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Feb 21st 2011, 23:38 by The Economist online
BIGGER ships have sailed the seven seas. But the scrappers have ensured that
the fleet of massive container vessels ordered by Denmark s Maersk Line will be
the world s biggest afloat by the time the first of them is launched in 2013.
Maersk announced on February 21st that Daewoo Shipbuilding of South Korea will
construct ten of the ships in an order worth $1.8 billion; the Danish company
has an option to order 20 more. And if the new ships claim no overall record
for size they will significantly alter the economics of container shipping.
The three previous ships whose size exceeded that of these giants were all oil
tankers. Maersk s new "Triple-E" fleet will be the biggest container ships yet
seen (artist's impression above). They will carry 18,000 boxes, 2,500 more than
the biggest container ship currently in service, which is also operated by
Maersk. The new vessels will use 50% less fuel per container than the present
average. That will be good news for the environment and for Maersk's
profitability, as crude oil sails past $100 a barrel.
The new ships will ply the routes between Asia and Europe, so the order is a
bet by Maersk that China will prosper long into the future and so will its
exports. Container shipping has bounced back remarkably quickly from the
post-credit-crisis lows of 2009. The recovery in shipping in the first half of
2010 took many in the industry by surprise as China s resilience was buttressed
by growth in parts of Europe particularly in poorer countries such as Russia
and Turkey and in America.
Profits ahoy
Maersk s annual results are due to be delivered on February 23rd and should
make pleasant reading for investors. That the industry is steaming ahead was
confirmed last week by Asia s largest container line, Neptune Orient. It said
it had made $460m of profits in 2010 compared with a loss of more than $740m
the year before. This year is likely to be plain sailing too. Shipping rates
are rising and Maersk reckons global trade could grow by 8%. Clarksons, the
world s biggest shipbroker, is predicting something closer to 10%.
If the future for container-shipping lines looks promising, the same cannot be
said for the bulk carriers, despite China's continuing hunger for raw
materials. The Baltic Dry Index, a measure of shipping rates for bulk goods
such as coal, iron ore and grain, has foundered as container-shipping rates
have picked up. The reason, explains Michael Lewis of Deutsche Bank, is the
rapid growth in bulk-shipping capacity: the worldwide bulk fleet is expected to
grow by 16% this year, double the rate at which freight volumes will grow.
Bulk shippers ordered lots of new vessels when China s demand for raw material
sent the index soaring to nearly 12,000 in 2008. But it closed on Monday at
just 1,301. The current bulk fleet weighs in at 623m tonnes, with 277m tonnes
(ie, 44% of existing capacity) on the order books. Container-shipping order
books, in contrast, are back to normal, at around 25% of the existing fleet.
Container shipping has fared better because it is far less fragmented than bulk
shipping. There are just 20 or so global container carriers: Maersk's container
fleet is around 500-strong. The bulk-shipping business, however, has few
dominant firms, with most lines owning no more than a handful of vessels. That
container shipping is dominated by just a few big lines made it easier for the
industry to take out excess capacity in the 2009 downturn and will reduce the
chances of reckless expansion now that good times are back.