Why Size Matters: Container Ship Economies of Scale

MarineLink.com
Tuesday, September 03, 2013
Image courtesy of Maersk Line

Maersk Line’s first 18,000 teu vessel, the Maersk Mc-Kinney Moller, which was doing the rounds on her maiden voyage in Northern Europe last week, has prompted much speculation on her economies of scale, particularly as HHI has just confirmed that it is negotiating an order for five slightly larger ships with UASC, says Drewry Maritime Research in a new paper.

The economies of scale offered by Maersk Line’s 18,000 teu vessels are so great that few can ignore them. Assuming the Triple E’s consume 164 tonnes of fuel a day (excluding diesel), the estimated IFO bunker cost of the Maersk Mc-Kinney Moller (18,270 teu) would already be 35% lower than a  typical 13,100 teu vessel on a per teu carried basis – $218/teu versus $333/teu. Apart from the fact that the ships are bigger, their hulls are reported to be designed around an average ship speed of only 23 knots, compared to over 24 knots for the first 13,000 teu vessels, enabling them to glide through the water more efficiently.

The unit cost comparison is based on an average westbound ship speed of 20 knots for both sizes of vessel, and an eastbound ship speed of 14.6 knots which is the average of Maersk’s services between Asia and Europe according to Drewry’s 'Carrier Performance Insight' . The ships are also assumed to be 85% full westbound, and 55% full eastbound, which may only be achieved in steady state conditions, when all of the vessels deployed in the AE10 service are Triple Es.

As bunker consumption tables for 18,000 teu vessels are not readily available, and Maersk does not disclose such information, the daily consumption has had to be extrapolated from those of vessels ranging between 10,000 teu and 16,000 teu, but they do more-or-less tie in with public announcements from Maersk and national press reports. Maersk claims the vessels to be 35% more fuel efficient per container carried than the first 13,100 teu ships, and the Daily Telegraph has reported that their westbound fuel consumption is approximately 150 tons/day, compared to normal consumption of over 214 tons/day.

Ship operating costs, including manning, insurance, stores/lubes, R&M and Admin, are also an impressive 11% cheaper – $76/teu carried versus $85/teu carried, although here again, the result has had to be extrapolated from Drewry’s analysis of vessel sizes ranging between 3,000 teu and 12,000 teu in its report entitled ‘Ship Operating Costs 2012-2013 ’. It is based on 2011 costs, which are currently being updated for this year’s edition.

The Maersk McKinney Moller is manned with a crew of just 21, which is not unusual these days, but it is possible to run her with just 13 crew.

Putting both IFO bunker and ship operating cost savings together reveals that Maerk’s 18,000 teu ships are a massive 30% cheaper than 13,100 teu ships on a round voyage basis – $294/teu carried versus $418/teu carried. This does not include Suez Canal and port costs, however, so is not a total slot cost, but the differential in ship operating cost is clear.

Drilling down into this result in more detail, the westbound saving amounted to $121/teu, which is equivalent to approximately 9% of last week’s average spot freight rate from Shanghai to Rotterdam, according to the World Container Index. The eastbound saving was an even higher $128/teu, which is equivalent to 30% of last week’s spot rate from Rotterdam to Shanghai.

Other savings include faster cargo handling. According to APM Terminals, berth and crane productivity of the Maersk Mc-Kinney Moller (18,270 teu) last week already reached a record 215  and 37.1 gross moves per hour respectively in Rotterdam.  This compares with a ‘normal’ berth productivity average of between 140 and 150 moves per hour and a crane productivity average of between 32 and 33 moves per hour for a well stowed 14,000 teu vessel. Because of its greater size, an average of seven cranes could be worked on the Maersk Mc-Kinney Moller, with the maximum going up to eight, whereas only six can usually be worked on a 14,000 teu size vessel.

Drewry's conclusion is that the rush to order vessels over 16,000 teu for deployment between Asia and Northern Europe will gain momentum, despite the fact that they will be too big for the new Panama Canal locks that are due to open in mid-2015.
 
Source: Drewry Maritime Research



 

Maritime Reporter October 2013 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Permanent Magnet Technology for Maritime Propulsion

Multipurpose vessels, especially those that operate primarily at part loads, have been facing pressure when it comes to making money in today’s business environment.

Industry Professionals to Speak at ShipConstructor Conference

The speakers representing various companies at next week's SSI Americas ShipConstructor User Conference, October 7-9, 2014 in Mobile, Alabama, demonstrate SSI's

NY Harbor Supply & Distribution Fall Reception/Buffet

More than 600 attendees are expected at the 52nd annual New York Harbor Supply & Distribution Fall Reception/Buffet for the energy and energy related industries

Shipbuilding

Samsung Heavy Venturing Overseas

SHI is ready to invest around $950 million in the overseas shipbuilding facility by 2017, according to SHI’s Chief Financial Officer Chun Tae Heung. Tankers, bulk

Ingalls Shipbuilding Begins Fabrication for Aegis Destroyer

Huntington Ingalls Industries' (NYSE:HII) Ingalls Shipbuilding division today marked the start of fabrication for the future Aegis-guided missile destroyer Paul Ignatius (DDG 117).

Industry Professionals to Speak at ShipConstructor Conference

The speakers representing various companies at next week's SSI Americas ShipConstructor User Conference, October 7-9, 2014 in Mobile, Alabama, demonstrate SSI's

Finance

Norvestor to Become PG’s Largest Shareholder

Norvestor VI, L.P., a fund advised by Norvestor Equity AS, announced it has signed an agreement to invest in Ing Per Gjerdrum AS including its subsidiaries PG Hydraulics AS and PG Construction AS.

GasLog Closes First Option Vessels Dropdown

GasLog Ltd.  announced today the closing of the sale of two modern liquefied natural gas (“LNG”) carriers, the Methane Jane Elizabeth and Methane Rita Andrea,

Brent Holds Above $97, Eyes Worst Quarter Since 2012

Brent crude futures hovered above $97 a barrel on Tuesday, aided by firm U.S. and Chinese data, but the oil benchmark was on track for its deepest quarterly drop

Container Ships

MOL Restructures Asia to S. Africa Service

Mitsui O.S.K. Lines, Ltd. (MOL) announced the restructuring of its existing Asia to South Africa liner services into two direct loops. One service will call South China,

Report on MOL Comfort Incident is out

In response to the casualty of “MOL COMFORT” which occurred on 17 June 2013, ClassNK established the Investigative Panel on Large Container Ship Safety, comprised

DMR Examines Container Terminal Congestion Issues

Container port congestion has been hitting the headlines recently, but the reasons for it vary widely and in many cases it is only a short term issue. Certain world

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Navigation Offshore Oil Port Authority Ship Repair Ship Simulators Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1687 sec (6 req/sec)