By June Maersk will take delivery of the “world’s biggest container ship”, capable of carrying 18,000 boxes – but it won’t hold the title for long.

This May, China Shipping Container Lines (CSCL) announced it had ordered five vessels each capable of carrying 18,400 TEUs (20-foot containers), and its chairman Li Shaode has confirmed the mega-ships will be deployed in a 10-year joint service with United Arab Shipping Company (UASC).

The ships, to be built by South Korea’s Hyundai Heavy Industries, for a total of USD 700 million, will use engines that can automatically control fuel consumption to suit speed and sea conditions, helping to improve fuel efficiency and cut emissions.

News that CSCL will join Maersk in the super-size containership club is further proof of the demand for these fuel-efficient behemoths among the major lines – now it is just a question of when and how many more will make the leap.

UASC’s involvement in the ordering of the five CSCL 18,400 TEU ships is a move that underlines its ambition to become a significant player in an industry already awash with excess tonnage. The new container ships will form the basis of a Europe to Asia service, jointly run with CSCL.

Jorn Hinge, UASC’s president and chief executive, told the shipping journal Lloyd’s List this year the company was looking to cut costs even further by introducing vessels with a capacity of about 18,000 TEUs. Despite UASC being much smaller than the other shipping lines operating on the Asia-Europe route, which passes through the Arabian Gulf’s ports, Mr Hinge said he believed the only way the company could remain competitive was by ordering larger ships.

“If UASC wants to be competitive in our home market, we have to have the same kind of ships,” he said.

Last month, The National reported on how, despite a worldwide glut of merchant ships, some of the biggest names in the industry have been committing billions of dollars to building even more. The reason? Fuel efficiency. These new eco-ships were threatening to create a two-tier industry, The National reported, with all the cargoes going to the ships that are cheaper and cleaner to run, and the rest laid up and rusting away.

With the arrival of the mega-ship, carrying more containers per voyage, it will mean fewer ships on the route and lower costs for the shipping line and the shipper. Shipping lines that don’t go big could find shipping containers becomes uneconomical and ports that don’t adapt to these megaships could find themselves without cargo.

According to the shipping analysts Drewry’s monthly report Sea & Air Shipper Insight, while many of these new giants won’t actually hit the water for years, they pose serious questions for the industry.

“Ocean carriers did a decent job over the winter months balancing supply to ensure that freight rates remained relatively firm, but the delivery of big new ships – leading to new services and upgrades of existing loops – will mean lines will find that task increasingly difficult for the remainder of 2013,” says Simon Heaney, the research manager at Drewry.

“These new orders and speculation of more to come could be having a negative impact on rates right now. Carriers cannot shift the paradigm from the supply pressure they are facing so that they can get rates moving upwards again.”

Freight rates from China to northern Europe are down 30% since the start of the year at USD 796 per container, according to the latest Shanghai Containerised Freight Index.

“All 20 big, major container players will have to choose to either order similar ships or find themselves out of the Europe-Asia trade as smaller, less fuel-efficient vessels won’t be able to compete,” says Lars Jensen, the chief executive of Denmark’s SeaIntel Maritime Analysis. He estimates accumulated losses for the industry ran to about USD 7 billion over the past four years.

@www.thenational.ae

ABOUT THE AUTHOR
Adelle Geronimo is the Editorial Assistant for Trade and Export Middle East magazine. She graduated with a Bachelor's degree in Mass Communication at the University of the City of Manila, Philippines (Pamantasan ng Lungsod ng Maynila) in 2012.