Outlook for the marine container shipping industry part ii : shipping microeconomics - the new generation of vessels and the implications

• Main Author: Huang, Yuling.
• Other Authors: School of Civil and Environmental Engineering
• Format: Final Year Project
• Language: English
• Published: 2012
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/49059
• Institution: Nanyang Technological University

Maersk’s announcement of orders for 18,000TEU ships was a clear signal to declare war by increasing their market share and driving out smaller players. The perceived cost savings associated with the ever increasing size of containerships could be an effective ‘game changer’. The size increment of containerships is a trend that major container shipping companies cannot ignore to compete effectively. With today’s order book dominated by vessels above 10,000TEU, there is an increasing concern regarding the implications of these super post-Panamax vessels on the container shipping industry. Many studies have been done on the challenges posed by the ever larger containerships to ports and terminals. This paper will explore how the new generation of containerships can alter the landscape of the shipping industry through the study of inter-company interactions; in terms of competition and cooperation. Qualitative field research was done to support and fulfil the objectives of this report. Insights were gleaned from liner companies in the mix of market leader, challenger and follower. Non-biased opinions were also collected from consulting firms and research teams. Following the new generation of containerships, big vessels will displace small vessels across all ship sizes in all trade routes and add complexities to secondary trade lanes. It will also present a fierce price war that will cause the whole liner industry to be worse off in terms of profitability. As part of a vicious cycle, the viability of these vessels is largely unclear and gloomy. Consolidation of services is required to achieve slot cost savings, high sailing frequency, global coverage and high fleet utilisation. Companies that have not upgraded to vessels of competitive size and left outside the quasi-consolidations become uncompetitive. Hence, the survival strategy for smaller companies is to focus on their niche markets in the midst of the intense competition. With the intense competition acting as the backdrop, the stage is only set for big players like Maersk, alliances like G6, dedicated niche market player like Wan Hai or corporate failure.