Cosco's Ambitious $1.5Bln Megaship Plan

By Aiswarya Lakshmi September 11, 2015

Chinese shipping behemoth Cosco Holdings has confirmed it will order 11 container megaships for $1.5 billion, despite an estimated 30 percent overcapacity in container shipping having sent freight rates to levels that at times don't even cover the fuel cost of moving containers across oceans, The Wall Street Journal reported.

It has placed an order for 11 19,000 TEU containerships at four domestic shipyards. This is the largest single order for container ships Chinese yards have ever received.

When fully-loaded, such ships cut that cost by about 25 percent compared to smaller vessels.

China COSCO stated in its filling to the Shanghai Stock Exchange on September 9 that it has ordered two container ships at Dalian COSCO Khi Ship Engineering (DACKS) for $270.6 million, four at Nantong COSCO Khi Ship Engineering (NACKS) for $541.2 million, three at CSSC Shipbuilding for $418.5 million, and two at CSIC Shipbuilding for $279 million.

WSJ quoted Lars Jensen, chief executive of SeaIntelligence Consulting, as saying that concerns about overcapacity were well-founded, but that such vessels were needed to keep up with Cosco's larger rivals: "Over the next couple of years, any ship carrying below 12,000 boxes won’t be able to compete in terms of cost."

Cosco is the lead member of the CKYHE alliance, which also includes Taiwan’s Evergreen Line and Yang Ming Marine Transport Corp., Japan’s Kawasaki Kisen Kaisha Ltd. and South Korea’s Hanjin Shipping Co. In January, Evergreen ordered 18,000 TEU ships.

COSCO is the latest shipping major to join the ULCC race that includes Maersk, OOCL and CMA CGM.