Press digest

2017 November 7

Maersk: No plan to follow MSC with mega-ship orders

Maersk Line said it has “no immediate plans” to order new vessels to match the 11 mega-ships of 22,000 TEUrecently ordered by its 2M Alliance partner Mediterranean Shipping Co.

Chief operating officer of Maersk Line Soren Toft said in a third quarter earnings call that the carrier was “getting the ships that we need for now” and capacity was planned based on Maersk’s requirements. The 2M has the largest active fleet among the new alliances and the second-largest orderbook, according to IHS Markit.

“We have dialogue on this, and MSC’s requirements for additional capacity is something they can freely decide, but obviously we take our requirements and their requirements into account when we plan the future capacity,” he said. “That dialogue is ongoing and as you will see we are putting more competitive vessels in the 19,000- to 20,000-TEU segments.”

Maersk Line reported a $220 million third quarter net profit with the financial impact of July's cyber attack coming in at the higher end of expectations. It was estimated to have cost the group, but mainly Maersk Line, between $250-300 million.

By the end of the third quarter, Maersk Line had 20 vessels in its order book that totaled 261,000 TEU for delivery in 2017 and 2018, and seven of those ships will be second generation Triple-Es with a capacity of 20,600 TEU each. An additional six 15,200 TEU vessels and seven 3,600 TEU ice-class vessels have also been ordered, bringing Maersk Line’s total order book to 7.4 percent of the current fleet.

Maersk Line is expecting the strong market to extend into 2018, but if that changes, Toft said the carrier has measures to mitigate any negative impact created by any bumps in the road.

“We have a delivery plan agreed with the yards, but if we find that fundamentals are different to what we expect, we will certainly have some dialogue with the yards on that,” he said. “But we do have 800,000 TEU on liquid contracts of 12 months or shorter so we have other valves other than just postponing new deliveries.”

The new building delivery picture was also not always clear, joint Maersk Group and Maersk Line CEO Soren Skou pointed out. “We can expect about 5-6 percent of new capacity delivered in 2018, bunching together in the second and third quarter, but many things can happen and ships can be delayed without us being able to see that,” he said.

MSC’s order for 11 of the 22,000 TEU giants followed CMA CGM placing an order for nine such vessels. Interestingly, CMA CGM will equip its nine giant vessels with LNG engines, the fist shipping company to use LNG to power such large ships.Such orders may become more common as global carriers prepare their fleets for the implementation of a low-sulfur fuel reguation that takes effect in 2020.

New reports have emerged that 2M Alliance affiliate Hyundai Merchant Marine (HMM) is also considering its own mega-ship orders but the carrier has said no capacity-ordering plans have been finalized as yet. The CEO of HMM has said the low-sulfur rule could be as transformative for the ocean shipping industry as the advent of mega-ships.

These global carriers are responding to the solid market fundamentals that Maersk is basing its own positive outlook on, and the carrier expects global container demand to grow 4-5 percent.

Skou said overall supply and demand fundamentals looked healthy. “We have broad based, strong economic growth in the world, in the US and particularly in Europe, and we are seeing strong growth in China, India and even Russia and Brazil. So that is really the underlying reason why we are optimistic on demand and we see the supply picture as reasonable,” he said.

Looking at the container volume transported by Maersk Line in the third quarter, the impact of the cyber attack in July that shut down the group’s terminal operations for five days is immediately apparent. While carriers such as Orient Overseas Container Line reported soaring volume on the Asia-Europe and trans-Pacific trade compared to the third quarter of 2016, Maersk Line saw its liftings actually fall by 2 percent to 946,000 TEU. North-south volume declined by almost 4 percent to 1.28 million FEU.

Fortunately for the carrier it was able to increase freight rates, especially on the heavy volume east-west trades where average rates rose by 20 percent compared to the third quarter of last year to $2,186 per FEU. Average rates on the north-south trades were up 13.8 percent to 2,211 per FEU.