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The arrival of the Triple-E and container shipping size wars

The arrival of the Triple-E and container shipping size wars
Without doubt one of the most talked about ships of recent times, the Maersk Mc-Kinney Møller, the first of Maersk Line’s giant Triple-E containerships set sail from Daewoo Shipbuilding & Marine Engineering in South Korea on Tuesday.

The 18,000 teu ship represents the biggest salvo yet in the size wars that have gripped container shipping in recent years, and Maersk have 19 more of them come over the next couple of years.

The Danish giant’s slick PR machine has been in overdrive in the last few months ensuring that many who would normally hear nothing about shipping know about the arrival of the quarter mile long leviathans on the world’s oceans.

The Maersk Mc-Kinney Møller will actually enter service on 15 July pushing the size boundaries on the Asia – Europe trade to their largest point to date. However, it is already in line to be trumped in two years time with China Shipping Container Line’s (CSCL) orders for 18,400 teu capacity ships.

The size wars have been driven economies of scale and lower unit cost. Additionally newbuildings ordered today are much more fuel efficient than the predecessors, further lower operating costs at a time when bunker fuel prices continue to be a huge concern in the industry.

The big question is though how much of this lower unit cost will Maersk be able to pass on through its bottomline. The answer, based on the last few years is sadly for the container shipping industry, very little, if anything at all.

Surges in capacity on the Asia – Europe trade have resulted in near ruinous price wars. Any savings that are made are just passed straight onto the shipper.

The Triple-E’s start being phased in at time when lines are pushing to get rates back up again after they fell to levels that did not even cover operating costs during the first half of year. Indeed some market watchers have even blamed the psychological impact of orders for newbuildings, which will not be delivered for another two years.

As it stands it would look likely that container shipping’s size war is going to continue. Designs for 22,000 teu capacity Malaccamaxes are already on the drawing board. Analyst Seaintel this week recommended that the best way for the G6 and CYKH alliances to compete with the Maersk, CMA CGM’s and Mediterranean Shipping Co (MSC) planned P3 alliance is to place orders for more ultra large container vessels so as to be able to compete on unit cost.