Evergreen’s Strategic Mega-Ship Ordering for Ocean Freight Services

Mega-ships are the latest rage in ocean freight shipping.

Mega-ships or mega-vessels as they’re also referred to are giant carrier ships that look like small islands if you watch them appear over the horizon.

It seems that all the major carrier lines have been ordering these Goliath-sized ships. But there have been a few hold-outs.

According to an article from American Shipper, “Among the world’s top 20 lines, only Evergreen, ‘K’ Line and Yang Ming have refrained from operating, ordering or planning to charter such vessels.”

Evergreen has been criticized for not jumping on the bandwagon and ordering such giant ships. These enormous ships can carry loads like 13,000 TEUs or 14,000 TEUs of cargo across the ocean. As oil bunkers continue to increase, being one of the only major carrier lines without mega-ships could be a competitive disadvantage.

But now Evergreen Line is joining the mega-ship ordering trend and their patience in doing so may turn out to be a competitive advantage.

A BSAA blog states, “As Evergreen hammers out the final terms with the shipyard and investor from which it will charter the ships, the world’s sixth-largest container line may pull off a considerable coup.”

The BSAA blog goes on to highlight how much cheaper these giant vessels are now than when most of the carrier lines were ordering them up a few years ago and how the ones being ordered now also burn less fuel.

The American Shipper article mentioned above–which is a “newsflash” about Evergreen making a deal to charter mega-ships–quotes Alphaliner executive consultant Tan Hua Joo as saying, “Large ships are 30 to 40 percent cheaper than a few years ago.”

While this move looks like a good one on the part of Evergreen, there are some that question how good these mega-ships really are for the carrier lines. The worry is that these behemoth ships are adding to overcapacity causing pressure on the carriers to lower freight rates.

In 2011, carriers lost money due to lower freight rates largely caused by overcapacity. Carriers will now have to be strategic in utilizing their mega-ships to avoid the overcapacity problem.

Of course, international shippers importing and exporting cargo around the world would love to see another period of falling freight rates from overcapacity. However, if several of the major carriers went out of business from freight rates too low to generate profit, freight rates would quickly move away from shippers’ favor as the surviving carrier lines face less competition.

I wouldn’t worry about that though. Evergreen Line just showed they can compete and the rest of the carriers are not about to give in and turn belly up in the water.