Sunday 22 October 2017

Ships' capacity to carry goods to rise 20pc by 2016

Sarah McCabe

Sarah McCabe

NEW technology and investment means that ships, like airplanes, are bigger than ever before.

These larger and more efficient vessels are increasingly dominating fleets, changing the nature of the market.

In 2000 only 13pc of all goods were carried by vessels that held more than 5,000 containers – now more than half are transported using vessels of this size.

Three-quarters of all ships currently on order hold up to 7,500 containers or more. Shipping and energy giant Maersk is about to take delivery of its first new Triple-E vessel, a colossal state-of-the-art ship that can hold up to 18,000 20-foot containers.

The economies of scale involved means it can transport a container between Asia and Europe for 20pc to 30pc lower than other ships.

The end result of this trend is that the capacity of ships to transport goods will rise by just over one-fifth by 2016.

Ports are adjusting in response and Ireland's biggest indigenous shipping company, Irish Continental Group, has recently completed a development of its container-handling facility in Dublin meaning it can now handle over 450,000 containers annually.

NEGATIVES

There are negatives associated with larger ships and higher capacity too.

Bloomberg transport specialist Lee Klaskow points out that if demand from Europe does not pick up, the global imbalance of supply and demand could widen further.

He says this could delay the recovery of the industry – still suffering from the global slump in demand that began in 2008– until well into 2016.

But the gradual disappearance of older, less efficient vessels is helping to control, at least to some degree, the balance of supply and demand.

About 90 container ships have already been scrapped in the year so far, 32pc more than in the same period last year.

Scrappage is increasing because, even with slow global GDP growth, container vessels currently present a good deal for buyers.

Ship prices have fallen about 40pc in the past five years, while the vessels have become 30pc more fuel efficient in the same period. This is crucial, as the shipping industry is so exposed to fluctuations in fuel prices.

It has been estimated that new vessels in the 13,000-container range could save operators up to €13m over the next five years compared with ships purchased just five years ago.

It remains to be seen whether customers will demand that these cost savings be passed on, which could have a negative effect on the entire industry.

Problematically, many ports cannot handle larger ships like Maersk's new vessel.

Only 'Panamax'-sized ships can pass through the Panama Canal, although a new larger lane scheduled for 2015 will enable larger vessels to pass through it.

Irish Independent

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