Large Ships Result in Pricing War
Cascading of large container ships from the Asia-Europe market into North-South trades is significantly eroding pricing in those markets, according to Drewry.
It said that as of mid-2013, 108 ships ranging in size from 7,000 to 10,000, 20ft equivalent units were operating on the Asia-North Europe market. “All of these vessels will need to be cascaded elsewhere by the end of 2015 or early 2016”, said Drewry Container Analyst Neil Dekkar.
The effects can be clearly seen in the large increase in ship size in key North-South trades since July 2010. In the Asia-East Coast South America market between July 2010 and July 2013, the average ship size increased 41%, from 4,193 TEUs to 5,933 TEUs. In the Europe-East Coast South America trade, the size increased 45.3% from 4,420 to 6,422 TEUs, while in the Asia-West Coast South America trade the average ship size increased 87% from 3,289 TEUs to 6,165 TEUs, Drewry said.
Driving those changes are mega ships being cascaded into those markets. As of September, the largest ship deployed in the Europe-East Coast South America market was the 8,762 TEU MSC Agadir. The largest ship deployed in the Asia-West Coast South America market was the 9,178 TEU MSC Candice.
The fate of the Asia-Brazil freight rate market shows the impact. Head haul capacity was up nearly 18% between 1st January and 1st July of this year. As that happened, rates plummeted from nearly USD 2,000 per TEU to under USD 800 per TEU by August. By early October rates had fallen still further to between USD 500 and USD 600 per TEU, with an estimated USD 152 million in lost carrier revenue just in the 1st half of the year, according to Drewry. In order for these trades to be profitable, Dekkar told the JOC TPM Asia Conference in mid October, “capacity must grow in line with the market. Big ships are not an immediate passport to profitability”. (Source JOC)
Port Incentive to Retain Shipping Lines
Commissioners of the Port of Portland in Oregon have voted to approve an incentive scheme designed to encourage Hanjin shipping to continue using the facility.
The port will pay USD 20 per container moved through Portland to Hanjin and other carriers. A further USD 25 per container will be paid for additional boxes above a predetermined level, up to a limit of USD 4m during the course of the one year scheme.
The port hopes the cash will encourage Hanjin to keep calling at Portland. Hanjin has been threatening to pull services due to escalating costs and labour disruptions at the facility.
Hanjin is Portland’s largest customer, responsible for 80% of the port’s throughput of 14,000 TEU per month.
It is not known whether the incentive programme will entice Hanjin to continue its’ weekly Pacific Northwest Hanjin Express service, but port officials believe the incentive is a requirement for it to do so. The line is expected to respond to the offer within a week.
Portland’s Terminal 6 concession is managed by Philippines based International container Terminal Services Inc., and was ICTSI’s first foray into a developed market.
Other customers at the port include Hamburg Sud and Hapag-Lloyd, operating a joint Mediterranean-Pacific loop.
Maersk Line’s Safety Records Under Threat
As reported in DynaLiners, It was definitely not a good week for Maersk Line’s safety records. In heavy weather in the Bay of Biscay, the 8,200 TEU “Svendborg Maersk” lost about 520 containers overboard. Fortunately (in a way), being en route to the Far East 85% of them were empty and none of them contained dangerous goods. A few days later, in Bremerhaven, again in bad weather, the 8,700 TEU “Maersk Laberinto”, while entering the port, collided with moored 4,800 TEU “Maersk Missouri”, resulting in severe damage to one of the ship-to-shore gantry cranes of the NTB container Terminal and minor damage to two others.
