Maersk takes advantage of rate decline with new orders

Maersk Line takes industry by surprise with 9-ship order for 14,000-teu vessels despite freight rate collapse
Maersk Line takes industry by surprise with 9-ship order for 14,000-teu vessels despite freight rate collapse
Maersk Line takes industry by surprise with 9-ship order for 14,000-teu vessels despite freight rate collapse

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Maersk Line has taken the shipping industry by surprise with the announcement of an order for yet more container ships to the tune of US $1.1-billion, despite the near-collapse of freight rates on key trade routes, especially Asia-Europe.

The order was made this week as the world’s largest shipping line prepares to take delivery of the last of its 20 Triple E mega container ships, each capable of carrying 18,000-teu of containers. When first ordered they were the largest container ships of their kind in the world, and are surpassed today only by MSC Oscar and CSCL Globe.

Maersk Line has ordered nine 14,000-teu vessels from Hyundai Heavy Industries, with options for eight additional vessels in the contract. They are to be delivered from 2017 and will sail under the Singaporean flag.

This latest order comes less than a month after Maersk Line announced a massive US $1.8-billion order for eleven ULCSs with a capacity of 19,630-teu, a decision that in itself stunned the industry amid the greatest collapse in freight rates since the 2008 recession.

The new mega container vessels will be built at another South Korean yard, Daewoo, where the first Triple-E series ships were built.

According to Maersk Line COO Søren Toft, the carrier is taking a different approach to the design of container ships with the new vessels, in response to the current market dynamics.

"The vessels will be designed to operate in and perform efficiently across many trades and not just designed for one specific trade,” he said. “They will help us stay competitive and make our fleet more flexible and efficient.”

The order then is a first for Maersk Line in that the ships will be designed with a more operational profile, moving away from the industry’s traditional way of thinking, where the ship's hull is designed with a specific speed and draft in mind.

The new ships will be deployed on both east and westbound trades, as well as north-south, if and when capacity is needed, and without impacting the ships' fuel consumption, said Toft.

The nine new 14,000 teu vessels are that latest in a US $15-billion investment program announced last year, aimed at expanding and redeveloping the world’s largest container vessel fleet over the next five years.

The investment program began this year with an order for seven 3,600-teu feeder vessels, followed by the order for 11 ULCSs, and this latest order for nine 14,000-teu ships. Several billion dollars will also be spent on retrofitting older vessels and purchasing new containers, the line has indicated.

The carrier's current orderbook thus contains seven feeder ships, set for delivery in 2017. 11 ultra-large vessels of 19,630 teu, set for 2017 and 2018, 11 chartered vessels of 9,500 to 10,000 teu, set to be delivered during 2015 and 2016, and the the latest order for nine 14,000 teu vessels, set for delivery in 2017.

Industry analysts have speculated that Maersk’s timing of the latest order is likely in response to the collapse in freight rates and not in spite of it, as shipyards have significantly reduced their prices in order to mitigate falling demand for new tonnage from ocean carriers experiencing chronic oversupply.

In 2011, when Maersk ordered the first of the Triple E vessels, it paid US $190-million for each vessel, whereas in June when it ordered its new 19,000-teu series of vessels, it paid US $163-million per container ship, even though the ships are slightly larger.

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