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Container Shipping & Trade

Container Shipping & Trade

2019: A turning point for the container ship sector

Wed 02 Jan 2019 by Rebecca Moore

2019: A turning point for the container ship sector

For the industry as a whole, 2019 will be the year we see digitalisation and LNG take off. For the container shipping sector, the primary focus will move from consolidation to enhancing services.

With the spate of digitalisation and blockchain initiatives trialled and launched in 2018 -- from carriers, ports and external suppliers -- these new projects will begin to take a clearer shape in 2019, and they are likely to have a huge impact on the efficiency of the entire supply chain.

Of particular note in this arena is the plan by AP Moller-Maersk, CMA CGM, Hapag-Lloyd, MSC and Ocean Network Express to launch an association paving the way for digitalisation. The group intends to create common information technology standards for the whole of the box shipping industry. These common standards will be aimed at enhancing interoperability, building standardisation and allowing digitalisation to further its impact in 2019.

In recent years, for many of the large container ship operators, the dominant market strategy was all about growing as fast as possible through consolidation and M&As. This theme has abruptly stopped in 2018. Such is the scale of the carriers within the top seven container shipping lines, that further mergers within that group would have difficulty achieving regulatory approval. Rather, there are now rewards to be reaped by focusing on boosting reliability and quality of services.

The 2020 low sulphur directive is, of course, a pressing issue for container ship operators – and efforts to meet it will inevitably reach fever pitch in 2019. Scrubbers have gained momentum in the box ship industry and will continue to be at the forefront in 2019 as the 2020 directive's deadline piles on the pressure for operators to comply.

I believe we will see more contracts for LNG newbuilds come to fruition, as new initiatives and wider experience using LNG for both mega box ships and feeders gives other operators the confidence to choose gas as a fuel.

Meanwhile, the trend to build ever larger box ships will continue to grow. 2018 saw contracts for 23,000-TEU mega ships being signed. The economies of scale they offer and increased fleet competitiveness means we will see more contracts for mega ships in 2019.

 

Digitalisation: from concept to reality

Credit: DP World

2018 was test time for digital and blockchain solutions – 2019 will be when we start seeing these early phases and trials move from concept to reality and start delivering results.

I believe two factors will drive this: the launch of a carrier association to create common information technology standards for the whole industry (as mentioned in my introduction) and the plan to launch a Global Shipping Business Network.

The global network will be an open digital platform which has nine leading ocean carriers and terminal operators behind it as well as software solutions provider CargoSmart. Having so many carriers and large port operators behind this platform will give it the momentum it needs to become an industry mainstay. Prior to this extensive effort, the sector has seen some smaller initiatives and the Maersk-IBM TradeLens partnership.

 

Hapag-Lloyd highlights industry change

Until recently, the focus of the container ship industry was about getting bigger as quickly as possible – but one company has begun to shift the industry in a new direction. Hapag-Lloyd recently has disclosed details of a new, mid-term game plan called Strategy 2023, wherein the company has said it will focus more intently on services for its customers.

I believe other container ship operators will follow this lead. While consolidation has helped to cut costs, there is little benefit from this strategy to be gained going forward – indeed, the market is now monopolised by such a small number of behemoth carriers, it is difficult to see how any more consolidation could take place.

Furthermore, there are profits to be made by focusing on service. Research undertaken by Hapag-Lloyd revealed that customers for whom quality service is paramount make up as much as 45-50% of market.

 

Scrubbers surge to the top

Credit: CR Ocean Engineering

After previously professing little interest in scrubbers, the box ship scrubber market is booming as the 2020 low sulphur directive's deadline nears. In 2019, this market is only set to strengthen.

One symbol of the ‘about-turn’ of industry reaction to scrubbers is Maersk. It was widely thought the carrier would avoid deploying this equipment, but Maersk announced in 2018 that it would indeed be adding scrubbers to its fleet.

Recent statistics show the growth of scrubbers for container ships: As of October, DNV GL data for ships operating with scrubbers and confirmed orders throughout the shipping industry saw container shipping move into second place as a sector, with 243 scrubber contracts finished or in progress.

 

LNG to go mainstream

Credit: CMA CGM

LNG has come to the attention of the container ship industry in a big way in the last 12 months or so – with, in particular, CMA CGM's order for LNG-fuelled box ships.

Its use is still limited, but I believe 2019 is the year LNG will become much more mainstream.

CMA CGM has helped the bunkering infrastructure develop, and there have been several initiatives that will propel LNG use forward. Of note is the announcement by GTT, WinGD and Wärtsilä that they will offer their combined services to ship operators considering LNG power as a propulsion alternative after their involvement with CMA CGM’s LNG-powered newbuilds.

It is a non-exclusive co-operation, but by working together on common projects, it is just a small step to propose an integrated package between the three. There are huge benefits to this, as GTT LNG-as-fuel vice president Julien Bec pointed out.

“Using LNG involves a complex system with several suppliers involved and this leads to problems with interfaces – each package independently works correctly but when they are together you may have some problems and the idea is to avoid that. So when a shipyard or owner asks us to deliver a system, it is as if it is asking just one company.”

 

Breaking barriers with biggest-ever box ship orders

The trend to build ever larger ships was highlighted in 2018 by Hyundai Merchant Marine: it signed contracts for 12 23,000-TEU box ships – among the biggest box ships to have ever been ordered.

The benefits such a size offers, such as economies of scale, mean these orders will keep coming, especially as most of the major carriers are all involved in mega-alliances, where using such large ships makes sense.

Of course, such large orders might not have a positive impact on supply and demand, but I do not believe this will stop the orders coming in 2019.


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