News / Evergreen in bullish challenge to rivals by chartering a series of 18,000teu ships

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Recently demoted to the fifth largest container line in the world by the merger of CSAV’s container business into the ‘new’ Hapag-Lloyd, Taiwan’s Evergreen Line yesterday fired a warning shot across the bows of its rivals by confirming its charter of eleven 18,000 teu ships.

In December, Evergreen first announced its intention to join the 18,000 teu ultra-large containership (ULCV) club with plans to charter six of the behemoths “in order to optimise its competitiveness”.

At the time no further detail was provided about the owner of the ships, but yesterday Evergreen said it had signed long-term time charters with Japanese shipowner Shoei Kisen Kaisha, for not six but eleven 18,000 teu ULCVs.

“The group has taken this investment decision based on market demand and the capacity requirement for joint service,” said an Evergreen statement, alluding to its new membership of the CKYHE alliance.

The ships are to be constructed by Shoei Kisen Kaisha’s affiliate, Imabari Shipbuilding, and are stemmed for delivery from 2018 through 2019. Anecdotal reports suggest the vessels have been chartered on 15-year fixed-rate contracts, although the daily hire rate has not been revealed.

As was the trend before the oil price crash, the new vessels have been designed with priority on fuel economy; the ships’ main engines featuring a longer stroke enabling a 7% fuel efficiency advantage over traditional engines.

Indeed, the importance of lowering unit costs has become an all consuming obsession with ocean carriers as they compete for business at the same low freight rates as their competition.

Top of the agenda therefore for carriers is to operate the biggest ships, but in the slim-margin commoditised trades that have developed, particularly between Asia and North Europe, every avenue of saving is put under the microscope to squeeze out costs.

The rush to build or charter the biggest boxships was aptly described by Alphaliner as “the amazing containership race, or capacity gone askew”. The ‘race’ has seen the biggest ship crown passed from Maersk to CSCL to MSC in the past few months.

This month, Japan’s MOL announced it was upgrading its fleet in a “counter-offensive” strategy with 20,000 teu ships “to make us more cost-competitive”. The carrier is thought to be about to announce more details of its fleet renewal programme.

Evergreen’s announcement will heap more pressure on its CKYHE partners to also confirm upgrades of their fleet to balance the capacity injection  from Evergreen.

As the situation stands and with the reshuffled major east-west alliances now up and running, the CKYHE alliance operates the lowest average capacity ships on the key Asia-North Europe tradelane at 10,800 teu, compared with the four alliances’ average of 12,600 teu.

Notwithstanding the fact that lower bunker costs will assist the operators of smaller ships to close the gap on their bigger ship peers, the ‘norm’ of the trade is fast becoming 18,000+ teu ships thus putting the CKYHE alliance especially under greater pressure to maintain its 24% market share in the trade.