Asia/Pacific News
OOIL: Box Ship "Arms Race" is Terrible for Shipping Industry
Orient Overseas (International) Limited (OOIL) CEO Tung Chee Chen Wednesday said box shippers "cannot get out of this arms race" in reference to the trend towards ordering ultra large container ships, Lloyds List reports.
"It's a nature of our business," Tung told an audience at the Singapore Maritime Lecture.
He said Maersk had shown the shipping industry how efficiently larger ships could drive down unit costs when it launched its Triple-E class ships in 2010 as a response to resurgent box shipping demand.
"In good times, we all want to increase our profitability and efficiency, and try to build up size, believing the extra capacity can be absorbed," added Tung.
Although a proliferation of larger ships is adding capacity in the shipping industry more quickly than consumer spending is growing, he said players in the container market will continue to order ships with capacities of 18,000 twenty-foot equivalent units (TEU) to 20,000 TEU.
"Everybody [who] wants [to] remain competitive in the market today must have the same size of vessels in operation."
"Importantly, investing in mega-vessels will often be the best choice for the individual carrier, although it is a terrible thing for the industry as a whole."
Tung said finding finance to buy larger ships is not difficult even at a time when banks are reining in lending.
"Money is freely available; even in the worst times, when the banks are not lending, there are private equity and traditional shipowning business, who find this is a big opportunity to invest in ships because shipyards are hungry and offering lower prices."
This month, OOIL was reported to have ordered six newbuild 20,000 TEU box ships for delivery in 2017 in a deal worth $951.6 million.
