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Container
shipping lines are poised to take delivery
of a new generation of "megaships",
writes John Kemp in Fort Lauderdale's Maritime
Executive magazine. This comes just as the
growth of world trade is slowing down, contributing
to massive overcapacity in the market, he
says.
Megaships, which can be up to 400 metres
long, seem to be here to stay, not least
because so many more are already on order,
the product of high fuel costs and low interest
rates. They are also the principal form
of delivering goods from Asia to Europe
as Europe and Asia and Europe have the deep
water necessary to accommodate them.
But the trend towards larger vessels
is not without problems especially for other
businesses in the transport system, and
the trend could be nearing its limit as
the economies of scale associated with megaships
decline.
Container shipping capacity has doubled
every seven years since the turn of the
millennium and will reach nearly 20 million
TEU in 2015 up from five million TEUs in
2000.
But since the financial crisis, container
capacity has continued to grow rapidly,
even as the growth in freight volumes has
slowed, creating a massive overhang in shipping
capacity and pressuring freight rates.
Capacity growth is being driven by the
trend towards larger vessels. The size of
containerships has been growing faster than
for any other ship type according to the
OECD's International Transport Forum.
Between 1996 and 2015, the average carrying
capacity of containerships increased 90
per cent, compared with a 55 per cent increase
for dry bulk carriers and 21 per cent for
tankers.
The growth in containership size has
been accelerating. It took 30 years for
the average containership to reach 1,500
TEU, but just one decade to double from
1,500 to 3,000 TEU.
Between 2001 and 2008, the average size
of newly built ships hovered around 3,400
TEU but then jumped to 5,800 TEU between
2009 and 2013, and hit 8,000 TEU in 2015.
Both the average size of new containerships
and the maximum size are set to continue
growing over the next five years.
Shipping lines have already taken ownership
of 20 megaships with a capacity of more
than 18,000 TEU each and another 52 are
on order, according to the OECD.
The largest ship so far delivered has
a capacity of 19,200 TEU, but carriers with
capacity up to 21,100 have been ordered
and will be in service by 2017.
Megaships are being introduced into service
between the Far East and North Europe, the
world's largest route by volume, where potential
economies of scale are greatest, but are
having a cascade effect on other routes.
Large ships that formerly plied the Far
East-North Europe route are being displaced
into transpacific service, and former transpacific
carriers are moving to the transatlantic
route.
The new generation of ultra-efficient
megaships is credited with cutting the cost
of shipping even further and lowering greenhouse
gas emissions.
But researchers from the OECD question
whether megaships are contributing to unsustainable
overcapacity and imposing unintended costs
on shippers, port operators, freight forwarders,
logistics firms and insurers.
The new generation of megaships is the
lagged effect of the era of high oil prices
between 2004 and 2014 and low interest rates
since the financial crisis in 2008.
Costs in the shipping industry can be
divided into the capital costs associated
with the construction of new vessels, operating
costs, and voyaging costs primarily related
to fuel consumption.
Construction costs increase more slowly
than ship size. Increasing a containership
from 16,000 TEU to 19,000 TEU cuts the annual
capital cost per TEU-slot by around US$69
according to the OECD.
Larger ships are slightly more operationally
efficient than smaller ones, with an annual
saving of perhaps $50 per slot on a 19,000
TEU ship compared with a 16,000-TEU vessel.
But the real savings are on the fuel
bills. Megaships are "astonishingly
fuel efficient" and actually consume
less fuel on a voyage than 16,000-TEU ships,
according to the OECD.
With overwhelming cost advantages, especially
on fuel, and cheap finance readily available,
the upsizing decision appears to have been
a straightforward one for shipping lines.
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