Drewry: Boxship Leviathans Changing Lanes

Image Courtesy: Maersk Line

As carriers’ stock of ready-to-cascade Asia-Europe containerships is almost empty, the second phase of the cascade could be even more difficult for carriers to manage, according to shipping consultancy Drewry.

New Ultra Large Container Vessels (ULCVs) will force the cascade into a potentially more destructive second phase of bigger ships moving into North-South lanes as these vessels will stretch the ability of ports to handle them and trades’ capacity to absorb them without dumping utilisation.

The introduction of these leviathans and the proceeding arms race to catch up that has pushed the ceiling closer to 20,000 TEU, has had huge consequences for the industry, one of the biggest being the huge deployment headaches they have given carriers. With the biggest ships effectively locked into the Asia-Europe trade due to port handling limitations elsewhere carriers have had to be creative in shuffling ships into new trade lanes.

The phasing of ex-Asia-Europe ships into new lanes has routinely destabilised the new homes and has been a major contributing factor towards persistently low freight rates. The slowdown in demand that coincided with the arrival of the ULCVs exacerbated the industry’s overcapacity and has meant that for years carriers’ deployment decisions were less than optimal, according to Drewry.

“Deciding where to use their biggest assets has most often been based on necessity rather than demand,” Drewry said, adding that the average size of vessel on the Asia-North Europe trade is nearly as big as Maersk Line’s E-class units at 14,600 TEU, introduced 10 years ago. There are now only seven sub-10,000 TEU ships left on the route.

While the pressure to cascade ships is intensifying thanks to the new ULCVs, carriers in the Asia-North Europe trade now have less low-hanging fruit they can easily pick off and redeploy elsewhere.

Since the first quarter of 2013, the average ship size on the Europe-South Africa trade has grown by 92%, while for Asia-West Africa the growth rate was 79% and for Asia-East Coast South America it was 64%. Some of that will have been through newbuilds going directly into the trade, but most will be down to the cascade, Drewry said.

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