Will the era of “mega vessels” be short lived?

Analysts for the London-based consultancy, Drewry Maritime Advisors, say that the trend of “big ship obsession” may soon come to an end. 

As reported in LM, the three largest ocean carriers in the world – Maersk Line, MSC and CMA CGM – extended their dominance by taking on the most capacity, while the five leading carriers between them accepted two-thirds of all the new capacity.

The emphasis last year was on the big ships; deliveries of 10K+ ships amounted to 55% in twenty-foot equivalent units (TEUs) of all deliveries.

Ships of 10,000 TEU or above now constitute approximately one-quarter of the cellular fleet on the water, having only taken up less than 5% at the end of 2011. That share will only continue to rise as ships of that size currently make up around three-quarters of the total orderbook.

Looking further into the future carriers will have to continue to juggle new ship capacity with even more dexterity; new orders doubled in 2015 to an aggregate capacity of 2 million (90% of which were 10,000 TEU and above) that will have to find deployment before the decade is out, say analysts.

Most of the new orders occurred in the first nine months of last year as things cooled off in the fourth quarter. Newbuild prices are still very attractive and shipyards are very keen to generate business so the recent slowdown is either a signal that owners have realised there is no demand right now for any more new ships and/or that financial pressure among carriers and non-operating owners is suppressing activity.

“We think there are reasons that the big ship obsession could be about to end,” said analysts.

Research done by Drewry Maritime Advisors suggests that the economic argument for ordering ever bigger ships diminishes as they grow and actually reverses upon reaching 24,000 teu as ports struggle to turn them around efficiently and the total system cost rises.

“We know that for each individual company the desire for big ships is logical, but the impact on the industry at large has been disastrous with rock-bottom freight rates that we’re seeing now the end result,” added analysts.

“Carriers are running out of profitable trades to deploy the big ships. If we’re right that the economic imperative and the financial ability to order these ships is decreasing we think there is a reasonable chance that the much needed breather from new orders will hold firm,” Drewry concluded.