Executive Briefings

Despite Excess Capacity, Orders Continue for 'Ultra Large Container Vessels'

Attempts by carriers to tackle the capacity overhang are being undone as new orders for Ultra Large Container Vessels (ULCVs) continue to make the headlines, according to Drewry's monthly report, Sea & Air Shipper Insight.

The news that China Shipping Container Lines will join Maersk in the super-size containership club following board approval for five 18,000-TEU ships is further proof of the demand for these fuel-efficient ULCVs among the major lines - it is just a question of when and how many will make the leap.

However, while these latest new orders won't actually hit the water for years, their psychological impact is to keep the focus on capacity and the big question of how on earth carriers will be able to absorb it all.

"Ocean carriers did a decent job over the winter months balancing supply to ensure that freight rates remained relatively firm, but the delivery of big new ships - leading to new services and upgrades of existing loops - will mean lines will find that task increasingly difficult for the remainder of 2013," said Simon Heaney, research manager at Drewry.

"These new orders and speculation of more to come could be having a negative impact on rates right now. Carriers cannot shift the paradigm from the supply pressure they are facing so that they can get rates moving upwards again," added Heaney.

In the here and now, ocean freight rates are tumbling with Drewry's East-West Index contracting by 5.6 percent month-on-month in March.

Similarly, airfreight rates fell in March following February's short-lived recovery as the traditional spring season sales rush in Northern hemisphere markets failed to materialise. Drewry's East-West Air Freight Price Index slid 5.3 points in March to 96.9 points, weighed down by sharp falls in pricing from Shanghai to both North America and Europe.

Source: Drewry

The news that China Shipping Container Lines will join Maersk in the super-size containership club following board approval for five 18,000-TEU ships is further proof of the demand for these fuel-efficient ULCVs among the major lines - it is just a question of when and how many will make the leap.

However, while these latest new orders won't actually hit the water for years, their psychological impact is to keep the focus on capacity and the big question of how on earth carriers will be able to absorb it all.

"Ocean carriers did a decent job over the winter months balancing supply to ensure that freight rates remained relatively firm, but the delivery of big new ships - leading to new services and upgrades of existing loops - will mean lines will find that task increasingly difficult for the remainder of 2013," said Simon Heaney, research manager at Drewry.

"These new orders and speculation of more to come could be having a negative impact on rates right now. Carriers cannot shift the paradigm from the supply pressure they are facing so that they can get rates moving upwards again," added Heaney.

In the here and now, ocean freight rates are tumbling with Drewry's East-West Index contracting by 5.6 percent month-on-month in March.

Similarly, airfreight rates fell in March following February's short-lived recovery as the traditional spring season sales rush in Northern hemisphere markets failed to materialise. Drewry's East-West Air Freight Price Index slid 5.3 points in March to 96.9 points, weighed down by sharp falls in pricing from Shanghai to both North America and Europe.

Source: Drewry