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Monday, 29/07/2013, GMT+7

Sea monsters - the world's biggest ships

The driving factor in the size of container ships is the price of fuel. When the world's biggest container ship was launched at South Korea's Daewoo Shipbuilding and Marine Engineering yard on June 14, a new era began in the competitive container trade. The MV Maersk Mc-Kinney Moller is the first of 20 "Triple-E" class container vessels ordered for the Asia-Europe route by Denmark's A.P. Moller-Maersk Group.

The driving factor in the size of container ships is the price of fuel. When the world's biggest container ship was launched at South Korea's Daewoo Shipbuilding and Marine Engineering yard on June 14, a new era began in the competitive container trade. The MV Maersk Mc-Kinney Moller is the first of 20 "Triple-E" class container vessels ordered for the Asia-Europe route by Denmark's A.P. Moller-Maersk Group.

Everything about this leviathan is oversized: 400m long - 70m more than the height of Auckland's Sky Tower; reaching 14.5m below the waterline; able to carry containers stacked 20 high; with a total capacity of 18,270 20-foot containers (the Twenty-Foot Equivalent Unit, or TEU, the size of a 20-foot container, is the standard industry measurement).

The ship is more than four times the size of the largest container vessels that now visit New Zealand.

The Triple-E name describes three key attributes: energy efficiency, better environmental performance and economies of scale. It is a new industry benchmark designed to handle the roller coaster container industry.

"The whole background of this is that container shipping is very, very volatile price wise," explains Janet Porter, editor-in-chief, containers, at Lloyd's List and Containerisation International.

"We've just had a price war. It's driven Asia-Europe freight rates down to about US$500 per 20-foot container. They were at US$1300 three months ago. Companies want to get their operating costs down. The bigger the ship, the bigger the economies of scale. That's what they're all banking on at the moment. To get bigger ships with much more fuel-efficient engines. Ships are also sailing far more slowly to save fuel. That means lower emissions. They want to be environmentally clean."

With a top speed of 23 knots, the Mc-Kinney Moller is by no means the fastest container ship afloat. Instead, the vessel's twin MAN diesel engines are designed to conserve energy, using about 35 per cent less fuel per container, according to Maersk, than the 13,000 TEU ships delivered to rivals. Exhaust gases are recycled to save energy.

"The driving factor is the price of fuel," says John Konrad, editor-in-chief of Captain, a maritime website. The Triple-Es will be able to move a tonne of cargo 184km using one kilowatt-hour of energy. Maersk says that using the same amount of energy, a Boeing 747 can transport a tonne of cargo just 500m. By cutting fuel bills, Maersk is gambling that it can profit even in market downturns.

As well as the financial incentive, the Triple-Es will more than halve the amount of carbon dioxide emitted for each container moved, compared with the industry average on the Asia-Europe trade. Four more of the ships will go into service this year and the remaining 15 will be delivered next year and in 2015, and phased in as needed. CUTTING energy use is vital in an era of rising oil prices, and when the maritime industry's use of heavy bunker fuels has prompted demands that the world's commercial fleet reduce pollution, and cut CO2 emissions that help fuel climate change. The International Maritime Organisation has countered by pointing out that shipping emits only 2.7 per cent of greenhouse gases, making it the cleanest form of transport.

For Maersk, ordering the Triple-Es was a punt, based on how the company expected global trade to evolve. In April Maersk Group chief executive Nils Andersen said he expected "significant growth" on the Asia-Europe route. Maersk, which operates some 600 container ships, owned or chartered, must match vessels with routes, including New Zealand, as some grow and others shrink.

Until the global financial crisis, says Porter, the industry thrived on double-digit growth every year. In 2009, for the first time, cargo volumes plummeted, falling by 9 to 10 per cent. In 2010 they picked up again. By then manufacturers had run down stocks and needed to replenish inventory.

Shipping companies began ordering new ships. Meanwhile, trade remains uncertain, at least in the short term. But in the long run Maersk and other shippers think the Asia-Europe trade will grow.

The trick is to balance expected market demand with operating costs in an era of economic uncertainty, a global chess game that calls for strong nerves. Maersk's Asia-Europe trade involves 12 ships calling at as many ports, sailing in a loop. The Triple-Es will replace the existing fleet, which will be deployed on different trades, triggering a "cascade" effect.

If history is any guide, the size of container ships will keep rising. The container shipping industry emerged 60 years ago after World War II, but the capacity of ships only climbed sharply in the past two decades, from around 6000 TEU, seen as ground-breaking then, to 8000-10,000 TEUs and, about five years ago, 12,000 to 14,000 TEUs, the industry norm.

