HONG KONG — A China Shipping Container Lines (CSCL) executive has shrugged off demand forecasts predicting 3 to 5 percent market growth in the next few years that will not be enough to fill the capacity flooding into service.
At a ceremony in Singapore to welcome the world’s largest container ship, the 19,100 TEU CSCL Globe, the line’s deputy general manager Sui Jun told The Straits Times he was not concerned about overcapacity even though the weak global economy was suppressing trade growth.
"These forecasts hardly mean anything. The market is as big as it is — what matters to CSCL is that we are strong enough to compete for that pie," Sui told the Singapore newspaper.
"What does that mean? It means we aim to offer the biggest ships, the best services and the most extensive network," he added.
The CSCL Globe is part of an order placed by CSCL in May 2013, along with four sister vessels. Originally designed to carry 18,400 containers, that number was later rounded up to 19,000. All told, the five ships cost in the region of $700m.
Alphaliner says 60 new vessels capable of carrying 14,000 to 19,000 TEUs are due to be delivered starting from now through December 2015, mostly in the trades to and from northern Europe, further complicating already struggling spot rates.
The CSCL executive’s dismissal of overcapacity fears is shared by industry heavyweight Rolf Habben Jansen, Hapag-Lloyd CEO, who told JOC.com recently that it was a myth.
“I think that’s a little bit of a fairy tale. I think it’s something that’s being said quite easily, but usually not with a lot of real good data to underpin that,” he said.
“Let’s be honest, an imbalance of 1 or 2 percentage points should not be a huge issue. And looking at what’s happened over the last couple of years, and what’s currently happening in the orderbook, there’s not a lot of rationale, not a lot of logic on why there would be significantly more over-capacity in the years to come, compared to where we are today. I think if anything, that that is probably something that will help (support rates),” Habben Jansen said.
“I would still expect that net-net that we would actually see over the upcoming couple of years on average a somewhat higher rates than what we see today,” he said.
The CSCL executive was equally bullish on Singapore’s role in the carrier’s plans. "It is likely that our volume going through Singapore will hit double, or even triple-digit, growth in the next two years. Singapore's status as South-east Asia's maritime hub is undebatable,” Sui said.
The CSCL Globe made its maiden call at Singapore on Friday, tying up at a new berth at Pasir Panjang port. Even though it’s nominal capacity is greater than Maersk’s 18,000 TEU Triple-E vessels, the dimensions are similar — 437 yards long and 65 yards wide.
Deployed by CSCL to serve the Asia-Europe route, the CSCL Globe left Tianjin on Dec. 1 on its maiden voyage to Belgium's Zeebrugge before returning to Asia. It is now en route to the U.K.
The vessel, made in South Korea by Hyundai Heavy Industries, is one of five mega ships that the China Shipping Group unit owns and operates, as the company looks to strengthen its competitive edge in the crowded industry.
However, Asia-Europe is the only trade capable of handling the mega vessels, and with almost half the current order book for vessels greater than 10,000 TEU, there is widespread belief that this route will be the most heavily affected by overcapacity.
The key drivers of the all-important Europe-Asia trade are in trouble, too. China’s economy in the third quarter grew at a projected 7.3 percent, its slowest pace since the 2008 financial crisis, and analysts expect it to miss Beijing’s official growth target for the first time in 15 years.
Contact Greg Knowler at firstname.lastname@example.org and follow him on Twitter: @greg_knowler.