- POSTED: 27 Sep 2013 22:51
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The world's biggest container ship, owned by shipping company Maersk. made its maiden call in Singapore on Friday as part of its Asia-to-Europe route. However after years of overcapacity, there are concerns whether the Danish shipper can fill all that extra capacity on the McKinney-Moeller.
SINGAPORE: Longer than the Eiffel Tower, too wide for the Panama Canal, and too tall for any port in the United States -- that is the Maersk's Triple-E class, otherwise known as McKinney-Moeller, the biggest ship in the world.
It is on its maiden voyage and made its port-of-call in Singapore on Friday to deliver goods between Asia and Europe. It is one of 20 such mega-vessels the Danish shipping company has ordered at the equally impressive cost of US$3.7 billion.
Maersk said the ship has its economies of scale -- the new ship consumes 35 per cent less fuel, and has 16 per cent more capacity than Maersk's current-largest container vessel.
182 million iPads or 111 million pairs of shoes -- that is how much cargo the Triple-E class ship from Maersk can carry in a single journey from Shanghai to Rotterdam. However the question is, against a landscape of declining exports and cooling freight rates as well as an industry that has long been plagued by overcapacity, is there room for these kinds of super-sized vessels?
Freight rates on the Asia-to-Europe service -- which is the world's busiest container shipping route -- have plunged some 30 per cent this year, straggling below US$1,000 per container.
Maersk acknowledges that the initial orders for the Triple-E ships were placed at a time when the outlook for the global shipping industry was somewhat rosier. The company is now relying on a cargo-sharing scheme with two of its European rivals to cut costs and consolidate vessels.
Thomas Knudsen, CEO of Maersk Line (Asia Pacific), said: "It's very easy to do 20/20 hindsight and say it was the wrong timing. I think if you look at it, we have a very strong and very broad network. As these ships are coming, it's going to be two more years before the last one is delivered and I think by 2015, they're going to fit well into our network.
"We've also just announced an operational alliance called the P3, with the number two and three in the industry. If that goes through, we'll have the scale to take full advantage of these large ships."
Analysts also point out that despite its huge capacity, the Triple-E ships are running only at around 75 to 80 per cent capacity.
Suvro Sarkar, assistant vice-president of equity research at DBS Vickers Securities, said: "It makes sense for the liners to actually move up into the bigger ships, they can actually save 30-35 per cent in operating costs per TEU.
"But on the other hand, you have a very fragile demand-supply situation in the industry, so any additional capacity will of course even hamper the situation even further. For Maersk to actually fill up the ships, it's going to be a big challenge."
Patrik Wheater, editor of Shipping World and Shipbuilder, echoed similar setiments. He said: "The fact that it's not operating at full capacity tends to suggest that there isn't the market out there yet for vessels of this size. That said though, shipowners are ordering vessels of that size or more."
In light of China's economic restructuring away from being the world's factory, Maersk is now turning to other emerging markets -- including Vietnam, Cambodia and, in the longer-term, Myanmar.
But even with those potential hotspots, the outlook remains lacklustre at best. The container shipping industry saw growth rates of around 10 per cent before the financial crisis, with 4-5 per cent now the norm. Analysts see supply continuing to outweigh demand for another couple of years.
With the holiday season now approaching, traditionally a peak period for manufacturing and shipping volumes, Maersk said it was not expecting to see much of a pick-up and that the entire shipping industry needs to adjust to a new normal.