Friday Nov 15, 2024
Friday Nov 15, 2024
Monday, 23 March 2015 00:00 - - {{hitsCtrl.values.hits}}
ny as opposed to trust. Unions are against the corporatisation proposal and have already called strikes across all the ports. Jawaharlal Nehru Port Trust on the other hand is very keen on the idea and has already expressed a desire to be the first to be corporatised. Any such action will, however, require a change in the law, not exactly an easy issue in India.
18,000 TEU ships may not be 747s of shipping
Major non-operating Ultra Large Container Ship (ULCS) owner Seaspan doesn’t think ships of 18,000 to 20,000 TEU will become the 747s of shipping.
The re-sale or re-charter opportunities for these 18,000 TEU+ mega large container ships (MLCS) at the end of their charter period are anything but certain, the Canadian company reflects, arguing that their deployment will remain restricted to a limited number of ports on the Europe-Far East run.
In other words, they are missing the flexibility of the 10,000-14,000 TEU range of container ships that have developed into the work horses of an increasing number of liner trades.
This will include those operating through an enlarged Panama Canal which will be able to accommodate maximum 13,020 TEU Vessels.
Maersk Line to order more 18,000 TEU ships
Maersk Line has confirmed it is working on ordering a further number of 18,000 TEU ships by mid-year. Whether the new giants will have two engines, just as the 20x 18,300 TEU Triple-E units (of which now 15 are operating) is yet to be decided upon. As the carrier is convinced that steaming slow remains the way to go, a single engine should basically do, alike the vessels being built for the other 18,000 TEU operators (China Chipping, MSC and UASC).
We need additional economy-of-scale capacity to grow with the market, the management said, adding that it continues to expect rates going down rather than up with service expectations moving in the opposite direction. So why would anyone want to increase market share? It could be summarised that lower costs along with better service reflects Maersk Line’s business model.
Carrier breaks 20,000 TEU threshold
MOL has become the first carrier to break the 20,000 TEU threshold by ordering six Mega Large Container Ships (MLCS) of 21,500 (nominal) TEU. Four will be owned and built by Samsung Heavy Industries at $ 154.9 million apiece. The other two will be chartered from non-operating owner Shoei Kisen, affiliated to shipyard Imabari, which will also build same. Tentative dimensions of the giants are 400 metres long with design draught of 14.5 metres. However, at a breadth of 58.5 metres, the two Japanese ships will be just a bit finer-lined than the 58.8 metre wide South Korean units.
The 21,500 TEU MOL Ships (400x58.5/58.8) have almost the same dimensions as Maersk Line’s 18,240 TEU Triple-E (399.9x59.0). Including the six MOL new buildings, there are now 423 vessels of 10,000 TEU and larger of which 274 are operating and 149 being built. The number of ULCS (215) too large to pass through the new Panama Canal locks now exceeds the numbers which can (208). The really big ships of over 18,000 TEU (why not call them Mega Large Container Ships, (MLCS) now number 66. These are controlled, for now, by just four operators: China Shipping, Maersk Line, MOL and UASC.
Port productivity not improving
The fundamental industry problem identified as soon as mega ships of 10,000 TEUs and above started hitting the waves remains alive and well and wholly unresolved. That is the problem of productivity.
There has been little progress in carriers and terminals ability to get these ships quickly worked and sent back out to sea, resulting in delays to cargo and added costs for carriers.
Maersk Line made a point of mentioning the issue in its full-year earnings released and CEO Soren Skou discussed it in an interview.
We continue to build ships that are bigger and bigger and if we can’t get the containers off faster the whole thing will come to a grinding halt, Skou said. Since 2007 the ship size in the Asia-Europe trade has effectively doubled. We used to have 6,500 TEUs being the workhouse, now it’s the 13,000 TEU ships, which are the workhorses. Our point is simply that port productivity has not doubled since then. While there has been improvement in productivity, we are spending more time in port because of bigger ships.
In its 2014 results, Maersk said since 2007, the time spent in port by our vessels has increased significantly. Port and terminal productivity has not been able to follow suit with the increase in vessel size. On an Asia-Europe round trip the time spent in port (one vessel on average) has increased from 12 days (2007) to 18 days.
When it comes to individual crane productivity, Skou said the industry is stuck in a range and can’t break out. The industry is stuck at 25-30 moves per crane, per hour. We haven’t had any breakthrough development that can get that to 40-50 moves per hour, he said. JOC Port Productivity data collected from major container lines supports the idea that the numbers are not improving. For ships of 10,000 TEUs and above, total moves per hour globally dropped from 114 to 111 from 2013 to 2014, according to preliminary 2014 data.
Maersk Line profits zoom
Maersk Group made a record net profit of $ 5.2 billion in 2014, up 38% on the 2013 result and driven by a strong performance by Maersk Line, which reported a profit of $ 2.3 billion.
The liner shipping division earnings were 50% up on those of 2013, with the fourth quarter alone delivering a profit of $ 855 million, more than double the result of the same quarter in 2013, Maersk Group CEO Nils Andersen said. He said the group was very satisfied with the result and predicted that Maersk Line would beat the underlying profit this year.
The carrier plans to improve its competitiveness through unit cost reductions and the full roll out of the 2M Alliance that Andersen said allow Maersk Line to match the 3-5% increase in global demand for seaborne container transportation. Solid figures could be found through the 2014 results; container volumes increasing by 9.8% year-over-year to 2.4 billion, 40 foot containers driven by solid growth on North-South and Intra trades, while the long haul East West trades remained stable. Significant cost savings were achieved through the falling bunker fuel prices that dropped 11% since the thirst quarter to $ 512 a ton and a 7.9% lower bunker consumption per FEU. Maersk Line has reduced its consumption per 40 foot container by 49% since 2007.
(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).)
