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 November 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Madsen to Chair Norway’s Research Council Executive Board

Henrik O. Madsen appointed chairman of the executive board of the Research Council of Norway   DNV GL president and CEO Henrik O. Madsen was appointed as chairman

Port of Houston Expecting Record Year

The Port of Houston Authority is expecting 2014 to close as a banner year for the port, with 34 million tons of cargo handled through November, Executive Director

Hapag-Lloyd Completes CSAV Merger Capital Increase

Hapag-Lloyd completed the planned capital increase of EUR 370 million (approximately $452.5 million) as part of the business combination with the Chilean shipping

Shipbuilding

Damen Outfitting First of Nine Bahamas Patrol Boats

The first of nine Damen Stan Patrol 3007s ordered by the Royal Bahamas Defense Force has arrived at Damen Shipyards Gorinchem in the Netherlands for outfitting.

Liquefaction Terminals to Dominate LNG Capital Expenditure

Capital expenditure (Capex) on global LNG facilities is expected to total $259 billion (bn) over the period 2015-2019, with investments expected to be 88% larger

New Chinese Shipyard Launches First Ship

The new shipyard facility of Honghua Offshore Oil & Gas Equipment Company in Jiangsu, China, has launched its first ship, an IMT982 Platform Supply Vessel. The vessel,

Finance

Larger Tankers May Offer Better Return Chances

Investors looking for returns in the tanker markets can invest their capital in a variety of ways. Should an owner invest in a VLCC or an Aframax? How about an

US Plans to Shut Royalty Loophole on Coal Exports

U.S. coal companies will no longer be able to settle royalties at low domestic prices when they make lucrative sales to Asia according to reforms proposed by the Interior Department on Friday.

Hapag-Lloyd Completes CSAV Merger Capital Increase

Hapag-Lloyd completed the planned capital increase of EUR 370 million (approximately $452.5 million) as part of the business combination with the Chilean shipping

Container Ships

NZ Report: Human Error to Blame for Rena Grounding

New Zealand's Transport Accident Investigation Commission (TAIC) published its final report into the grounding of containership Rena in October 2011. The TAIC’s

Port of Houston Expecting Record Year

The Port of Houston Authority is expecting 2014 to close as a banner year for the port, with 34 million tons of cargo handled through November, Executive Director

Costa Rica Approves APM Terminals Project

Port operator APM Terminals, a unit of Denmark's A.P. Moller-Maersk, said on Friday Costa Rica's environment agency had approved the construction of its Moin Container Terminal project.

 
 
Maritime Security Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Ship Simulators Shipbuilding / Vessel Construction Sonar Winch
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: 0.2285 sec (4 req/sec)