Container carriers in ULCS race
According to the latest Alphaliner newsletter, 98 ultra large container ships (ULCS) of over 10,000 TEU have been delivered since 2008 with a further 147 units due for delivery over the next four years.
Their ranks are expected to swell by over 50 units by the end of the year as plans by various carriers to order ships of this size are firmed. The latest carrier to join the race is APL, who last week signed deals for ten 14,000 TEU units. APL’s planned jumbo units will be 64% larger than the biggest ships the carrier currently operates and are aimed at reducing unit capital and operating costs.
Further ULCS-orders are also due for Maersk Line. Later this month the carrier is expected to convert options for a further ten units of its DSME-built 18,000 TEU ‘EEE’-class ships. The carriers’ inability to rein-in the huge appetite for new and larger tonnage will inevitably lead to further rate competition. Of the main carriers, 13 have already opted for ships of at least 12,500 TEU, with only seven of the top-20 carriers not yet committed to ships of above 10,000 TEU.
Quite likely, those lines still holding out against the larger ships may soon be forced to follow suit as the unit cost advantage for a 13,000 TEU vessel operating on the Far East-Europe route is estimated at around $150/TEU compared to a 8,500 TEU ship and at about $250/TEU compared to a 6,500 TEU ship. Such a differential has become critical in a low-freight-rate environment. Carriers’ recent moves to pull out Far East-North Europe strings operated with smaller ships reflect the increasingly tough operating environment on this trade for ships with a capacity smaller than 8,000 TEU.
Despite the significant cost disadvantage of deploying smaller ships, some carriers have decided to buck the trend toward large ships. Notably, Evergreen which opted for 8,800 TEU ships for its fleet renewal program. Since July 2010, the line placed firm orders for 35 units of this size (including five on long-term charter and 30 owned – Evergreen declared the ships as 8,000 TEU units, whereas Alphaliner counts them as 8,800 TEU based on dimensions and design). Compared to competing lines’ +13,000 TEU ships, the deployment of these ships on East-West main lines will entail higher unit costs. This cost disadvantage could put Evergreen under pressure when these ships are delivered in 2012-2014.
There will be additional pressure on the remaining carriers to order 13,000 TEU ships in the coming months. NYK, which has until recently eschewed ships of above 10,000 TEU, has agreed to charter four 13,000 TEU units from its Grand Alliance partner OOCL from 2013. Other carriers operating under alliance arrangements may soon need to do the same, such as MOL which has not yet committed to ULCS while its partners APL and HMM have already done so.
