APL Exec: Prepare for Onslaught of Mega-Ships

APL Exec: Prepare for Onslaught of Mega-Ships

The president of the Americas for APL is telling ports on both coasts to prepare for an onslaught of large container ships because the economic, operational and environmental benefits of big ships are so compelling.

Vessels with a capacity of 8,000 to 13,000 20-foot containers are calling regularly now on the West Coast, and carriers are beginning to deploy big vessels in all-water services from Asia to the East Coast via the Suez Canal. Those ships are about twice the size of the largest Panamax-size vessels that can currently transit the Panama Canal.

Gene Seroka told the Los Angeles Transportation Club Thursday that in addition to significantly reducing the per-slot costs of carrying containers, the newest mega-ships are fuel-efficient, providing a fuel reduction of 20 to 30 percent compared to previous-generation vessels.

With bunker fuel the largest operating cost factor for carriers, currently selling at about $630 per ton, carriers are looking for every opportunity to cut fuel consumption. APL last year reduced its bunker fuel consumption 10 percent on a total fuel spend of $2.1 billion at the company, Seroka said.

APL is phasing 34 large new vessels into its fleet, including 10 ships of 9,200-TEU capacity that were purpose-built for the trans-Pacific trade to Los Angeles. The mega-ships will replace vessels of 6,000-TEU capacity or smaller.

The new ships are environmentally friendly, and will help APL to reach its goal of reducing its carbon footprint 30 percent by 2015, Seroka said.

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While most of the big ships that carriers are introducing begin service in the Asia-Europe or Asia-North America trade, the relatively large vessels they are displacing are finding their way into the north-south trades or being used as feeder ships in Southeast Asia, so most of the global trade lanes must gear up for larger vessels, Seroka said.

Carrier impatience to better utilize these mega-ships is seen in all-water services from Asia to the U.S. East Coast. Maersk Line CEO Soren Skou told The Journal of Commerce’s 13th annual TPM Conference in Long Beach Monday that carriers can’t make money with the smaller vessels being deployed through the Panama Canal, so they are shifting to the Suez route.

Skou predicted that all-water services that today stand at 90 percent Panama routing and 10 percent Suez routing will soon be 60 percent Panama routing and 40 percent Suez routing, with some of the Suez ships being of 9,000-TEU capacity.

These big vessels place pressing demands on ports to upgrade their marine terminals, Seroka said. The post-Panamax ships must be worked with post-Panamax cranes. Vessel berths must be extended to handle the longer ships, and wharves must be reinforced to handle the heavier loads.

Also, marine terminals must be enlarged to provide larger marshaling areas for container storage. Some degree of automation may be needed to turn the ships faster. Of course, harbors must be deepened, preferably to depths of at least 50 feet to accommodate the fully laden mega-ships.

Seroka said East Coast ports are beginning to struggle with all of these requirements as they move quickly to accommodate mega-ships on the Suez route. East Coast ports had been preparing for the completion of the Panama Canal expansion project in 2015, but it turns out that carriers are not waiting for that project to be completed, but are deploying more mega-ships to East Coast ports this year.

The delivery of large, new vessels will peak this year, and deliveries will diminish in 2014 and be reduced to a trickle in 2015. Looking ahead to what could be lean years, shipyards are cutting the cost of vessels in the hope of generating new orders.

In the past, carriers found bargain-priced mega-ships irresistible, and they would respond by placing large orders for new ships, thereby pushing the liner industry into perpetual overcapacity. Seroka said that scenario could be repeated in a couple of years, but he is betting against that happening. “We collectively learned a lot,” he said.

There are two or three container lines that did not participate in the current building boom, so they may use the upcoming slack period to upgrade their fleets, but Seroka said he does not anticipate another round of binge building.

Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him at twitter.com/billmongelluzzo.