RLL Container Report - 09 April 2014
From: John Keir, Ross Learmont Ltd
Date: 09 April 2014
You may not have noticed but there is a silent revolution taking place out at sea.
At the end of March, CMA-CGM followed in the footsteps of the two other P3 members by confirming the long-expected upgrade of six newbuildings to 18,000 teu. Maersk had previously ordered 20 Triple-E class vessels with a similar capacity, of which seven have already been delivered. The eighth vessel, Marstal Maersk will undergo sea trials this month and will be followed by a further five sister ships in the current calendar year. Next year, Maersk will complete the order, when they receive the final batch of seven of these queens of the sea. By 2016 the P3 group, consisting of Maersk, MSC and CMA-CGM, will be operating a fleet of 29 vessels each with a capacity of between 18,000 and 19,000 teu.
The G6 Alliance, which includes MOL, is studying options to purchase container vessels of 18,000 or more teu, which would enter service by 2020 or slightly later. In the shorter term, the G6 Alliance will operate a fleet of 48 vessels, each with a capacity of 13 to 14,000 teu. Interestingly, MOL think that a Suezmax vessel could theoretically carry up to 20,000 teu. Not to be outdone by the other major lines, China Cosco Holdings, the main listed unit of China Ocean Shipping Group, is planning to order five 14,000 teu ships and to develop its ties with China Shipping Group in the container sector. At the same time, China Shipping Container Lines received the CSCL Summer, the second of eight 10,036 TEU ships ordered from Chinese shipyards in October 2011 at a price of USD 94.3 million each.
However, Hapag Lloyd and CSAV are bucking the trend towards alliances by negotiating a merger, which would form the world’s fourth-largest container box fleet. This year, Hapag is due to take delivery of the last three 13,169 teu units of the 10-strong Hamburg Express class. The other Hamburg-based container line, Hamburg-Sud has been busily adding new tonnage with additional reefer plugs. It has long been speculated that the two residents of the Hanseatic city could eventually join forces to form a major player in container shipping industry but so far no white smoke has been spotted above Ballindamm or Willy-Brandt Strasse.
Seaspan has just taken delivery of the 10,000 teu Hanjin Buddha, the first of seven containerships ordered from Jiangsu Yangzijiang by Seaspan and Greater China Intermodal Investments, which are co-operating closely with their client, Hanjin. The Hanjin Buddha is expected to operate on the transpacific route, where it will eventually be joined in May by other similar-sized vessels. The 8,452 teu Ever Loyal was delivered to Evergreen and is the 18th ship in a series of 30 ships built by Samsung. These ships are part of a 55-ship newbuilding programme, to which the line will add seven new 14,000 teu vessels to be taken on charter. Evergreen is projecting to add just under 600,000 teu slot capacity to its fleet by 2017. Nevertheless, Evergreen has been criticised for not ordering more of the larger vessels. It could equally be argued that the 8,000 teu capacity allows Evergreen to operate their vessels either on the West Coast or on the East Coast trades by simply passing through the upgraded Panama Canal – once it is completed, of course. Indeed, it is anticipated that most ships with a capacity of 8 - 9,000 teu will eventually be redeployed from the Asia-Europe trade to the routes from Asia to the East Coast of America.
Why, you may ask, is there is mad rush to upgrade to 18,000-teu vessels? The answer is quite simple: these giant vessels should offer cost savings of up to 30% per teu, and at a time when freight rate increases fail to gain traction, the lines have wholeheartedly embraced the mantra of “big is beautiful”. Equally important, prospective clients could be willing converts to container transport: Severstal just announced that it will use containers to transport steel coils. The Russian steel producer quotes more reliable delivery times plus projected cost savings of between 20 and 30 percent. When lines and major clients start “singing from the same hymn sheet”, we might have to view this more as a crusade rather than a revolution.
Another Russian producer that may join in the crusade is Uralkaliy, which has just signed a deal to supply India with 800,000 tons of fertiliser per year. The contract starts already in April and the terms agreed are USD 322 per ton CFR (Cost and Freight). Divide that figure by, say, ten metric tons per teu and you quickly realise how important the projected slot savings will be in persuading key shippers like Uralkaliy to switch part of their shipments to containers, much as Fosagro is doing via the port of Ust-Luga. In December, Uralkaliy opened a brand new fertiliser terminal in the Port of Riga. Located on the river and close to the main container terminal, the facility has a capacity of 2 million tons per annum - enough cargo to fill up many an eastbound container vessel.
Belkaliy has a similar-sized fertiliser terminal just to the south of Riga in the Lithuanian port of Klaipeda. The Belarussian potash producer enthusiastically embraced intermodal transport early on and has been co-operating with major lines on trial shipments of fertilisers in refrigerated containers on the return leg to banana plantations in Colombia. Belkaliy will benefit from the larger MSC vessels that will start to call at the ice-free port of Klaipeda, when the latest upgrades to the local terminals are completed this autumn. In addition to fertilisers and steel coils, the container lines will be targeting Russian producers of non-ferrous metals, pulp, paper and sawn timber to provide export cargos to fill up eastbound vessels to India and the Far East. In the cut-throat world of commodity trading, improved transit times on modern vessels combined with a hefty reduction in per-teu transport costs should ensure the eager shipping line representative a seat at the negotiating table.
John Keir Ross Learmont Ltd
09 April 2014
Copyright © 2014 John Keir