With the arrival of the 19,100 teu CSCL Globe at the UK port of Felixstowe at the beginning of January, the era of the ultra large container vessel (ULCV) could be said to have truly begun.
Although ULCVs have been operating in increasing numbers on the Asia-Europe trade over the past year and a half, since the 18,270 teu Maersk Mc-Kinney Møller was launched in mid-2013, they have hitherto been operated only by Maersk Line and CMA CGM. The latter’s smaller, 16,400 teu CMA CGM Jules Verne and its sisterships are in the middle range of the ULCV class, which begins at the 13,000 teu level. With the arrival of CSCL Globe, other carriers are now playing catch-up, as deliveries of ULCVs come thick and fast.
The latest vessel is the first of a series of five under construction at Hyundai Heavy Industries (HHI) in South Korea. According to VesselsValue.com the unit was ordered for a price of US$140 million by China Shipping Container Lines (CSCL) along with four other vessels. The second of these, CSCL Pacific Ocean, was launched at HHI’s shipyard in early January and has begun sea trials.
Both vessels will operate on the Ocean Three alliance’s Asia-Europe AEX 1 service that CSCL runs in conjunction with CMA CGM and United Arab Shipping Co (UASC). Three further vessels – CSCL Atlantic Ocean, CSCL Indian Ocean and CSCL Arctic Ocean – are all due to be delivered by March 2015 and will join the same service, which is eventually expected to deploy 11 vessels between 10,000 teu and 19,000 teu on a weekly rotation.
The actual capacity of the vessels remains the subject of some debate. While CSCL has been advertising this as 19,100 teu, industry analyst Alphaliner claims that the vessels’ true capacity is 18,892 teu. While the difference may seem negligible, the industry has entered an era in which carriers are vying for title of operating the world’s largest box ship. This title appears to be one that lines eagerly covet.
Mediterranean Shipping Co (MSC) is set to take the crown from CSCL, when it takes delivery of MSC Oscar. This was recently launched to begin sea trials. The vessel has been constructed at the Daewoo Shipbuilding & Marine Engineering (DSME) shipyard in Okpo, South Korea, where Maersk’s Triple-E series have also been constructed. The vessel, which was ordered by China’s Bank of Communications for US$141 million according to VesselsValue.com, has an advertised capacity of 19,224 teu. Six sister vessels are under construction at DSME and, according to VesselsValue.com, two more units are set to go to MSC on charter. Given the Geneva-headquartered carrier’s 2M alliance tie-up with Maersk, it will not be a surprise if the remaining Bank of Communications ships join the MSC fleet.
Alphaliner believes that this vessel is likely to be overtaken when UASC takes delivery of the first of its largest ULCVs, Barzan, which is set to be delivered in April.
“Although the UASC ship is currently listed as 18,800 teu, company officials have indicated that the ship’s nominal capacity is likely to be adjusted upwards prior to delivery.
“In addition to these four series of ultra large container ships, contracts for six units of 19,200 teu at Samsung Heavy Industries (SHI) have been reported. However, details about this new SHI series of super jumbos are not currently available,” the analyst said in a recent report.
It was, of course, Maersk Line that began the march of the ULCVs when it started to build its Emma class vessels. Emma Maersk was launched at Denmark’s now-defunct Odense shipyard in 2006, shrouded in secrecy. The recent arrival of CSCL Globe at Felixstowe was eerily reminiscent for long-serving maritime journalists, who were present eight years before when Emma Maersk first arrived at the UK’s largest port. The press was given a perfunctory tour of parts of the accommodation block, but all the vessel details had been removed from its bulkheads, as its capacity remained a tightly guarded secret. Although Maersk at the time claimed its capacity was 11,500 teu, rumours circulated in the industry that it was, in fact, far higher.
Over the next few years the vessel’s capacity was revised upward and it is now recognised as being 15,500 teu, making Emma Maersk the first of the ULCVs. The huge slot cost savings that the units presented were not missed by other carriers, but Maersk continued to lead the way by placing an order for 10 18,000 teu Triple-E vessels in early 2011 at DSME, and a few months later exercised an option to add another 10 vessels to the order. The Triple-E vessels have now been revealed as having nominal capacity of 18,340 teu.
