June 14, 2013 / 2:06 PM / in 4 years

REFILE-Maersk unveils world's biggest ship in weak freight market

4 Min Read

(Adds dropped word "in" in first paragraph)

* Naming ceremony held at shipyard in South Korea

* First of 20 super-size ships being delivered

* CEO hopes cost savings will help return it to profit

* Container freight rates hit by overcapacity, competition

By Ole Mikkelsen

OKPO, South Korea, June 14 (Reuters) - Denmark's Maersk Line unveiled the world's biggest container ship on Friday, hoping a new fleet of super-size vessels will deliver savings and return it to profit in an industry battered by overcapacity, weak economies and cut-throat competition.

At a ceremony in the South Korean shipyard where the vessel was built, Maersk Line, a unit of oil and shipping group A.P. Moller-Maersk, named the 55,000 tonne ship "Maersk Mc-Kinney Moller", after the son of the group's founder.

With a length equivalent to four football pitches, the $185 million ship is the first of 20 to be delivered to Maersk Line over the coming years to replace older, smaller vessels.

The delivery could hardly come at a worse time in the industry. Freight rates for transporting standard 20 foot containers from ports in Asia to Europe have plunged 60 percent since mid-March as a result of a price war between the world's biggest container shipping companies, led by Maersk Line.

"It is probably the fastest rate drop we have seen ever," Maersk Line Chief Executive Soren Skou told Reuters at the ceremony at Daewoo Shipbuilding & Marine Engineering's shipyard in Okpo, South Korea.

"Hopefully the ships will help us to get closer to profitability on Asia to Europe," Skou said.

The tough environment has put cost cuts and economies of scale in focus. The new mega-size vessels, which were ordered by Maersk well before the latest plunge in freight rates, are 400 metres long and 59 metres wide, giving them the capacity to transport 18,270 20 foot containers.

They are expected to operate on the loss-making but crucial Asia to Europe route - the world's biggest trade lane and also the most important for Maersk Line.

"If the ships are filled, they will carry cargo more cheaply than any other vessels on the seas," said Marc Levinson, economist and author of a book on container shipping.

"If they're half-filled, they will lose enormous amounts of money," he added.

According to Skou, there's no need to worry.

"Volumes are pretty strong at the moment. We have full ships," he said.

Cost Savings, Capacity Concerns

The new series of mega-ships are called "Triple E" vessels, based on their design focus on economies of scale, energy efficiency and environmental improvements.

Maersk Line expects it will consume approximately 35 percent less fuel per 20 foot container with the new ships, compared with the 13,100 20 foot container vessels being delivered to rivals in the next few years.

The company, which moves 20 percent of container cargo from Asia to Europe and 18 percent the other way, dismissed fears the new ships might add to pressure on container freight rates.

Capacity would not be increased. Rather Maersk Line would move smaller ships on the Asia-Europe route elsewhere, where it would either scrap smaller and older vessels or return them to owners in the case of chartered ships, Skou said.

"We are taking out 6,500 and 8,000 20 foot container ships and will use these (Triple E ships) instead. Our costs per container will go down," he said, forecasting only vessels with a capacity of 10,000 20 foot containers or more would be competitive on Asia-Europe routes within two years.

Levinson, however, was not convinced.

"The container shipping industry already has much more capacity than the world needs. The Triple Es will add to that overcapacity, forcing rates down," he said.

Maersk Line will take delivery of the first vessel on June 28 and the ship is expected to be put into service on July 15.

The company, whose competitors include Swiss-based, privately-owned MSC, French-based CMA CGM and China's COSCO Container Lines, will receive four more this year, while the remaining 15 will be delivered in 2014 and 2015. (Editing by Mark Potter)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below