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Cash-rich United Arab Shipping Co (UASC) is considering buying five of the world's largest container ships for around US$700 million, people with direct knowledge of the deal said, in a move that underlines its ambition to become a significant player in an industry already awash with excess tonnage.
UASC's Triple-E mega container ships will form the basis of a new Europe to Asia service, jointly run with China Shipping Container Lines (CSCL), which earlier this week confirmed its own order for five Triple-Es, adding extra capacity on previously lucrative trade routes between Europe and Asia, reported Dow Jones Newswires.
A record amount of vessels were ordered in 2007 just before the start of the financial crisis triggered a plunge in global trade. Tighter credit and uncertainty prompted a temporary lull in new shipbuilding, but stubbornly high fuel prices have since increased demand for bigger and more fuel-efficient designs even though the industry is groaning with excess capacity.
Five years on and routes between Europe and Asia are showing little or no growth in demand while industry analysts estimate oversupply at 10 percent, resulting in rock-bottom freight rates, which make it tough for companies to cover the industry's heavy fixed costs and operating expenses. All but seven of the world's 30 biggest shipping companies lost money last year, according to shipping analysts Alphaliner.
"All 20 big major container players will have to choose to either order similar ships or find themselves out of the Europe-Asia trade as smaller, less fuel-efficient vessels won't be able to compete," said Lars Jensen, chief executive of Denmark-based SeaIntel Maritime Analysis. He estimates that accumulated losses for the industry ran to about $7 billion over the last four years.
Market leader Maersk Line was first to order the mammoth ships, which can carry more than 18,000 20-foot containers, 2,000 more than CMA-CGM's Marco Polo, its nearest rival and currently the world's largest container ship. Maersk has 20 Triple-Es on order from DSME with the first ship scheduled to be delivered next month.
Cargonews Asia
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