[130611.EN.SEA] Some Carriers Say Bigger Is Better, But Is It True in Today’s Market?

IT was not so long ago that we were marvelling over the fact that carriers were beginning to place orders for vessels with a nominal capacity of 14,000 TEU in a bid to achieve greater economies of scale.  The move led many to question just how big vessels will get in the future and at what size beyond 14,000 TEU would be too much.  One thing we can say with certainty is that 18,000 TEU is not considered too big, at least for the industry’s largest player, Maersk Line, which to date has ordered 10 of these vessels and will reportedly exercise its option to purchase another 10 by June of this year.  It seems as if bigger is more beautiful in the container shipping industry. At least that appears to be the general perception among carriers. Even lines that at one time said they would never invest in capacity beyond 10,000 TEU are now beginning to come around.  Today in The Container Shipping Manager we will take a deeper look into the question of whether bigger is more beautiful in the current market where bunker prices are high and freight rates are depressed and there are growing fears of overcapacity in the market… In order to get an understanding of whether size matters in the current market we will look at the charter market and compare the costs of operating the various vessel sizes most commonly found in the sector.  The above graph shows the index time charter rate for all time charter vessel sizes combined.  As we can see, the index was in free fall towards the end of 2008 all the way through to the end of 2009 where it reached its trough.  As we have seen in previous studies of the time charter market, we know that time charter rates continued to plummet even as freight rates were beginning to pick up again.  Since hitting rock bottom, time charter rates have been steadily increasing since then, at least up until the third quarter of last year before a brief period of correction, after which time it rose again. This latest hike has come as freight  rates have been trending down.

Source : CMS, 25.04.11.