New ships seen forcing mergers
Imminent delivery of the many post-panamax container vessels now on order will cut returns and lead to consolidation of the industry, an economist says.
Lloyd's shipping economist Paul Gardiner said newbuildings due for delivery by the end of 2001 would boost the present fleet of 96 post-panamax vessels by 70 to a total of 166.
'Consolidation will be encouraged by the poorer returns likely to result from overcapacity and lower slot costs - which are an inevitable consequence of the post-panamax boom - and existing alliances may be undermined,' he said.
Consolidation could lead to mergers of alliances, which could at least compensate for some of the heavy costs of restructuring, he said.
Consolidation could intensify as shipyards delivered the new vessels over a short period.
'The number of post-panamax ships will grow rapidly, with the fleet likely to reach 200 units in the first half of 2002, while the [post-panamax] share of total containership capacity will inevitably grow even faster,' he said.
The post-panamax field of operation would expand, with many current limitations eliminated by improved infrastructure and increased liner co-operation and consolidation. This could not be reversed, because the post-panamax revolution was here to stay.
At some stage, the industry also would face the prospect of a 15,000 teu (20 ft equivalent unit) vessel. This would bring a new set of challenges which would revolutionise the industry.
The Grand Alliance has 25 post-panamax vessels in service and 20 on order.
Maersk/Sea-Land has 14 in service and 14 on order, New World Alliance has 35 in service and 10 on order, Cosco-K Line-Yangming has six in service and 12 on order, United Alliance has seven in service and five on order and Evergreen-Lloyd Triestino has nine in service and nine on order.
This would push the supply and demand equation further out of balance.
'A simple calculation based on the usual cascade effect suggests that the combined slot capacity of the main groupings on the east-west routes would rise by 20 per cent, assuming all else remained the same,' he said.
With few ships due to be scrapped, limitations on redeployment on north-south trades, and the continuing growth prospects for Asian exports to Europe and North America, many vessels were likely to remain in the east-west routes, Mr Gardiner said.
Capacity would surge at least 30 per cent over the next two years.
He doubted trades could achieve growth of 15 per cent both next year and 2001, and overcapacity was likely.
This would reduce slot costs, which could lead to lower freight rates, partly to fulfil the need for higher utilisation of the larger ships to justify their use.
As post-panamax use increases, container terminals around the world are rebuilding to handle mega carriers.