Mega-Boxships to Create More Pressure on East-West Rates

Alphaliner says UVLC deployment will continue into 2018, with widespread consequences for the container freight market.

Data from Alphaliner suggests that deployments of ultra-large container ships (ULCS) will continue to grow with "renewed strength" into 2018, exacerbating industry overcapacity and creating widespread consequences in the container freight market, Shipping Watch reports.

A total of 37 newbuilds with capacities of 13,8800-20,000 TEU have reported to have been deployed on the Asia to Northern Europe routes so far in 2015, while an additional 13 are set to enter the market before the end of the year.

Weekly capacity growth on routes between Asia and Northern Europe this year is said to have increased by 2.3 percent year on year - even with the voiding of 75 sailings. 

At the same time, demand during H1 2015 on the headhaul routes, from the Far East to North Europe, was down 3.5 percent.

In response, rates this have have tumbled to multi-year lows, and in June carriers were said to losing close to $100 per box.

"Currently, these ships of over 15,000 TEU cannot be deployed on other tradelanes (than Asia-Europe) and the continued addition of ULCS capacity will threaten the delicate supply-demand balance on the trade," said Alphaliner.

For 2016, Alphaliner says 37 ULCS are expected for delivery, 13 of which will be "the absolute largest" vessels within the 19,000 to 20,000 TEU range, including 11 to be deployed by Mediterranean Shipping Company (MSC).

In 2017 a total of 53 vessels scheduled for deployment, including newbuilds for CMA CGM, China COSCO, Maersk Line, and MSC, whileanother 32 newbuildings are expected to be delivered in 2018, says Alphaliner.

In May, Drewry Shipping Consultants Ltd. (Drewry) said weak Q1 2015 demand in the box markets means ULCVs have failed to deliver on their promise of improved economics for their owners.