Following two trial runs with the 18,000-TEU CMA CGM Benjamin Franklin, French carrier CMA CGM has decided to make the move permanent and transfer five more sister ships to the Transpacific market, according to Drewry Shipping Consultants.
CMA CGM recently announced that it will upsize its Asia-US West Coast Pearl River Express (PRX) service so that from the end of May, 2016 it will deploy six of its ‘Great Explorer’ containerships with capacities ranging from between more than 17,700-17,800 TEU.
In the process these vessels will become the largest ever to sail regularly on the Transpacific, easily surpassing the previous record set by the 13,800-TEU MSC Daniela.
Despite Drewry’s reservations of the US West Coast ports’ ability to efficiently handle ships of this size on a regular basis, it seems that the French carrier is convinced and said that transfer of the five other Great Explorers (from the Asia-North Europe FAL1 service) will help to accelerate its growth in the Transpacific.
That statement has a whiff of spin about it as the size of ships deployed has no influence on cargo demand. More realistically, CMA CGM has realised that it has a surplus of big ships on the faltering Asia-Europe route and decided that the relatively stronger Asia-USWC route can take up some of that slack.
CMA CGM currently has 36 ships of over 10,000 TEU with the biggest (the Great Explorers) currently serving the Asia-North Europe FAL1.
CMA CGM will certainly need the Transpacific cargo growth to be dynamic in order to maintain or better its ship utilisation on the Asia-WCNA route.
As things stand that would be enough to increase CMA CGM’s nominal capacity share of the Asia-WCNA market from just under 10% to about 11%, putting it level with MSC in second place behind Maersk, which has around 15%.
The upgrading of the PRX service will mean that CMA CGM’s average size ship on the Asia-WCNA route will be about 9,600 TEU, considerably above the current trade average of 7,600 TEU.
Then there is the question of US ports ability to efficiently turn around big ships, particularly if lots more follow.
According to CMA CGM’s online schedules when the CMA CGM Benjamin Franklin called at Long Beach in February, 2016, it was at the port for four-and-a-half days. Spending that long at one port is not a productive use of an expensive asset.
US terminals are investing heavily to be ‘big ship ready’ from raising the heights of ship-to-shore cranes to be able lift containers stacked 10 high on deck to making berths longer and deeper.
The Port of Long Beach is spending in excess of US$4 billion to expand its terminal and rail capacity, along with new bridge and road infrastructure.
The soon to be opened $1.3 billion Middle Harbor container terminal project, which the port said will be the world’s first all-electric, fully automated terminal will be able to accommodate 18,000 TEU vessels immediately and later will be able to handle ships of up to 24,000 TEU when the second phase of the project opens in 2019, when it will have an annual capacity of around 3.4 million TEU.
Drewry believe that how much the Great Explorers test the US ports productivity will ultimately be down to whether CMA CGM can fill them. If the carrier’s volumes are static then the ships will sail with the same amount of cargoes as the previous 11,000 TEU.
The real driver of this story is the fact that the Asia-North Europe trade is saturated by big ships and CMA CGM’s decision to move the Great Explorers is an acceptance that the ailing trade needs a breather.
As of February 2016, there were 40 ships in the 18,000 TEU class or above operating on the route, representing one-fifth of all ships deployed.
Heaping pressure on top of an already over supplied market is the orderbook that will this year see another 1.3 million TEU added to the fleet, before scrapping or any delays to deliveries.
Of this year’s scheduled deliveries, 250,000 TEU worth will be new ships of 18,000 TEU and above, while there is a further 300,000 TEU coming from the 14,000-18,000 TEU sector.
CMA CGM itself has three 20,600 TEU units arriving in 2017, six 14,000 TEU units from the end of 2016 through 2017 (all owned) and another 10 x 9,400 TEU charted vessels coming this year, plus five smaller owned Panamax ships.
All told, from now until 2019 carriers will need to find homes for 72 x 18,000+ TEU ships so broadening the number of trades they can enter is vitally important.
The Drewry View: More carriers may follow CMA CGM’s lead and cascade big ships into the Transpacific, but they risk harming the utilisation and freight rates unless they drastically reduce the number of services. If they do make the move, carriers will also have to accept their primary assets will spend more time at port and will therefore be less financially productive, at least until the US West Coast has fully got up to speed.