Maersk order set to smash the size barrier

SOMETHING curious is afoot in the container world. For so long owners were simply protecting themselves, concentrating on cuts and survival.

When the crisis ended with surprising suddenness, they were busy moderating their strategies.

On the issue of ship design and price, after a few faulty steps they seem to be taking the lead.

This was evident in the news that Maersk is in the final stages of negotiation with shipyards for a series of 18,000 teu boxships. South Korea’s Daewoo Shipbuilding & Marine Engineering and, reportedly, Samsung Heavy Industries were the two yards most likely to build the series.

There has been speculation regarding how many ships and at what price. The order is said to be worth $2bn, comprising 10 ships at $200m each, but the Korea Economic Daily reported DSME had lined up a 20-ship order for twice that much.

Either way, the news is a significant turning point in the position of owners. The salient feature of the orders is the choice of size, but also the ability of the owners to extract better, more energy-efficient designs from the yards.

Shipyards have long been criticised for simply churning out designs that would become costly and obsolete in a new era that demands energy-efficient vessels. Pre-crisis, they had no reason to do otherwise. Demand was so strong that they could dictate the terms.

On the new Maersk giants, a considerable amount of design work has to be completed. It is known that they will have new propulsion systems and other technological advances that would considerably reduce slot costs and cut emissions.

The Maersk news is a trendsetter in that the company made clear choices about how its future delivery will look. The engines are reportedly designed for slow steaming only, implying that Maersk believes and endorses the idea that slow steaming is here to stay, enunciated by industry leader Ron Widdows, chief executive of Neptune Orient Lines, and many others.

Lloyd’s List reporter Janet Porter has gleaned that engines on the new ships would probably be smaller than the 80,080 kW, 12-cylinder main engine of the Emma Maersk , the current largest containership at 397 m, but one that will be surpassed in size by the new 470 m vessels.

Because of the slower speeds prevalent today, ships are regarded as overpowered. But in opting for a smaller engine for a bigger ship, Maersk would appear to be bowing to the reality of slow steaming in perpetuity. To be sure, it would still have many ships in its fleet that could operate at faster speeds. But the size of the order, most likely $2bn, is not insignificant, even for a company such as Maersk.

The sweet element of all this is how quickly the status quo has changed. Almost no containership orders were placed between late 2008 and the end of June this year, when Taiwan’s Evergreen ordered 10 ships of 8,000 teu at $103m each.

Chairman Chang Yung-fa famously stayed out of the newbuilding buying spree at the height of the shipping boom and has said, like Mr Widdows, that he sees no merit in the biggest ships now in the orderbook pipeline, because they can only be deployed on the Asia-Europe trade — as indeed the new Maersk giants are almost certain to be. NOL followed with orders in July.

It was Evergreen that started the activism. In April, Dr Chang threw down the gauntlet to shipbuilders by broadly declaring that he planned to order 100 ships over the next few years, but he was not in a rush to do so.

Evergreen backed away from negotiations to order 12 8,000 teu boxships from South Korea’s STX Offshore & Shipbuilding, sending a signal that the centre of gravity over demands on design and price had shifted to shipowners.

That signal was confirmed when Gerry Wang, chief executive of Seaspan, said last month that the New York-listed shipowner was willing to order up to 40 boxship newbuildings if yards lower prices and adopt new technologies.

Mr Wang threw down the gauntlet, calling on yards to produce revolutionary new designs or lose out on massive orders that are likely to be placed in the upcoming months. He was campaigning for a new generation of lightweight, fuel-efficient ships with greater load capacity than their equivalents in service today. He also said that prices have to come down further before Seaspan is ready to make a move, with a target of $8,000-$10,000 per teu.

It turned out that Maersk was already pushing the initiative, as it has been in talks with the yards over the big ships for some time. If the price per ship is around $200m apiece, then the price per teu would be around $11,000, not the deal that Mr Wang was looking for. But savings on running costs and other benefits to emerge from the new designs might lead to reductions that make up for this.

The move by Maersk has created some competitive heat. Other owners will be pressing yards for better designs and other yards will be rethinking their design strategies. This is the way that markets are supposed to work, where the invisible hand favours innovation that emerges from demand.

Jan Marceli Kopernicki, head of shipping at Shell and the president of the UK Chamber of Shipping, recently called for shipowners to be far more aggressive in industry-led action to improve environmental performance.

The lesson here is that while owners’ motives are entirely self-interested, their concerted action is helping to stir life in hidebound yards and could improve the industry’s environmental performance as well. (Lloyd’s List)

Daewoo caught ‘off guard’ by megaship enquiries

SOUTH Korean shipbuilding giant Daewoo Shipbuilding & Marine Engineering said it had been caught “totally off guard” by enquiries from shipowners about so-called megaships.

In an interview with Bloomberg, DSME director Choe Yong Seok said the company had been basing order projections for 2011 on regular-sized containerships, but instead the company received an increasing number of queries for bigger ships.

“The time is ripening for big containership ordering,” Mr Choe was reported as saying. DSME has a track record in building larger ships. According to Clarksons, of the 57 containerships on its orderbook, 23 are over 10,000 teu. This includes five 14,000 teu on order from Claus-Peter Offen.

Other carriers lining up to order bigger ships from DSME include Singapore’s Neptune Orient Lines, which has ordered two 10,7000 teu vessels. Meanwhile, Zodiac Maritime has placed an order for up to 10 vessels of 13,000 teu at STX Offshore & Shipbuilding.



Orient Overseas Container Lines said the company would “not rule out” purchasing so-called megaships and was mulling an order for 13,000 teu boxships. Industry sources say the Hong Kong line is in talks with a South Korean yard and another in China about an order.

Maersk Line is thought to be aiming evening higher, with specualtion that it may soon sign for 10 ships with an intake 18,000 teu ships, possibly with an option for another 10 attached.

A recent report by Macquarie Equity Research said orders from containership operators were picking up in the wake of strong third-quarter profits.

The report estimated new boxship orders in the first 11 months of the year to have reached about 550,000 teu, or 3.9% of the existing fleet.