On August 13, 2019, Evergreen Marine Transportation issued an announcement on the Taiwan Stock Exchange (TWSE), confirming that the company will order up to 11 ultra-large container ships with a container capacity of 23,000 TEU.
The total price of Evergreen Marine’s ordering of this batch of super-large container ships may reach up to US$1.76 billion. According to the announcement, Evergreen Shipping plans to lease 4-5 23,000TEU container ships through its subsidiary Evergreen Hong Kong Co., Ltd., with an estimated transaction amount of US$598 million to US$799 million. At the same time, it plans to order 5-6 same-type transport capacity through another subsidiary Qingbiao Shipping Co., Ltd., with an estimated transaction amount of US$725 million to US$960 million. According to relevant information, most of the large container ships previously ordered by Evergreen Shipping were built by Japanese or Korean shipyards, including 11 20,000 TEU container ships (G-type ships) built by Imaji Shipbuilding and 12 12,000 TEU container ships, as well as another 8 12,000 TEU container ships built by Samsung Heavy Industry. However, there have been rumors in the industry that Evergreen Shipping's bid attracted major ship construction companies from China, Japan and South Korea, including Jiangnan Shipping, Hudong Zhonghua, Hyundai Heavy Industry, Samsung Heavy Industry, and Japan Shipbuilding United (JMU). Chinese shipbuilding companies reported Evergreen Shipping a price of about US$150 million per ship, while South Korean shipbuilding companies' quotations were about US$160 million per ship. However, Evergreen Shipping said that the transaction price and details of the transaction object will be announced separately.
"Build a big ship for future operational needs"
Not long ago, the Taiwan media "Business Times" reported that Evergreen Shipping Chairman Zhang Zhengyong revealed at the Fascist Association (a corporate legal person meeting in Taiwan) that Evergreen Shipping has bid farewell to the operating trough period. In the first quarter of this year, the revenue was 45.697 billion NT$ (approximately US$ 1.47 billion), a year-on-year increase of about 24.03%, and a net profit attributable to the parent company of NT$ 559 million (approximately US$ 17.97 million), a significant increase of 307% year-on-year. On August 14, Evergreen Shipping released its 2019 first half of performance report, and the company turned losses into wins year-on-year. "The global economy is growing moderately and positively. Although there is uncertainty in the short term, there is sufficient momentum in the medium and long term, which will help drive the growth of container cargo." Zhang Zhengyong predicts that Evergreen Shipping's operating performance next year will be better than in 2019. In Zhang Zhengyong's view, the average utilization rate of trans-Pacific routes operated by Evergreen Marine is relatively high. The trade friction between China and the United States has caused the source of goods to be transferred to Southeast Asian regions such as Thailand, Vietnam, and , Malaysia, and . Faced with the transfer of industrial regions, Evergreen Shipping has built a capacity layout mainly based on near-ocean routes. Faced with the "big ship pressure" gradually exerted by competitors, Evergreen Shipping decided to add more than 10 super-large container ships based on the existing G-type ships.
investing in a new fleet when ship construction prices are low is considered a powerful means for Evergreen Shipping to enhance its own route network layout and consolidate its market position in the alliance. In order to improve the company's fleet capacity, eliminate some old ships and maintain operational efficiency, it is also an inevitable choice to introduce super-large container ships in batches. With the opportunity to move forward and make arrangements in advance, Evergreen Shipping's market competitiveness and fleet operational benefits may gradually emerge.
It is also worth mentioning that Evergreen Shipping currently ranks seventh in the world in the global capacity ranking (statistics of Alphaliner), with a total capacity of about 1.3 million TEU, a total of 208 ships, 61 ships were ordered, and a designated capacity of about 360,000 TEU. By the end of this year, Evergreen Shipping will add 8 new container ships (including 2 above-mentioned G-type ships), and from 2020 to 2022, its new capacity may reach 55, and its total capacity will increase to 1.66 million TEU, surpassing Hapag-Lloyd, ranking fifth in the world.
Super large ship competition may end in stages?
Linear companies or shipping alliances with financial strength may be close to completing the capacity layout of super-large container ships.
Maersk Shipping has always been the "customization pioneer" of ultra-large container ships. From 3E ships to the second-generation 3E ships, Maersk Shipping seems to have been at the forefront of the industry, but after seeing factors such as the market saturation of ultra-large ships, port connection and unloading efficiency, market supply and demand balance and freight rates of ultra-large ships, Shi Suoren, CEO of Maersk Group, said last year that Maersk Shipping will not invest in ordering ultra-large ships before 2020. Shi Suoren said at the time that Maersk Shipping has more than 20% market share in the ocean transportation market, which provides the company with a competitive cost structure, so there is no need to consider acquisitions. "We do not intend to order any large ships or invest in second-hand ship by 2020, which is also related to investment in new major ports before 2020."
Mediterranean Shipping has previously ordered more than ten ultra-large container ships with a capacity of more than 23,000 TEU on its 19,000 TEU type container ship, and this first-made ship has been put into operation on the Far East-Northwest Europe route. According to Alphaliner statistics, Mediterranean Shipping currently has 19 ordered ships, including the remaining undelivered super-large ships, with a designated capacity of 340,000 TEU. After all these ships are delivered, the gap between Mediterranean Shipping and Maersk Shipping will further narrow. As a member of a shipping alliance, the market suitable for super-large capacity operation is fixed. I believe that if nothing unexpected happens, the 2M composed of Maersk Shipping and Mediterranean Shipping will focus on other route markets with relatively small market competitiveness.
In recent years, COSCO Shipping has also ordered a large number of ultra-large container ships. At the same time, as an "ally" of COSCO Shipping, D cabin ship has also ordered ultra-large container ships that are more in line with the new regulations of the International Maritime Organization (IMO) in China's shipyards. In addition, the capacity of Oriental Overseas (OOCL) has been attributed to COSCO Shipping. Evergreen Shipping has also announced the ordering of more than ten 23,000 TEU ships. The competitiveness of the ultra-large container ships owned by OCEAN Alliance in the Far East-Northwest European route market can be seen. Of course, the efficiency of the alliance operation should not be weakened by the strength of members within the alliance. In addition, some shipping consulting agencies have lowered the demand for market cargo growth in the next 1-2 years. Whether the competitiveness of super-large ships will be weakened within the alliance will be an uncertain factor. Instead of simply increasing the capacity of a certain route, it is better to look at other routes or markets to make more accurate capacity investments.
Let’s look at THE Alliance again. The new member Hyundai Merchant Ship has ordered 12 22,000TEU ships. Although Hapag-Lloyd did not clarify its construction plan, industry insiders revealed that it has contacted some Asian shipyards on the ordering of several super-large containers. After all, in the container transportation market, the super-large transportation capacity that the members of THE Alliance can allocate is far less than the above two shipping alliances. But we can also make some speculation or imagination: to avoid head-on confrontation with the other two shipping alliances in the Far East-Northwest European route market, focusing more attention on the more advantageous market is also a strategy for this smaller alliance to balance the container market, and this may also be more beneficial to itself and its alliance members.
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