in response to the growing influx of Chinese electric vehicles, reflecting broader geopolitical and trade tensions.
The PCTC market’s current dynamics echo past trends in the shipping industry. For instance, the 2008 financial crisis saw a significant drop in demand across various shipping sectors, but the car carrier market rebounded swiftly due to renewed demand for vehicles. Today, the market is again experiencing a boom, driven by a mix of increased global demand for automobiles and strategic investments by key industry players.
Historical parallels can also be drawn with the LNG sector, which has seen similar surges in orderbooks and charter rates due to growing global energy demands. The LNG sector’s current 55% fleet-to-orderbook ratio reflects a robust response to anticipated future needs, mirroring the proactive stance of the PCTC market.
Looking ahead, the PCTC market’s expansion is likely to continue as global automotive trade evolves. The increasing popularity of electric vehicles, shifts in manufacturing hubs, and the strategic maneuvers of shipping companies all point to sustained growth. As new players enter the market and existing ones expand their fleets, the PCTC sector is set to remain a crucial and dynamic segment of the global shipping industry.
The red-hot car carrier market is undergoing a transformative period, with substantial growth on the horizon. Driven by evolving trade patterns, strategic investments, and geopolitical factors, the PCTC market is poised to play an increasingly vital role in the global logistics and shipping landscape.
