SeaIntel: Megaships Taking Over Asia-Europe Trade

With the current orderbook of 90 mega-vessels of more than 14,000 TEU to be delivered in the next three years, the Asia-Europe trade will see 88% of vessels in excess of 14,000 TEU by 2020, according to market intelligence provider in the container shipping industry SeaIntel Maritime Analysis.

Asia-Europe is already close to the limit of what this trade can reasonably be expected to absorb until 2020 in terms of vessel upgrades. Further vessel ordering in the 18,000+ TEU category is highly likely to result in excess capacity issues, SeaIntel said.

Assuming a healthy 5% demand growth in the coming 3 years, and also assuming the same degree of vessel utilization as seen in 2017, the Asia-North Europe trade will be fully covered by just 15 weekly services. As explained, this would essentially force each of the alliances to permanently eliminate one of their current services. Furthermore, SeaIntel estimates that this would require 165 vessels.

As a result, the current orderbook is expected to result in a fleet of 125 vessels in excess of 18,000 by end-2020.

From this perspective, there would be “room” to phase in another 40 vessels of 18,000 TEU and above on the Asia-North Europe trade. But this perspective is extremely narrow and fully disregards the cascading ramifications, SeaIntel added.

“Existing cascading of 14,000-17,000 TEU vessels to the Asia-Mediterranean trade will, by end-2020, increase the composition of vessels in excess of 14,000 TEU to 83%, and the trade lane will be entirely unable to absorb more than a small portion of the spill-over from the North European trade,” the intelligence provider further pointed out.

“Of course, 18,000+ TEU vessels can also be phased directly into the Mediterranean trade, there is nothing preventing this scenario. From that perspective, the field is wide open for more orders of 18,000+ TEU tonnage. However, this will further exacerbate the cascading issues,” SeaIntel CEO, Alan Murphy said.

In conclusion, if the carriers end up taking advantage of the current low newbuilding prices and order the “remaining” 40 mega-vessels, thus bringing the entire Asia-North Europe trade lane to 18,000+ TEU, the Asia-Mediterranean trade will not be able to receive the cascaded vessel, and even more trades will feel the capacity squeeze.

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