The headlong dash to grow market share was disastrous for many carriers during the financial crisis. But has the industry learned anything?
Maersk Line this week confirmed an order for the second batch of its10 “triple-E” class container ships, the eyebrow-raising 18,000 TEU giants being built by Korea’s Daewoo Shipbuilding and Marine Engineering Co.
The Danish carrier now has 20 of these vessels in the pipeline, and it doesn’t require a visit to the calculator to reveal that 180,000 TEUs will be added to the fleet in 2013 and 2014, and the 180,000 TEUs will come online in 2014 and 2015.
Maersk expects demand on the Asia-Europe trade to increase by five to eight percent a year from now to 2015. But in a statement announcing the decision to exercise its option to build another 10 of the megaships, Maersk said the ships would help meet the demand as well as help the carrier maintain its market share.
It was the “maintain market share” comment that got our attention. Maersk makes no secret of its intention to continue to dominate the market, and said as much when the announcement was made that it intended to order 30 ships of 18,000 TEU capacities. Interestingly, Maersk has decided against exercising its third option for 10 of the vessels and will stick with 20.
According to market intelligence outfit Alphaliner, Maersk leads the Asia-Europe trade with a 5.3 percent share of the market. This is not awfully far from CMA CGM’s 4.8 percent share, or MSC’s 4.7 percent. The close proximity of the competition, which is also unleashing its orderbooks, means Maersk had to do something to keep ahead of the market.
Yet even with its five to eight percent growth predictions, there is the unsettling feeling that market share remains the driving force behind the orderbooks. The world’s major economies remain in serious trouble, so it is not like we are sprinting down the road to recovery. The US stimulus measures end this week and who knows what impact that will have on its economy, and the EU is facing a tragedy of Greek proportions.
The price war on Asia-Europe has pushed freight rates down to incredibly low levels, and there are doubts we will even see a peak season this year. Profitability among the carriers will drop significantly.
Shipping lines have to plan three or four years ahead, and that is no easy task, but one would assume carrier executives would be more cautious with orders after the 2009/10 meltdown. Newbuildings of 10,000 TEU and above have been the main contributors of additional capacity on the Asia-Europe route, says Alphaliner, with 32 units of this size delivered so far this year. Another 15 vessels over 10,000 TEU will be in service before the end of the year.
It seems there are only two speeds at which container lines know how to operate – full steam ahead or stop engines.