It's a busy time right now for shipyards and shipowners. The pace at which new ships are coming off the slipways for the big carriers has rarely, if ever, been witnessed before. This quarter alone, Maersk Sealand, Evergreen, China Shipping, Cosco, 'K' Line, Yangming, as well as lines in the Grand Alliance, New World Alliance and United Alliance, are all taking delivery of new tonnage, most of it in the post-Panamax category. No less than 50 new ships of around 5,500-TEU capacity are due to be delivered this year and in early 2002. This represents the largest-ever influx of new capacity in a given size category of container ship. The 5,500-TEU ships represent some 275,000 TEUs of slot space. The current world fleet is estimated to be around 4.8 million TEUs, so these new ships will add 6% to global capacity.

If we consider the rest of current ship construction plans, there are roughly 100 post-Panamax ships on order -- representing about 140f current worldwide slot capacity of 4.8 million TEUs -- and they will all be delivered by the beginning of 2003.All this new construction hype could well be seen as a big nudge toward -- dare I say it -- overcapacity. Those who see this from the industry hardware side, and fear the worst, could well be right in their judgment.

But this issue is so critical that it deserves a closer look. Despite appearances, these ship orders are not some ploy by the carriers to destroy the industry, wreak havoc in the marketplace, and oust the minnows that are struggling to survive. The carriers have been down that road before, and are loath to do it again.

In all but a very few cases, the new slot space coming onto the big east-west trade lanes will likely be absorbed by market growth, and/or cleverly planned slot-sharing agreements, ensuring the $60 million spent in a Korean yard for a 5,500-TEU ship is money well spent.

Take just one example -- Cosco, Yangming and 'K' Line, which operate together in an alliance. This year and early next, these carriers will have as many as 24 new 5,500-TEU ships delivered. 'K' Line is placing seven of these in its Japan-Europe Express service by early 2002. There they will replace eight 3,500-TEU vessels. 'K' Line's annualized capacity will thus rise from around 180,000 TEUs to 290,000 TEUs. This is more than a 50 0ncrease, much greater than expected market growth over the course of the phasing-in process for these new ships.

So instead of distributing the new capacity only among its alliance partners, which may be tempted to slash rates to fill the space, the way ahead might be to offer up some of the slots through a slot-sharing agreement with a carrier outside the alliance. This not only extends the market coverage for that carrier, but also helps fill the space in the short term until market growth can support the extra capacity. There's an argument to be made that even though new capacity will be coming onto the market, a divided-up ship is less destabilizing for rates than a ship needing to be filled by a single carrier.

So what is happening now? 'K' Line is offering slots to Hanjin on the Japan-Europe Express in exchange for slots on the Hanjin China Europe Express. Slots are filled, and markets are extended. This is an example of capacity planned within the context of an alliance and rounded out by bringing in another user, extending coverage in a trade in which that user already participates.

Not everyone does things this way. Take CMA CGM, the French carrier that isn't a member of any alliance but has signed several slot-sharing deals. On the French Asia Line, which has an almost identical trade route as 'K' Line and Hanjin, CMA CGM is injecting eight new 6,500-TEU ships by year-end to replace nine 4,000-TEU ships.

Beginning in March, it will offer CP Ships, a newcomer on the trade, some 200 TEUs per week on this service as part of an overall 600-TEU-per-week slot allocation deal that covers three Asia-Europe and Asia-Mediterranean services. By the end of the year, when the new ships are in service, CP Ships' overall weekly slot allocation will be up to 1,500 TEUs, or around 500 TEUs per service.

CP Ships has always acknowledged that Asia-Europe was one of the trade lanes it missed in its impressive portfolio. But surely, when the 6,500-TEU ships were ordered two years ago, not even Jacques Saade of CMA CGM and Ray Miles of CP Ships could have been clear about what would be happening today.

So in my view, there are two different approaches here. 'K' Line is building its empire gradually, using its hardware to extend market coverage within an alliance configuration. CMA CGM is producing the hardware first based on anticipated market demand, then finding partners to allocate the space to. Now that's not irresponsible, mind you. CMA CGM has won accolades for being a forward-thinking company, and among the fastest-growing. It just makes me think that if the entire industry were full of companies such as CMA CGM, there would be a lot more competition in this business.

Paul Richardson can be reached at 011-44-208-942-1993 or Richardson is the editor of PR News Service, an e-mail news service covering container shipping.