ULCS to dominate Europe – Far East
With their economies of scale, on the long haul Europe – Far East in particular, ULCS (Ultra Large Container ships, of 10,000 TEU and much larger), play a dominant role in the accelerating alliance formation. Currently, 200 ULCS are operating while another 147 are on order with a grand total capacity of 4,600,000 TEU. An overview of the present number of such ships (existing and on order) of the relevant alliances, including the individual carrier’s and the alliances’ share of total ULCS capacity, as well as the largest units (and their operator) included:
| P3 Network | ULCS | TEU | Total TEU | Shares |
| CMA CGM | 36 | 12,500 | 476,600 | 10.2% |
| Maersk Line | 38 | 16,300 | 620,700 | 13.3% |
| MSC | 65 | 14,000 | 913,000 | 19.5% |
| Total ULCS | 139 | 14,500 | 2,010,300 | 43% |
| Largest | 20 | 18,300 | 366,000 | Maersk |
| G6 Alliance | ULCS | TEU | Total TEU | Share |
| APL | 15 | 11,600 | 174,500 | 3.7% |
| Hapag-Lloyd | 10 | 13,200 | 131,700 | 2.8% |
| Hyundai | 16 | 11,900 | 191,000 | 4.1% |
| MOL | 9 | 12,200 | 110,000 | 2.4% |
| NYK | 4 | 13,200 | 52,800 | 1.1% |
| OOCL | 8 | 12,400 | 99,300 | 2.1% |
| Total ULCS | 62 | 12,200 | 759,300 | 16% |
| Largest | 10 | 14,000 | 140,000 | APL |
G6 Alliance member NYK is expected to confirm an order for 10x 14,000 TEU units soon. Some think that it is actually mulling over switching to 10x 18,000 TEU ULCS to catch up with the P3 Network’s largest units.
| Greener Alliance | ULCS | TEU | Total TEU | Share |
| Coscon | 22 | 12,400 | 272,100 | 5.8% |
| Evergreen | 20 | 13,900 | 278,100 | 5.9% |
| Hanjin | 24 | 11,200 | 268,300 | 5.7% |
| “k” Line | 5 | 13,900 | 69,400 | 1.5% |
| Yang Ming | 15 | 14,000 | 210,000 | 4.5% |
| Total ULCS | 86 | 12,800 | 1,097,900 | 23% |
| Largest | 15 | 14,000 | 210,000 | YM |
| Non-Alliance | Ships | TEU | Total TEU | Share |
| China Shipping | 22 | 13,700 | 300,700 | 6.4% |
| Hamburg Sud | 3 | 10,500 | 31,500 | 0.7% |
| UASC | 24 | 14,900 | 358,300 | 7.7% |
| ZIM | 4 | 10,100 | 40,200 | 0.9% |
| Total ULCS | 53 | 13,800 | 730,700 | 16% |
| Largest | 15 | 19,000 | 95,000 | China |
China Shipping and UASC will operate their five 19,000 TEU and 18,000 TEU, respectively ULCS in a joint Europe – Far East Service. Hamburg Sud is the only (future) ULCs carrier not serving the East-West routes. It will deploy its’ three units in the Far East – East Coast South America trade.
CSCL Upgrades Capacity of Mega Ships
China Shipping Container Lines have upgraded the capacity of five ships on order at Hyundai Heavy Industries from 18,400 TEUs to 19,000 TEUs, the South Korean shipyard said as it began construction of the first of the world’s largest container vessels.
Hyundai said it has started cutting steel at its’ Ulsan yard for the first ship, which it will hand to the Chinese centre in November, with the remaining four scheduled for delivery by the end of the 01st quarter of 2015.
CSCL ordered the five ships, each costing USD 136.6 million, in May 2013 for deployment on its’ Asia-Europe service. Adding an extra 600 TEUs of capacity is not expected to significantly raise the cost of the vessels.
Foldable 40ft Containers
Holland containers Innovations (HCI), in partnership with CARU, is continuing a pilot project to test out its’ foldable 40ft container which carry the 4Fold brand name.
The 4Fold boxes were tested out at the end of last year between Hong Kong and Rotterdam, where they were unloaded from Cosco’s Prince Rupert vessel.
The boxes are now being tested out on a route between Venlo, in the Netherlands and Spain.
4Fold containers can be folded flat and stacked, taking up only a quarter of the space of one standard container.
Empty containers on a ship can account for anything up to 50% of its’ full load of boxes so the potential impact of 4Fold, not only in ocean freight but road and rail too, is significant.
The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP)