Tuesday, May 12, 2015

Maersk Completing Order of 10 Container Megaships

Maersk Completing Order of 10 Container Megaships
Maersk Line, the world’s biggest container-shipping operator by capacity, is completing an order of 10 container megaships from Korea’s Daewoo Shipbuilding & Marine Engineering Co. worth more than $1.5 billion, two people directly involved with the matter said.

It will be the first time since 2011 that Maersk Line, a unit of the Danish shipping and oil conglomerate A.P. Moller-Maersk A/S, returns to the market for ships of this size. Back then, it placed an order with DSME for 20 so-called Triple-E ships, which carry in excess of 18,000 containers each. The last two vessels from that order will be delivered to Maersk by July.

“The new order—likely six firm ships and four options—will be announced in coming weeks and deliveries will start in 2017,” one of the people said. “The ships will likely be deployed in the Europe-to-Asia trade loop as part of Maersk’s 2M alliance with [Swiss-based] Mediterranean Shipping Co.”

Container shipping, which moves more than 95% of the world’s manufactured goods, is largely controlled by about a dozen European and Asian operators. Those companies have come together over the past year to form alliances that substantially cut operational costs through the sharing of vessels, trade networks and port calls. Industry officials say that over the next three years, smaller competitors likely will be forced out of the main trade lines from Europe to Asia and across the Pacific and Atlantic oceans, as they won’t be able to compete in terms of cost and capacity.

Maersk 2M alliance with MSC moves 35% of all cargo between Asia and Europe and also controls a market share of 15% and 37% of goods moved on the trans-Pacific and trans-Atlantic routes, respectively. Ocean Three, another grouping, made up of French shipping giant CMA CGM SA, China Shipping Container Lines Co. and Middle East shipping major United Arab Shipping Co., controls a 20% slice of all cargo between Asia and Europe and 13% and 7% across the Pacific and Atlantic oceans, respectively.


“All big names have either ordered or are in the market for ultra-large container ships,” said Jonathan Roach, an analyst with London-based Braemar-ACM Shipbroking. “The orders are to fulfill capacity commitments within the alliances, rather than demand-driven, and this is creating a serious overcapacity in the water of around 30%. This means that freight rates will continue to be under pressure over the next couple of years.”

The cost of shipping a container from Asia to Europe, the world’s biggest seaborne trade route, jumped 151% this week to $861 after 13 straight weeks of declines, according to the Shanghai Containerized Freight Index, which tracks freight rates. But Mr. Roach said the increase was the result of delayed general rate increases by all shipping lines, and prices are expected to fall over the next several weeks.

The weekly average freight cost for the first four months of 2015 stands at $797 a container, compared with $1,168 in the same period last year. Operators have said prices below $1,300 over the long run are unsustainable. Analysts expect global container-fleet capacity to increase by 8% this year, nearly double the rate of demand of around 4% to 5%.

Source: Wall Street Journal

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