Hyundai Glovis, the logistics unit of South Korea’s largest automaker, Hyundai Motor Group, joined forces with Korea Ocean Business Corporation (KOBC) to add four more large-scale car carriers, or PCTCs, which can carry 10,800 small vehicles. PCTCs, short for Pure Car and Truck Carriers, are LNG-fueled vessels used for transporting vehicles.
The PCTCs Hyundai Glovis plans to deploy are the world’s largest car carriers in terms of capacity, as the current capacity of the largest car carriers ranges from 7,000 to 7,500 units.
Hyundai Glovis announced earlier this month that it has signed a deal with state-owned KOBC to commission the construction of the largest car carriers as part of its plans to secure 28 LNG-powered PCTCs in its fleet by 2027.
This partnership aims to address the logistical challenges in automobile exports, exacerbated by a shortage of car carriers. KOBC will cover construction costs, and Hyundai Glovis will take on the leasing and operation of vessels upon its completion in 2027.
The global container shipping sector is facing a rare shortage of car carriers, leading to a surge in freight rates, according to South Korea’s shipping industry on Feb. 23.
Historically, the car carrier segment has operated distinctly from other maritime transportation, such as container ships and bulk carriers. Carmakers were limited to a few regions - North America, Europe, Japan, and South Korea - and most vehicles were sold domestically.
While PCTC construction was centered in North America and Europe, the leading carrier operators were predominantly in Korea and Japan. These operators transported vehicles produced in Korea and Japan to North America and Europe, and vice versa.
But this relatively niche market is facing changes as China ramped up electric vehicle (EV) production in the past few years. EV shipments from China jumped from 600,000 units in 2020 to 3 million units last year. A surge in export volumes had led to a shortage of PCTCs. Car carrier freight rates, which were around $16,271 for a 6500 CEU (car equivalent unit) vessel in 2020, surged to $115,000 in January this year.
A sharp increase in demand coupled with tight supply has been pushing up freight rates. On the supply side, 49 car carriers that failed to meet the International Maritime Organization’s energy efficiency and carbon emission standards have been dismantled. Between 2016 and 2020, orders for car carriers declined as leading carmakers built production factories closer to their markets.
But China’s EV production boom in recent years boosted demand for car carriers. BYD sold 526,000 EVs in the global market in the fourth quarter of last year, surpassing Tesla for the first time.
Global demand for EVs has slowed this year, but Chinese carmakers continue to clear out inventory by lowering prices. Exports of cars made in Korea and Japan are also on the rise. Hyundai Motors and Kia topped 2 million units in exports last year for the first time in seven years. Car shipments from the Far East - Korea, China and Japan - which accounted for 42% of global car shipments in 2020, rose 51% last year.
Facing challenges in securing car carriers, Chinese carmakers are constructing and managing their own carrier fleets and extending long-term charter agreements. BYD dispatched its first car carrier from Shenzhen Port, China, to Europe this January. This vessel transported 5,449 EVs.
Korea’s leading shipping companies are also adapting to these changes. HMM rebooted its automobile transportation business, ordering seven new car carriers and signing a 15-year charter contract worth 2 trillion won. The vessels are expected to be delivered in 2026. Hyundai Glovis will expand its fleet of 83 ships to 110 by 2027.
