Every now and then, it's good to sit back and take a broader view of the container shipping business without getting too bogged down with intricacies of officialdom and complicated, bureaucratic industry churnings. So maybe it's about to time to look at what's going to happen to hardware and the approximately $6 billion worth of ship capacity the big lines intend to pile into the trans-Pacific and Asia-Europe trades in the next two to three years.
By early 2003, carriers will have introduced an east-west slot allocation in the form of more than 100 post-Panamax ships that don't have a chance of being used anywhere but on two major trade lanes in their lifetime.Hong Kong's Orient Overseas Container Line, itself the subject in recent months of 'will they or won't they merge, be merged, acquire, or be acquired?' speculation, is about to take the plunge with construction of four 7,000-plus-TEU ships in South Korea. Total cost? Somewhere around $250 million.
OOCL is a member of the Grand Alliance, as are P&O Nedlloyd and Hapag-Lloyd. Those two lines have a total of eight ships over 6,700 TEUs on order in Korea, representing an investment of more than $500 million. The first of the eight is due to enter service next month. P&O Nedlloyd already has four 6,700-TEU ships in the Asia-Europe trades, and its executives have confirmed the company's new ships will not be used in the Pacific.
It can be recalled that at least one Grand Alliance member line confirmed intentions to launch an additional Asia-Europe route, thereby easing the capacity-bunching problems that might exist otherwise on the other six strings in this trade.
If that happens, it could offer a perfect deployment for at least the eight new huge ships of P&O Nedlloyd and Hapag-Lloyd. And that in turn would send some smaller ships to other trades -- the familiar cascading-down-of-tonnage scenario that always has the pundits confused and the marketplace smirking at the clever ability to conceal the obvious.
But let's not knock the Grand Alliance guys too hard. After all, market growth in the Asia-Europe trade does indeed demand the injection of a whole new string of 7,000-TEU container ships, and a cascading of unwanted slots elsewhere. Well, so we're told.
Of course, the Grand Alliance isn't alone. Take China Shipping Group as another example. The carrier has at least 15 new post-Panamax ships coming out of shipyards in the next two years, as well as umpteen charter deals for ships between 2,500 and 4,050 TEUs.
But where will this rush of post-Panamax tonnage from China Shipping end up? There can be little doubt that at least one of the group's trans-Pacific strings will take care of five of the new vessels. As for the rest, who knows? If China Shipping enters the Atlantic trades, or thinks Europe-South America looks good, then the cascades begin again.
From my insiders, there is no doubt China Shipping will introduce Panamax ships in the 4,050-TEU size on the Asia-Europe trade lane to replace chartered ships half that size. There is no doubt there will be at least one post-Panamax string in the trans-Pacific.
There also is little doubt that within the China Shipping trans-Pacific portfolio, the Asia-South America service will deploy 5,500-TEU ships in place of 3,000-TEU ships by early next year.
But there is also the question of why the guys in Shanghai feel it necessary to allocate 'substantial slot space' to CMA-CGM on this service, with particular emphasis on improved service capabilities.
Maybe I misread this one, but if you introduce ships twice the size, don't you try and make sure you can fill them first with your own capacity? If you can't, then you could push a bit of business someone else's way?
Of course, there's a lot more: Cosco, Yang Ming, 'K' Line, Mitsui O.S.K. Lines, APL, Hyundai -- the list goes on.
Some say you have to move with the market. Personally, I believe lines are acting professionally, and moving with a potential that exists now. Whether that potential exists when the last of the big ships in the current new order book enters service, I'm not so sure.
Paul Richardson can be reached at 011-44-208-942-1993 or firstname.lastname@example.org. Richardson is the editor of PR News Service, an e-mail news service covering container shipping.