With new ULCVs on the horizon, another Asia-Europe loop was 'inevitable'

The CMA CGM AMERIGO VESPUCCI in the port of Rotterdam

With its member lines receiving a large number of newbuild ULCVs this year the addition of a seventh loop between Asia and North Europe by the Ocean Alliance was “inevitable” said Drewry.

While the 2M rival alliance has opted to accommodate six extra newbuild ULCVs into its network revamp by slowing vessel speeds and cutting port calls in order to allow more buffer time in schedules and thereby to improve reliability, it would appear that the Ocean Alliance had little choice other than to expand its offering from later this year suggested the consultant.

The Ocean Alliance partners – CMA CGM, COSCO/OOCL and Evergreen – are responsible for 62% of the approximate 460,000 teu of ULCV deliveries stemmed for this year noted Drewry, with the Chinese state-owned carrier due to receive 12 19,200-21,200 teu vessels in the first half of the year alone.

“No amount of slow steaming could hide all of that new tonnage and a new standalone Ocean Alliance service was inevitable,” said Drewry.

Moreover, a stunning 620,000 teu of new ULCV tonnage is slated for delivery in 2020, including big orders placed by HMM, Evergreen and CMA CGM.

And rumours have been recently circulating in the industry that Cosco subsidiary OOCL is about to place an order at a Chinese yard for six 23,000 teu LNG-ready ULCVs.

However, carriers also now have sufficient power and influence over desperate Asian shipyards to defer deliveries significantly should they need to.

Publishing the details of the Ocean Alliance’s new loop, as part of the VSA’s revised network commencing in April, OOCL said last week that the extra Asia-North Europe loop would allow “room for growth”.

“With the addition of the new Loop 7 product, the increased frequency between Asia and North Europe will allow for greater loading flexibility, confidence on service commitments, as well as room for growth through the extended network coverage,” said OOCL.

The average number of dedicated Asia-North Europe services has declined dramatically over the past decade from a high of 40 in 2012 to just 18 currently, while during the same period of time the average size of vessel deployed on the trade has jumped from just under 10,000 teu to 16,148 teu.

However, Drewry also believes that there is further scope for ULCVs to be introduced on the route given that eight of the current Asia-North Europe loops continue to operate with sub-ULCV size ships.

It added that only five out of the 18 services currently deploy 12 vessels – which it expects eventually to become the norm on the route – and reasoned that there were still opportunities to upsize or phase more units into the existing loops of the alliances.

The decision is also related to the forthcoming higher bunker costs associated with IMO 2020 low sulphur regulations, prompting carriers to maximise slow steaming to conserve fuel across their networks, suggested Drewry.

“The amount of ULCVs arriving over the next few years is an unwanted legacy from a period when carriers were over confident in the market and possibly misguided in the benefits those ships offer,” said Drewry.

“Nonetheless, we believe they will be able to mitigate the capacity inflation by delaying deliveries and slowing services.”