Maersk Mc-Kinney Møller was launched in mid 2013 and deliveries of the order continued for the remainder of that year and throughout 2014. In January 2015 Maersk took delivery of the 14th vessel in the series, Munkebo Maersk, which activated the 2M alliance with MSC and provided the first sailing of the carriers’ joint Far East-Europe AE-5/Albatross loop. It loaded its first cargo at the northern Chinese port of Dalian. The loop will be operated with 10 vessels of 14,000 teu to 19,000 teu, of which five will be provided by Maersk and five by MSC. At the time of writing the operation was set to be joined by MSC Oscar.
Maersk has six more Triple-E units under construction, which are expected to make an entrance on an almost monthly basis.
UASC also took delivery of its latest ULCV in January, the 15,000 teu Al Murabba. This followed its sistership, Sajir, which was delivered in November 2014. Both vessels are expected to join CSCL Globe on the FAL 8/AEX 1/AEC1 service. UASC has the most ambitious ULCV newbuilding programme after the Triple-E series, with six units of 18,800 teu - of which Barzan is the first - and 11 14,993 teu vessels. Construction of the series began in August 2013, and the order has been split between HHI at Ulsan and Hyundai Samho Heavy Industries (HSHI) at Mokpo. Interestingly, the smaller vessels are all designed to be retrofitted with LNG fuel tanks in the future.
According to Drewry’s orderbook data, 54 vessels of over 10,000 teu are scheduled to be delivered through to the end of this year, assuming that they are all constructed on time, with the Ocean Three carriers representing 21 of those units. These will increase the average size of the alliance’s ships on the Asia-Europe trade from 12,200 teu to 15,500 teu. And despite the injection of Triple-E capacity, the average size of ships currently deployed by 2M lines is 11,900 teu. This is explained by the fact that Maersk employs vessels of less than 10,000 teu capacity on three of its weekly loops. However, by the end of 2015 average capacity will rise to 14,300 teu with the delivery of another 15 ULCVs.
With bunker prices falling so precipitously over the last few months it is difficult to get a firm grip on the operating costs that carriers face. When CSCL Globe made its maiden call at Hamburg, CSCL executives said that the break-even freight rate for headhaul services on Asia-Europe was at US$600 per teu – a dramatic drop from the US$1,000 per teu rate that had been an industry marker for the last couple of years. At the same time, it was commonly held that the cost per teu of an 18,000 teu vessel was around 30 per cent less than a 13,000 teu vessel – with the caveat that vessels need to have at least a 90 per cent utilisation in order to realise those savings.
Of course, it is comparative slot costs on which carriers are now focusing. With lower slot costs comes a greater ability to win market share through more competitive freight rates. And it is therefore no surprise that almost all of the carriers that had not placed an order for ULCVs are now doing so. They need to, if they want to stay in the largest deepsea container shipping trade.
In his new year address to employees and customers, Mitsui OSK Lines (MOL) president Koichi Muto revealed that the line planned to place an order for ships of up to 20,000 teu. This would represent a step change for this member of the G6 alliance, which appears to have been left behind in the race to build bigger ships. Both it and the CKYHE alliance will have an average ship size of 12,200 teu by the end of this year, says Drewry, but the latter will also have one 14,000 teu service in place.
“With relatively few big ships for delivery in 2016 and beyond, the G6 lines will be under pressure next year to compete on slot costs with their immediate peers,” Drewry says.
Both Nippon Yusen Kaisha (NYK Line) and Kawasaki Kisen Kaisha (K Line) have, separately, announced orders for ULCVs. After some years of not ordering any new tonnage, they reversed that policy last year. NYK Line indirectly ordered eight 14,000 teu ships at the Kure shipyard of Japan Marine United via a long-term charter with a Japanese shipowner. The vessels are due for delivery between February 2016 and January 2018. K Line will take delivery of five 13,870 teu vessels this year and another five of the same size in 2018.
That will go some way to addressing the yawning gap. But the question is: will it be too little too late? Additional questions for those carriers which already have placed orders for ULCVs are whether there will be the cargo volumes to fill the ships on the Asia-Europe trade – because that is the only trade which can handle them – and whether port capacity, and particularly port productivity, can keep up with the increase in volumes – if these do increase as hoped. CST
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