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Low fuel prices have halved slot cost benefit for big box ships: Drewry

DATA from London's Drewry Shipping Consultants shows that, while bigger box ships enjoy a cost advantage, falling fuel prices have halved the slot cost benefit for mega-ships, notes Vancouver's Ship & Bunker.

"Carriers are fearful of being left behind in the race for ULCVs (ultra large container vessels), but while they will retain a diminishing competitive advantage, the value of having a smaller, but more flexible fleet in a slowing market should not be overlooked," said Drewry.

Drewry says an 18,000 TEU vessel on a round-trip Asia-North Europe route yielded a US$38 per slot cost savings compared to a 14,000-TEU vessel, down from $76 per slot at its June 2014 peak.

Due to their size ULCV's can only operate on the Asia-Europe trades, and while they have been joined by the 10,000 TEU and above newbuilds, Drewry says "it's where carriers are putting the 8,000-10,000 TEU that reveals how they are trying to spread the burden of the new capacity."

Those smaller newbuilds delivered in 2015 have been deployed in nine different trade lanes, and Drewry points to the Asia to east coast South America route as an example of how that can then push down spot rates.

"It is a delicate balancing act, and one that carriers cannot win all of the time," said Drewry, before suggesting that the situation will only get worse as there are many more mega-ships on the way.

"The alarming drop in Asia to Europe traffic and a parallel crash in rates caused two of the big carriers groups to take the unprecedented decision to suspend services in the supposed peak season, while the two other alliances have been tinkering with missed sailings to support higher rate requests," said Drewry.

"The rush to purchase ULCVs is borne of the desire to reduce slot costs and not be left behind, but the impact on the wider industry in terms of heavily discounted freight rates has thus far been entirely predictable," said Drewry.