Maersk Supership to Set Sail Below Capacity
Some Ports Don’t Have Equipment to Handle the World’s Largest Container Vessel When Fully Loaded
Danish shipping company Moeller-Maersk is launching the largest-ever cargo vessel in South Korea this week. The quarter-mile ship is the height of a 20-story building and contains enough steel to build eight Eiffel Towers. Photo: Bloomberg
Maersk Line’s first Triple-E class cargo ship—the world’s largest vessel of its kind—is to set sail from a South Korean shipyard this week.
But even as hopes are high that its launch will herald a new era in container shipping, the vessel will start its life operating below capacity.
Maersk hopes that the giant ship will give the line an advantage over competitors plying the sea lanes between Europe and Asia, amid a price war that threatens some operators’ ability to stay afloat.
At 1,300 feet long, 20 stories high and carrying 11% more cargo than the world’s biggest current vessel, the new ship will consume 35% less fuel per container than Maersk’s current lineup, according to the company, a unit of Danish conglomerate A.P. Møller-Maersk A/S. But Maersk will have to sail the vessel, which is expected to leave its shipyard on Friday, well below its capacity of 18,000 containers as the company waits for ports to upgrade.
Its first Triple-E is one of 20 that Maersk has on order but is expected to carry an average of only 14,000 containers at first, since many port gantries aren’t tall enough to handle the additional boxes. Of the total of 16 ports certified to handle Triple-E size vessels, several lack the necessary gantries.
The new Maersk Mc-Kinney Møller, named after the late son of the company’s founder, will ply the Asia-Europe route but won’t call at any U.S. ports. The ship is scheduled to load its first containers July 15 in Busan, South Korea, bound for Europe via Malaysia.
“We will operate it as a smaller ship for the first few months while ports upgrade their cranes,” said Lars Jensen, head of Maersk Line’s Asia-Europe operation. “You can’t do much about this while the infrastructure is adapting to larger ships.”
At $185 million a ship, the Triple-E is a big gamble for Maersk Line, partly because of a glut in new capacity on Europe-Asia routes. Maersk is one of three companies with Triple-E vessels on order. Rival CMA CGM this year began sailing new vessels that can carry 16,000 containers, until now the largest container ships at sea.
Freight rates jumped to around $1,400 a container this week, but they had been hovering around $600 for much of the year as a sluggish global economy has slowed
growth in international trade.
“The Triple-E was designed to sail at full capacity,” says Jonathan Roach, a senior container analyst at London-based shipping brokerage Braemar Seascope Ltd. “If it
doesn’t, there will be a significant impact on profitability.”
Mr. Roach says the recent rise in rates—the result of increases by Maersk and other big operators—is potentially good news for ship operators. The test will be whether the higher rates stick.
“If we see a drop to below $1,000 in the next few weeks, we are back in a vicious price-war cycle,” he says.
Maersk’s Mr. Jensen acknowledges that capacity on Asia-Europe routes is around 10% above demand. The Danish company, the world’s biggest container operator by capacity, is betting that adding larger, more-efficient Triple-E vessels to its fleet eventually will push operators with smaller ships out of the world’s busiest trade route.
“In three to four years, companies will operate Asia-Europe with ships that can carry 14,000 containers and above. Those who don’t have these ships won’t be able to compete,” he says.
Many major shipping operators are immune to short-term losses in a secretive industry that is dominated by family-owned conglomerates with deep pockets and Asian state-backed enterprises and investment funds with long investment horizons.
Shipping analyst Alphaliner recently said that all but seven of the biggest 30 marine- freight operators were unprofitable last year. People in the industry say cumulative losses over the past four years were around $7 billion.
Container ships transport 90% of world trade in manufactured goods, according to industry observers.
Despite the losses and a return on investment of only around 3% over the past few years for the industry’s biggest players, it seems that the way forward is bigger vessels.
United Arab Shipping Co. is set to order five Triple-Es as early as this month to run a joint Asia-Europe service with China Shipping Container Lines Co. The Chinese operator, which is unprofitable, made a similar order in May.
Write to Costas Paris at costas.paris@dowjones.com
Corrections & Amplifications
The new Maersk Mc-Kinney Møller will be bound for Europe via Malaysia. An earlier version of this article incorrectly said it would be bound for Europe via Singapore.