Orders for bigger containerships are in response to rising bunker costs

Despite weak freight rates and a poor time charter environment, containership operators are ordering ever larger vessels. Though this may seem counter-intuitive, shipbroker Braemar Seascope says it reinforces a trend that is at least five years old.

Containership operators cannot control freight rates, especially in a post liner conference competitive environment. They can however control the unit cost of shipping each TEU, through economy of scale. Ordering ever larger containerships is a direct consequence of this cost management.

At a recent conference in Istanbul, Braemar Seascope Research Manager Mark Williams highlighted the strong correlation between the price of bunker fuel oil  – the largest single cost per TEU movement  – and the average size of containerships ordered over the past 10 years.

The strength of the relationship is confirmed by the fall in bunker prices and average TEU capacity of newbuildings ordered in 2009, though of course the ships ordered in 2009 will likely be delivering into a higher bunker price environment in 2012 and later.

If bunker prices continue to rise, there will eventually come a point at which naval architects will find it harder to build bigger ships. The Malaccamax concept appears to be the maximum size for Asia Europe trades and port operators will find it harder to continually upgrade facilities. The new eco designs for containerships will become ever more important in liner companies’ cost management strategies, says Braemar Seascope.

November 10, 2011