Shipyards in 2013 will deliver more new container vessels than during any year in the history of the industry, but the arrival of these large, fuel-efficient ships will be a mixed blessing for container lines.
Carriers have no choice but to seek the economies of scale offered by vessels that have a capacity of 8,000 20-foot containers or greater, said Robert Sappio, president and CEO of Rickmers Americas.
“It is all about scale and having lower costs,” the former APL executive told the South Carolina International Trade Conference Tuesday.
Large new vessels significantly lower per-unit carrying costs, and the newest vessels that began entering the global container fleet last year are very fuel-efficient. Many of the vessels delivered since 2011 are designed to steam at 18 knots, which is down considerably from the fuel-guzzling 24-knot vessels that dominate the fleet.
When steaming at 18 knots, the new vessels reduce fuel costs by $28,000 a day. With bunker selling for around $700 a metric ton, each new vessel will save $28,000 a day in fuel costs, or $1.5 million during a typical 56-day round-trip voyage in the trans-Pacific. “They’ve got to have those ships,” Sappio said.
However, the huge influx of new capacity into the global fleet could lead to serious excess capacity on the major east-west routes if carriers do not lay up a significant amount of tonnage next year, Sappio said.
Carriers must also resist the temptation of ordering more vessels until trade picks up on the major trade routes, including the trans-Pacific. New vessel orders have “fallen off the cliff” since 2011, and shipyards are lowering the price of new vessels to stimulate demand, he said.
In the liner industry today, the biggest lines are increasing their market share, and they are setting the direction of the entire industry. In the Asia-Europe trade, the three largest carriers — Maersk Line, Mediterranean Shipping Co. and CMA CGM — have a combined market share of 50 percent.
Those same top three carriers have ascended to a leadership role in the Transpacific Stabilization Agreement, the discussion group that includes the largest carriers in the U.S. import trade from Asia, Sappio said.
Another big issue in the trans-Pacific is the large gap between freight rates negotiated by beneficial cargo owners in their service contracts and the rates being paid by cargo consolidators, known as non-vessel-operating common carriers. The NVO spot rate in August exceeded $2,800 per 40-foot container, which reportedly is almost $1,000 more than BCOs are paying in rates that were locked into their service contracts early this year.
Sappio said that spread must be narrowed, but not by lowering the rates charged to NVOs. The rates charged to BCOs in their service contract must go up if carriers are to return to profitability, he said.
Contact Bill Mongelluzzo at email@example.com. Follow him on Twitter @billmongelluzzo.