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With Hyundai Merchant Marine (HMM) about to launch an Asia-North Europe service deploying panamax-size vessels, maritime consultant Drewry has debunked the theory that unit slot costs on bigger ships will always work out cheaper.

HMM surprised the industry with its pledge to offer a weekly loop to North Europe outside its slot charter agreement with 2M partners Maersk Line and MSC.

However, the sustainability of the South Korean carrier’s bold move has been questioned, given that it will only deploy panamax ships of around 5,000 teu, in stark contrast with the ‘new normal’ 15,000 teu-plus ULCVs now operating on the tradelane.

Yet new analysis from Drewry calculated that, due to bargain-bucket charter rates, the unit slot costs of around $680 on a 6,000 teu ship are lower than a 10,000 teu vessel at approximately $720 per unit and not significantly higher than a 14,000 teu ship, at some $650.

At the biggest ULCV size of 22,000 teu the margin widens to around $130 per unit, although the difference is not as great as might have been expected.

Drewry’s calculation is based on the current charter market rate for a 6,000 teu size ship of about $13,000 per day, with fuel costs at $356 per tonne, and assumes that the ULCVs are owned by the carriers.

Thus the current “relatively cheap” charter rates make the smaller ship surprisingly competitive on the trade, said Drewry.

Slated to start on 8 April from Busan with the 4,728 teu Hyundai Forward, HMM’s AEX (Asia Europe Express) will call at Rotterdam, Hamburg and Southampton, claiming a transit time of 28 days from Shanghai to Rotterdam, compared with the 30-40 days advertised by competitors.

Drewry said HMM’s “marketing tool for the AEX is speed”.

“If they can combine speed with reliability they will have a valuable USP,” said Drewry.

Moreover, liner schedule reliability is currently at an all-time low and shippers constantly complain that transit times are being extended to suit carriers’ operational requirements.

In some cases, containers are being transhipped by alliances without prior notice at way ports for relay onto a following vessel, resulting in further delays to the arrival of the boxes and creating possible problems in the supply chain.

Shippers have told The Loadstar they now aim “not to have all their eggs in the same basket”, splitting bookings among approved carriers, but in a consolidating industry this is becoming more difficult.

And with only three east-west alliances, the choice for shippers in terms of splitting their bookings over ships has reduced.

In the case of the 15,262 teu Maersk Honam, which caught fire on 6 March in the Arabian Sea while on a 2M Asia-Mediterranean loop, it is not only surviving Maersk and MSC containers that will be substantially delayed by the salvage operation and declaration of General Average, but also the boxes of slot charterers Hamburg Sud and HMM.

CMA CGM’s weekly SEANE loop also deploys panamax ships between Asia and Europe, and Drewry added: “As long as charter rates remain attractive and bunker costs do not escalate too sharply there is space for a handful of such services that can offer something unique to the market.”

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  • Ingvar Bergman

    March 26, 2018 at 2:49 pm

    Finally someone who make a customer friendly move and dare to act outside the scope of onkel John.*
    With that many weekly departures FE/EU it has been a shame not to let some go faster which is possible with the powerful Panamaxis built 10-15 years ago. It will increase the bunker bill but should yield a premium rate. Good luck HMM.

    *Read Maersk whom everyone use to follow.

  • Gary Ferrulli

    March 26, 2018 at 3:10 pm

    Interesting as read the article, then the reality of the trade and they will not be
    competitive. This addresses the cost per slot for “purchase”, build or charter.
    Shows clearly that the bigger ships are more cost effective and if you think $130. per slot is insignificant, don’t get into the business.
    But the most glaring absence is the operating costs per slot. Between the two,
    HMM may be trying to get into the market just to be there, but they will not be

    • Mike Wackett

      March 27, 2018 at 9:58 am

      Tend to agree with you Gary that on the face of it HMM’s small ship operation cannot compete in the ULCV new world – think The Containership Coy 2010 – 2011.
      However, it has loyal support from big SK manufacturers who might be prepared to pay a premium for gaining greater control over their supply chain.
      Slot charterers tend not to be the first to hear of operational changes, moreover their bookings are at risk commercially from the lines that provide the slots.
      And not only can HMM offer the transit USP but for example in the UK it is offering a Southampton call, which the 2M have now pulled out of entirely in favour of Felixstowe, at a disadvantage for some shippers.