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Drewry: Have we reached peak ULCV delivery?

London, UK — The surge in the amount of ultra-large container vessels (ULCVs) arriving over the next few years has some worried about the extra capacity, but according to Drewry Shipping Consultants, carriers will be able to mitigate the capacity inflation by delaying deliveries and slowing services.

According to its latest Container Insight Weekly, last year, a total of 26 containerships of at least 18,000 TEU were delivered to carriers, the most since ULCVs first hit the water in 2013 All of the aggregated capacity of 525,500 TEU that arrived in 2018 was deployed in the Asia-North Europe trade.

The current orderbook schedule calls for a slightly less punishing deluge this year (460,000 TEU), followed by what would be another record haul in 2020 (620,000 TEU). While it is true that accommodating such large tranches of new capacity will be challenging, especially as the Asia-North Europe trade is in a slow-growth phase, there are reasons to believe that the task will not be as onerous as it initially appears, says Drewry.

“Firstly, it is common that the annual delivery schedules are adjusted downwards in time. It is highly unlikely that all of the ULCVs scheduled for the next two years will arrive as originally planned with many being pushed into following years.

“Secondly, just because a new ship enters a trade it does not automatically follow that the net capacity of the route increases. Slow steaming gives lines the option to phase in a new vessel to a weekly service and maintain the existing capacity, assuming the new ship is of a similar size to those it is joining. The trade-off is longer transit times between ports.”

According to the report, this is precisely what 2M carriers Maersk Line and MSC are planning to do from March. As part of a network revamp, the two carriers will introduce six extra ships on to their 10 existing Asia-Europe (including Mediterranean) services. By adding more ships on to the same number of services (there will, however, be a net reduction of eight port calls in the network) the carriers said they will be able to improve schedule reliability by adding “extra operational buffer.”

“The decision to slow ships down is probably also motivated by a desire to reduce ship fuel consumption in light of the anticipated higher bunker costs associated with IMO 2020, but nonetheless it will enable more ships to be entered into the trade without adversely hiking up capacity.

“As difficult as the task of allocating ships is, it is something that carriers are well accustomed to by now. Their long-standing experience gives us some measure of confidence that they will find the appropriate solution to absorb the new tonnage due over the next few years. As Figure 4 shows the introduction of ULCVs in 2013 helped to kick-start the trend for fewer services using bigger ships. That pattern is likely to continue, but will eventually level off as the stock of ULCVs in the pipeline dwindles. To counteract that we expect to see a higher proportion of Asia-North Europe services taking the long road and deploying a minimum of 12 ships.”




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