When the banking crisis hit in 2008 trade faltered, explains Porter. The top end of the scale seemed stuck at 14,000 TEUs. But Maersk went out on a limb, initially ordering 10 Triple-Es at US$195 million each, with an option for ten more. When that option was exercised, the cost per vessel was US$185 million.

Rival shipping companies are close behind. Lloyd's List reports that Switzerland's Mediterranean Shipping Company (MSC) has been "linked" to an order for three 18,000-TEU ships from Daewoo. And the China Shipping Container Lines Company has ordered five ships of 18,400 TEU at about US$140 million per vessel.

While cheaper and larger than the Triple-Es, the price difference may reflect less sophisticated engines, meaning higher fuel costs and more carbon emissions. United Arab Shipping is also expected to order 18,400-TEU ships. And even 18,400 TEU may not be the limit. David Tozer, global manager for container ships at Lloyd's Register Group, told the Guardian in March that 25,000-TEU ships are possible.

Unable to control fluctuating container-freight rates, shipping companies are also seeking to consolidate. Last month the big three - Maersk, the French line CMA CGM, and MSC, which control 40 per cent of the world's container shipping capacity - announced a London-based alliance, the P3 Network, set to operate from next year. The trio will pool 255 ships in the Asia-Europe, Trans-Atlantic and Trans-Pacific trades. By deploying the best ships on specific trades, they hope to save on fuel and service more ports more often to out-compete rivals.

Larger ships, cleaner, energy-efficient engines and strategic alliances will have knock-on effects - 80 per cent of global trade is now shipped via container vessels, according to a UN report this year.

TAKE shipping lanes. Next year a widened Panama Canal is due to open, able to take ships of up to 14,000 TEU and allowing vessels in the China-US trade to visit US East Coast ports. Currently, the US is serviced by the West Coast ports of Oakland and Los Angeles-Long Beach.

Then there is the plan to build a second passage through the isthmus, which could also affect the size of container ships. China and Nicaragua last month announced the US$40 billion project, which would give China a 100-year concession to build a canal capable of taking vessels of up to 250,000 tonnes - more than twice the size limit for the US-dominated Panama Canal.

Significantly, the Triple-Es are too large to use even the upgraded Panama Canal, although they can navigate the Suez Canal. As well as accommodating huge bulk carriers and tankers, which carry raw materials and oil to China from Brazil and other Latin America nations, the proposed Nicaragua passage would open the way for a post-Triple-E generation of even more gigantic container vessels.

Vessels larger than the Triple-Es may also have difficulty negotiating the Malacca Strait, a key choke point on the Asia-Europe trade. The Malacca Max - the biggest theoretical vessel that could navigate the strait - is 20,000 TEUs.

Bigger ships would presumably have to travel from Pacific to Atlantic via China's unbuilt canal, or maybe through the Southern Ocean.

Harbour facilities are also key to the rise of the Triple-Es. While 16 Asian and European ports are certified to handle the new ships, only 13 can now do so. Significantly, the US does not feature. Competitive ports need deep water, large, high-speed cranes, lots of storage space and ample transport links to quickly clear wharves.

In Europe, rivalry for the lucrative Asia trade is so intense that London is building a US$2.34 billion container port, Thames Gateway. Antwerp is enlarging its facilities for the Triple-Es.

There are no plans to use Triple-Es in the New Zealand trade. Richard Lough, senior international and coastal supply adviser at Maritime New Zealand says, "they're too big. They're too deep. There's not a port in New Zealand that can take them. The biggest container ship we would probably be able to take - and it hasn't arrived yet - is probably 5000 TEUs. They've generally been about 4200 TEUs."

Tauranga, the fastest growing container port, is dredging its shipping channel to eventually handle 8000-TEU vessels and upgrading port facilities. But while this may give Tauranga an edge over Auckland, it is companies such as Maersk which ultimately call the shots. For instance, Maersk could opt to call only at one "super hub" in each main island. In May Maersk announced it was switching some of its ships from Tauranga back to Auckland, reversing a move made in 2011.

"The simple thing," says Porter, "is that at some stage everyone is affected by the cascade effect." In this respect the Triple-Es may conceivably influence the vexed issue of whether Auckland's port should be sold to help finance the city's new rail infrastructure projects.

And any super hub would probably need to upgrade, with better rail links and so on. Just as Maersk is trying to future-proof its position in the global maritime industry, so its decisions can lead to trading nations having to make expensive infrastructure decisions to future-proof their economies.

Source: New Zealand Herald (29/7/2013)

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