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Mega-ship delivery keeps Asia-Europe capacity on the rise

The new 20,600 TEU CMA CGM Antoine de Saint-Exupéry will join the Asia-Europe trade on Feb. 6. Photo credit: CMA CGM.

The mega-ships continue to flood in to the Asia-North Europe container trade lane with two brand new giant vessels delivered in the last week in time for the peak Lunar New Year shipping period.

Latest to hit the water is CMA CGM Antoine de Saint-Exupéry, which at 20,600 TEU is the largest container ship to fly the French flag. The vessel, named after the famous French writer and poet, will be deployed on the French Asia Line 1 service (FAL 1) with the first sailing on Feb. 6.

Last week, Orient Overseas Container Line took delivery of the sixth and last of its 21,413 TEU ships, the OOCL Indonesia. It will join its five sister ships on the Asia-North Europe Loop 1 (LL1) with the first sailing this week.

Andy Tung, chief executive of OOCL, said at the christening of his new vessel that the container shipping industry was benefiting from a healthier global economic environment not seen since the 2009 financial crisis. He said trade and economic cooperation was being boosted by the signing of deals such as the Hong Kong-Association of Southeast Asian Nations Free Trade Agreement (FTA) in November 2017.

“Once ratified, the new FTA arrangements will not only open opportunities for trade growth, but also facilitate more effective and efficient trade links through the elimination of import duties and streamlining of regulations that would inevitably help improve supply chain flow over the long run,” Tung said. “In our industry, speed is of essence and we are very excited to see these kinds of policy directions pushing forward.”

Despite rising demand that is driving up container volume on the trade between China and Europe, the brand new mega-ships from CMA CGM and OOCL are entering a trade lane that is already oversupplied, with spot rate levels remaining under pressure. Rate movements on the major east-west trades are tracked at JOC.com's Market Data Hub.

Data from IHS Markit, the parent company of JOC, shows that the total new container ship capacity due to be delivered in 2018 will come to about 1.3 million TEU. Approximately 30 percent of that new capacity will be for mega-ships of 18,000 to 25,000 TEU.

Existing orders for 18,000 TEU-plus newbuildings in the mega-ships sector will see a virtual doubling of that fleet by the end of 2021. A total of 57 mega-ships are on order, with 24 set for delivery this year and a further 32 evenly spread through 2019 and 2020. A single vessel is due for delivery in 2021. The aggregate capacity represents a 91 percent increase on the current fleet of 68 mega container vessels.

The 2018 forecast by IHS Markit predicts that container volume growth on Asia to North Europe and the Mediterranean will strengthen through the year, increasing by 4.5 to 4.9 percent compared with 2017. However, the global container fleet is on track to grow still faster, even after scrapping is taken into account and a quarter of the capacity is delayed.

This appears to be a concern to some of the carriers. Yang Ming has delayed three 14,000 TEU ships it was to have taken delivery of in 2018 to 2019 and just last week Cosco Shipping, the carrier with the largest order book, announced it would be deferring 10 mega-ships of 166,576 TEU of capacity to 2019. Cosco Shipping has a total of 27 vessels on order that will be delivered between January 2018 and December 2019, and of those vessels, 17 are in the 20,000 to 21,000 TEU class that are destined for loops on the Asia-Europe trade.

Alphaliner said a January surge in vessel deliveries of 250,000 TEU will be followed in the next four months by additional new ships with a total capacity of 790,000 TEU, all expected to join the world fleet between February and May. The ships will arrive in time for upgrades planned on various services of the 2M, Ocean, and THE Alliance, but will also trigger a cascade of smaller, although still fairly large, ships into secondary trade lanes, such as South America, Indian Subcontinent, and intra-Asian routes.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.

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