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Cost-per-slot mentality increasingly questioned at TOC Euro meet

THE cost-per-slot mentality of mega ship supremacy has become increasingly doubtful for those attending the TOC Container Supply Chain event in Hamburg, reports London's Loadstar.

The advent of 18,000-TEUers has brought about a mass of slots available to shippers at rock bottom rates, whose value is reduced further by low bunker prices and ever-weakening charter and freight rates.

"There are now a lot of 12,000-TEU vessels coming onto the market at rates which disrupt the cost savings offered by ULCVs," said Ocean Shipping Consultants director Andrew Penfold.

As to sinking charter rates, NileDutch operations director Franck Kayser said: "If you take 8,500-TEU vessel now that was built 10 or 15 years ago, there are a lot of them that you could fix at US$6,500-$7,500 per day.

"If you compare that to a super fuel-efficient 14,000-TEU vessel, and on today's bunker rates, the slot cost is pretty much the same," he said.

Said Mr Penfold: "This is as bad as it's ever been. Freight and charter rates are nowhere near break-even points. How have we got here? Partly through the over-optimism of carriers who thought there would be larger volumes than there have been. The growth rate is much slower than we had hoped and come to expect.

"The financing of these ships is also an issue. At the moment, money is very cheap and lines are faced by the prisoner's dilemma -for a particular line there is often a very strong and rational reason behind ordering vessels of these sizes, but when everybody does it the whole market can be turned right over, and at the same time some lines are investing for market share and not for profitability in the short term," Mr Penfold said.

He added that while overcapacity had been caused by the appearance of mega ships, other sectors, such as the 1,500- to 2,500-TEU feeder sector was facing a shortage of tonnage.

There was also a question of running great risks in buying big, said Maritime Strategies International analyst James Frew.

"You have to make a massive bet to make those investments. If you look at OOCL's order for ULCVs, the value of the order was almost the same as the entire market cap of the company, so don't forget the risk these companies are taking," he said.