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Global Supply Chain News: First Sailing of Record New Container Ship May be Its Last



HMM Algeciras comes in at Massive 24,000 TEU, but Megaships Now a Drag on Carriers as Demand Plummets

April 29, 2020
SCDigest Editorial Staff

With some modest fanfare, the latest new record-breaking container ship was launched last week by South Korean shipping line HMM, as the HMM Algeciras left a shipyard in Okpo, South Korea, built with a capacity of an amazing 24,000 TEU.

But it appears the new megaship's initial voyage might be its last, at least for a while, given the global collapse of global trade and container volumes.

Supply Chain Digest Says...

The giant container ships at least for a while are going to keep on coming.

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The giant new ship was set to become part of The Alliance carrier consortium, which in addition to HMM includes Hapag-Lloyd, ONE and Yang Ming. But the alliance is cancelling many sailings from Asia into Europe, and needs a new giant 24,000 TEU megaship in the mix like the proverbial hole in the head.

The giant ship era is generally thought to have been ushered in with the 18,000 TEU Triple-E ships announced by Maersk in 2011.

Since then the megaships have become even larger, with a 23,000+ TEU ship holding the current title of largest vessel until the Algeciras left the shipyard.

The giant ships, expected to deliver lower cost per container for shipping lines, have been controversial from the start, with many arguing that any efficiencies container lines were gaining from their deployment were being lost and more as a result of delays and higher unloading cost and complexity at the ports.

Now, just as the record-breaking ship is launched, reports that the megaships are an albatross around the neck of carriers as container volumes decline rapidly due to the virus crisis.

The Wall Street Journal reported last week, for example, that the megaships are sailing half empty, destroying the cost efficiencies they were supposed to bring to financially challenged container carriers.

"A very large boxship is like the A380 superjumbo," Lars Jensen, CEO of Copenhagen-based SeaIntelligence Consulting told the Journal, comparing them to the Airbus SE double-decker jets that struggled badly in market for new aircraft. "It only works in specific corridors, otherwise it's too big."

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In addition to the huge number of containers required to fully utilize the megaships, the ships require deep shipping channels, large terrminasl berths, and supersized cranes that only the largst ports operate, limiting on what routes they can be deployed.

And the giant ships may run cross current to supply chains, with many expecting there to be more regional manufacturing and less reliance on China, changing the patterns of container freight.

"Expanding regional trade would depend less on giant vessels operating with carefully choreographed port calls and instead lean on smaller ships that can be deployed more flexibly on point-to-point sailings," the Journal wrote.

How that will ultimately impact the carriers, which have been taking delivery of dozens of the megaships for some eight years now, remains to be seen, but it could involve shippers having to wait longer to get their containers, as carriers park ships longer between sailings to give them a chance to fill up.

And the giant container ships at least for a while are going to keep on coming.

Two shipyards in South Korea combined are set to deliver a dozen more 24,000 TEU ships ordered by carriers by year's end. Whether they sail after a maiden voyage from the shipyard looks doubtful indeed, at least until container volumes recover dramatically.

Have megaships lost their relevancy in the new supply chain? Let us know your thoughts at the Feedback section below.


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