A RENEWED ordering binge by container lines has seen as much tonnage ordered in the last six months as the whole of 2006. But the record orderbook calls into question the optimism of carriers, with some industry observers wondering whether overcapacity will bite them in the stern.

A whopping 284 container ships with a total capacity of 1.52 million TEUs (20-foot containers) were ordered by carriers in the first six months of 2007, nearly the same as the whole of 2006 when 400 vessels of a total 1.58 million TEUs were ordered.

This brings the containership order book to an all-time high of 5.45 million TEUs for 1,351 ships representing 53 per cent of the existing fleet capacity with deliveries through 2011, according to the latest fleet forecast by AXS-Alphaliner. This latest ordering binge - worth a total of US$22.5 billion - translates to a 15 per cent capacity growth in 2007 and 14 per cent expansion in 2008, against a forecast 10-12 per cent growth in cargo demand.

The continued capacity expansion comes at a delicate time for the industry.

Despite upbeat pronouncements of surging demand ahead of the annual peak season, carriers are fighting both the perception and possible eventuality that excess capacity will once again drag down freight rates just as a rate recovery was gathering steam.

Neptune Orient Lines (NOL), operator of the world's eighth largest container line APL, said last week that its average revenue per 40-foot container rose 2 per cent to US$2,618 between May 5 and June 1, from US$2,556 a year earlier. The slight freight rate gains came on the back of an 11 per cent rise in volumes totalling 178,300 boxes during the period.

Industry pundits had, before this latest slew of orders, anticipated that the industry could ride out the capacity gains which would have been largely absorbed by 2009/10, but should the ordering continue apace, their tune is likely to change. Carriers are quick to point out that infrastructure-related congestion will limit the available, effective capacity actually in operation helping to narrow the supply/demand gap.

Two-thirds of the total vessels ordered in the first six months this year were contracted in May and June alone.

Nearly a third of the vessels ordered were very large container ships (VLCS), over 7,500 TEUs, or totalling 816,000 TEUs at a cost of US$11.5 billion. May and June saw particular action in the Super Panamax arena of around 12,500 TEUs in size with no less than 56 orders, 48 of which were contracted by non-operating owners, according to the report.

Neptune Orient Lines has also gone on an uncharacteristic ordering spree in recent months, culminating in the purchase of eight new vessels worth US$1 billion last week.

The order represents the first time in five years the group has opted for owning newbuilds rather than chartering and also represents a major upsizing for the Singapore-based carrier. The newbuilds have a capacity of 10,000 TEUs, nearly double the 5,500 TEU mainstays of APL's 105-ship fleet.

NOL shares have nearly tripled in value this year, and the stock is the best performer among the 49 members of the Straits Times Index this year.

The group's share price surged over 11 per cent yesterday to close up 60 cents at S$6.00.

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