Maersk Line says current container market dynamics challenging big ship ecomomics

The pioneer of the ultra-large container vessel, Maersk Line, says the idea that a bigger ship always means a lower cost is being challenged by current market dynamics.

Speaking at a media briefing on Wednesday, the global chief operating officer of Maersk Line, Soren Toft said, “Previously the bigger the ship the lower the cost, but what we are seeing right now is a phenomenon of very depressed time charter rates and very low bunker cost.

“So part of the equation of going from a 6,000 TEU vessel to a 10,000 TEU vessel in a trade is being challenged because of these dynamics.”

Maersk Line has consistently been at the forefront of new large ship sizes, and was the first company to move into the 18,000 – 20,000 teu vessels, with the 18,000 teu Triple-E vessels, which have been idled on occasions recently where the line has blanked some of its sailings.

Toft also noted that with a bigger ship you had to call more ports and make more contingencies.

“So there is much more to this a bigger ship is always better,” he stated.

A bunker price that is currently in the range of $200 – $220 was one of the few bits of good news Toft was able to give in terms of where the market was headed.

“The general trajectory we see for rates in the liner industry is for a slow erosion of rates,” he said.

The average container freight rate has seen a 1.9% decline annually since 2004.

“We see no reason why that trend over the long term will not continue,” he added.

Given the current low demand growth, Maersk expects its capacity at present to remain flat through 2016.



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