Mega-ships are both bane and opportunity for container lines, reducing per-container costs while simultaneously fueling overcapacity that puts pressure on freight rates.
Data released by Clarksons this week show how aggressively container carriers and non-operating owners are pursuing larger tonnage in a race to drive down operating costs to remain competitive.
|Ship Orders as Percentage of Existing Fleet|
|# of ships on order||TEU capacity on order, in millions of TEUs||Order book as a % of existing fleet in this size category|
|Sub 3,000 TEUs||105||0.18||4.30%|
|11,000 TEUs +||94||1.41||67%|
As a percentage of the total cellular fleet currently in operation, total current orders amount to just over 20 percent, Clarksons said in its daily Box Clever derivatives report. But as ship sizes get larger, so does the order book. The order book for ships less than 3,000 TEUs, which can be profitably deployed in fewer and fewer markets, is just 4 percent of the operating fleet of that size. But in the mega-ship category of ships with capacities greater than 11,000 TEUs, the order book of 94 ships is 67 percent of the existing fleet in that category.
Recent mega-ship orders illustrate the trend. United Arab Shipping placed a $1.4 billion order for five 18,000-TEU container ships and five 14,000-TEU vessels with South Korea’s Hyundai Heavy Industries. United Arab is the third carrier to order ships with capacities of 18,000 or more 20-foot-equivalent units, following Maersk Line's initial order of 20 roughly 18,000 Triple-E ships and China Shipping Container Line's order for five 18,400-TEU container ships in May.
SeaIntel reported in July that equalizing ship sizes and thus cost competitiveness with the P3 alliance of Maersk, MSC and CMA CGM will require some significant ship ordering by members of the other two major alliances, the G6 and CKYH. P3’s average vessel size by the second quarter of 2014 will be roughly 25 percent larger than CKYH’s and 12.5 percent larger the G6’s, SeaIntel said. When all the currently ordered ultra large container vessels (ULCVs) are delivered by the end of 2015, the P3's advantage will have increased to 22 percent compared to the G6’s average vessel size, and decreased slightly compared to CKYH’s to 23.5 percent. The message was clear: bigger ships will be needed by non-P3 carriers to remain cost-competitive.