South Korean, Hyundai Heavy Industries is negotiating with several unnamed shipping lines for the order of 11 VLCC’s as shipping companies are seeking ways to cut their costings.
“Shipping lines won’t be able to survive if they can’t bring down their unit costs,” Ka said June 26 in an interview in Seoul. “Freight rates have recently fallen a lot, with rates to Europe from Asia at about a sixth of last year’s average. That’s why shipping lines want bigger ships.”
Ka added that the ongoing ordering spree for mega containerships is expected to last until early next year as carriers strive to cut costs by employing bigger vessels on routes with already low freight rates, as is the case in Asia-Europe trade.
Shipping capacity is outpacing demand as larger vessels enter into service and spending slows in Europe, where unemployment remains above 11%. Most vessels used now on the Asia-Europe route can fit at least 14,000 20-foot containers, according to Park Moo Hyun at Hana Daetoo Securities Co. There are more than 100 of these mega vessels in service, he said.
Nevertheless, an issue remains regarding the ability of carriers to secure enough cargo for these giants of the seas to attain the economy of scale.