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The rise of the mega-boxship, but will bigger remain best?

The rise of the mega-boxship, but will bigger remain best?
The rapid rise of the mega-containership of 18,000 teu and above has radically altered the landscape of mainline container shipping.

The Malaccamax containership had long been the stuff theoretical conference presentations, but when Maersk Line announced it was ordering a series of twenty 18,000 teu containerships in February 2011 few realised just how big the impact, of what the Danish company dubbed the “world’s largest ship”, would really be.

The Triple-E proved to be the proverbial game changer and this week saw confirmation that the Danish line was in talks with Daewoo Shipbuilding and Marine Engineering for 11 more ultra-large containerships (ULCS), this time of 20,000 teu.

A little over four years since the first orders were placed, less than two since the Maersk Mc-Kinney Moller was delivered in July 2013 and the impact on container shipping has been profound.

As the benefits of yet greater economies of scale combined with new fuel efficient designs it became clear little short of a size war has broken out among the top players, with companies piling in to order yet larger ships.

At the beginning of April Orient Overseas Container Line (OOCL) contracted for the largest yet with an order for six 21,100 teu vessels at Samsung Heavy Industries nearly 17% larger in capacity terms than the Triple-E. OOCL joined two other Asian lines that took ULCS plunge this year following Mitsui OSK Lines (MOL) and Evergreen Line.

Combined with previous orders from Maersk, United Arab Shipping Corp (UASC), China Shipping Container Line and Mediterranean Shipping Co (MSC) the OOCL order brought the number of 18,000 teu and above containerships either on the water or contracted to 79.

Further orders from Maersk, an expected series of ten 19,000 teu ships from Cosco, and a series of 20,600 teu vessels from CMA CGM, and the number of vessels in the 18,000 teu plus class will easily push past 100.

Maersk clearly benefitted from first user advantage as its financial results have continued to show only today when it reported a $714m first quarter profit, however, as everyone else joins the club this advantage could be quickly eroded.

Container lines are notoriously good at giving back to their customers the gains they have made through efficiencies and cost savings.

With only one or two lines operating 18,000 teu class vessels those companies can reap the benefits, but once every carrier starts to get such vessels a more problematic scenario will likely play out.

With lots of new capacity to fill it is almost inevitable that a price war will ensue as lines desperately compete to ensure their massive new tonnage is properly utilised. To make matters worse they can only deploy the vessels on one trade: Asia – Europe.

Last year saw port congestion appearing across the Asia – Europe trade, which was in part blamed on the ULCS, just imagine what this will be like when there over a hundred 18,000 teu plus ships in service.

And I will not even get into the scenario in terms of salvage should the worst happen to one of these seagoing behemoths, or how many yards would be capable of taking such a vessel in for repair.