On Air Now

Current Show

Jerry Bader   8:30 AM - 11:00 AM

Text "JBSHOW" to 79489 and get updates from me. Email me at: jerrybadershow@mwcradio.com

Show Info »

Upcoming Shows

Program Schedule »

Listen

Listen Live Now » 1360 AM Northeast, WI 97.5 FM Green Bay, WI

Weather

Current Conditions(Green Bay,WI 54303)

More Weather »
70° Feels Like: 70°
Wind: W 5 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Today

Scattered Thunderstorms 77°

Tonight

Mostly Clear 56°

Tomorrow

PM Thunderstorms 77°

Alerts

Container firms order new ships to gain economies of scale

By Ole Mikkelsen

COPENHAGEN (Reuters) - Global container shipping companies have a strong appetite for new vessels, despite existing overcapacity, because they want to trade up to larger ships to benefit from economies of scale, according to shipping analysts.

Shipping association Bimco expects total container shipping fleet capacity to grow by 5.9 percent in 2013, although estimates for the amount of container capacity being scrapped are at a record high.

"Despite the challenge they face, the second tier carriers continue to have a strong appetite for new capacity," shipping newsletter Alphaliner wrote on Tuesday.

Ordering new ships is aimed at lower operating costs to match economies of scale enjoyed by the largest carriers with the biggest vessels.

Alphaliner said the order book of the three largest carriers, Maersk Line, part of Danish conglomerate A.P. Moller-Maersk , Switzerland's Mediterranean Shipping Company and France's CMA CGM , currently stands at 15.6 percent of their current fleet.

The combined order book of the next 18 carriers has reached 19.8 percent of their existing fleet.

Nine of 17 carriers reported positive operating earnings in the third quarter, but performances of individual carriers were mixed and operating profit or loss ranged from minus 5.1 percent for Regional Container Lines to plus 8.1 percent for Maersk Line.

"The largest carriers continue to enjoy significant scale advantages, with Maersk and CMA CGM, the first and third largest carriers, continuing to outperform the rest of the industry," Alphaliner said.

Maersk Line has take delivery of five mega ships with a capacity of 18,270 TEU each this year and another 16 sister ships will be finished by DSME <042660.KS> shipyard in South Korea and delivered within the next year and a half.

The average size of container ships on the busy routes between ports in Asia and Northern Europe exceeded 10,000 TEU earlier this year.

Bimco expects that vessels with a total capacity of 450,000 twenty-foot containers (TEU) will be scrapped in 2013, which is the highest annual total ever to be scrapped in the industry.

"It is one of the best ways the industry can help themselves," shipping analyst Peter Sand from Bimco said.

He said the average age of scrapped container ships has fallen to around 22 years from around 30 years a few years ago.

The container shipping industry has been struggling with overcapacity because of too many vessels and too few goods to transport as a result of the economic downturn.

Maersk Line, the global market leader with nearly 600 container vessels, has said it planned to increase spot rates on routes from Asia to Northern Europe by $750 per TEU with effect from December 15, a 75 percent increase if successful.

Competing liners such as Israel Corporation-controlled Zim Lines, Chinese company Orient Overseas Container Line <0316.HK>, South Korea's Hanjin Shipping <117930.KS> and German-based Hapag-Lloyd have also announced rate rises with effect from mid-December.

Bimco expects fleets to grow by a lower pace in 2014 than in 2013.

(Editing by Anthony Barker)

Comments