Maersk CEO confirms order for 11 new megaships

DENMARKS’S Maersk Line, the world’s biggest container-shipping company by capacity, is considering ordering 11 container megaships from Asian ship builders in the second quarter of this year, the company’s chief executive officer, Soren Skou has said.

Asian yard officials estimate the value of the order for the so-called Triple E ships will be around $1.8 billion. Each of the ships can carry in excess of 18,000 containers, more than any other ship on the market.

“We need to grow with the market and increase our capacity by 425,000 containers from 2017 onward for three years,” Skou told The Wall Street Journal, adding that  “It’s very likely the first order will be 11 Triple E size ships. That’s what we need for a weekly round trip from Asia to Northern Europe.”

If the order goes through, it will be the first time since 2011 that Maersk Line, a unit of Danish shipping and oil giant A.P. Moeller-Maersk A/S, buys new ships. Back then, it ordered 20 Triple E ships at a cost of around $185 million per vessel. The price has now fallen to around $165 million.

At the time, competitors doubted whether Maersk Line would be able to fill such behemoths. But those competitors are now rushing to place their own Triple-E orders. Those vessels, the world’s biggest and most fuel efficient, can save around 25 per cent  of the cost of moving a container from Asia to Europe, compared with smaller vessels in Maersk’s fleet, provided they sail fully loaded.

 Skou said he expects tough competition in the industry to continue, suppressing freight rates this year. Demand for seaborne-moved cargo is expected to grow three per cent five per cent this year, he said.

“Over the past 10, 15 years prices have come down on average one to two percentage points a year. We need to build a business that can sustain that kind of deflationary pricing market,” Skou said. “I can’t have a strategy that is based on a hope that prices will magically start increasing.”

Addressing the recent port turmoil on the United States of America West coast, Mr. Skou said Maersk Line’s customers are increasingly looking to divert cargo to other gateways, including ports in Canada, Mexico and the U.S. East Coast.

Nine months of labor disputes and work slowdowns at 29 U.S. West Coast ports came to an end last week, with negotiators reaching a tentative agreement on a new five-year labor contract. The dispute caused major delays in moving cargo in and out of the U.S. since West Coast ports handle nearly half of all U.S. maritime trade, and more than 70% of the country’s Asian imports, according to the American Association of Port Authorities.

“Our customers are looking on how they can get alternative gateways,” he said. “More cargo is already moving through Canada Pacific Northwest ports, U.S. East Coast ports and Lazaro Cardenas in Mexico. Our customers will not put all their eggs in only one basket,”  Skou said.