Jan 27, 2015

MOL puts provisional orders for 20,000-TEU ships

The specifics of Mitsui OSK Lines' (MOL) containership construction project for ultra-large 20,000-TEU units it plans to order are now mostly finalized. MOL intends to deploy a total of six ships on the Asia-Europe route between the second and fourth quarters of 2017. Of these units, MOL recently decided provisionally to construct two units at Japan's Imabari Shipbuilding and the remaining four at South Korea's Samsung Heavy Industries. The two ships to be built by Imabari will be long-term chartered from group company Shoei Kisen Kaisha. As for the four ships to be ordered from Samsung, MOL initially planned to charter them from Greek-affiliated U.S. owner Costamare, but the U.S. firm was dropped in the final phase of deliberations. MOL will continue to seek ways to procure the ships in an off-balance format.

Following Maersk Line's 18,000-TEU Triple E boxships, market entries of 19,000-TEU and larger ships, such as the MSC Oscar of Mediterranean Shipping Co. (MSC) and the CSCL Globe of China Shipping Container Lines (CSCL), are increasing now. Amid such a development, MOL has now taken the first step towards the construction of the world's first boxships with nominal loading capacity of above 20,000 TEUs. The four ships from Samsung will be deployed between the second and third quarters of 2017, and the two ships from Imabari in the fourth quarter of 2017, all to the Asia-Europe route. As MOL's other G6 Alliance members are also considering placing orders for five or six identical ships, a total of 11 or 12 ships are to be deployed to a single loop on the Europe route.

In 2014, MOL decided to focus on looking into mainly 20,000-TEU-class ships as it made plans for procuring its next-generation core fleet on the Asia-Europe route. MOL held a first bid geared toward shipowners and shipyards, both domestic and foreign, in the latter half of 2014. After two bidding processes, it finally decided to place orders with Imabari and Samsung. MOL had virtually finalized Costamare as the owner for the four ships to be ordered from Samsung, but the two companies failed to reach an agreement on terms in the final stage, resulting in Costamare dropping out of the deal. While the construction and completion timelines for Samsung remain unchanged, MOL will finalize the ordering format from here on.

There will be slight variations in ship specifications between Imabari and Samsung, but the loading capacities of all six units are expected to be around 20,500 TEUs. The hull size will be almost the same with that of Triple-E of Maersk, but loading capacity will be improved by increasing the number of holds below hatch covers. Enlargement of boxships has historically been continuing, but such size upgrades are now beginning to reach their limits. Boxships of 18,000-20,000 TEUs measure about 400 meters long overall and 59 meters wide with draft of 15-16 meters. This means they are already almost in the uppermost realm, particularly in width and draft, to pass through the Suez Canal. MOL also believes that 20,000 TEUs will be the upper limit of ship size upgrades for the time being, and it has decided to build 20,000-TEU ships in an attempt to procure the most competitive boxships given current restrictions.

Under its current midterm management plan 'STEER FOR 2020', MOL has laid out plans to improve boxship revenue/profit starting in fiscal 2014. In the first three years, MOL expects to reduce costs by a total of Y30 billion, including fleet replacements. In addition to three-year charters of five 14,000-TEU ships from APL Ltd. that were arranged by May 2014, other major sections of the plan include the deployment of 10 units of 10,000-TEU ships and retirement of midsize vessels. In the following three years, MOL also expects a cost-cutting effect of another Y30 billion through deployment of the abovementioned 20,000-TEU ships, return of the five 14,000-TEU ships to APL and the cascading of its existing ships to other routes.

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