Tonnage Titans – 8. Mediterranean Shipping Company

Diego Aponte

Diego Aponte. Credit: MSC

Mediterranean Shipping Company (MSC) raised eyebrows with an order for 11 vessels of 22,000 teu in September 2017, an announcement made just a week after rival CMA CGM placed orders for nine similar mega-ships.

The orders startled a market that had seen no orders for container ships for two years, and sparked fears of a destructive newbuilding spree that would set back an industry returning to profitability after a sustained period of annual losses.

MSC played down those fears. “A significant number of 13,000-teu and 14,000-teu vessels will come off-hire in the coming years. The new order is expected to effectively replace this fleet, rather than substantially increasing MSC’s overall capacity,” a spokesman for the carrier said at the time.

It was not too long after that when the big-ship orders began to come in. Earlier this year, Hyundai Merchant Marine (HMM) placed an order for 20 new container ships, 12 of them 20,000 teu-class vessels, and COSCO ordered 17 20,000-plus teu vessels that will be delivered by December 2019. IHS Markit data show that about 30% of that new capacity that will be deployed in 2018 will be for mega-ships of 18,000–25,000 teu.

MSC has a fleet of 490 container vessels, with a capacity of around 3.1 million teu, as well as operating a handful of bulkers, general cargo, and ro-ro vessels. IHS Markit data show that the gross tonnage of its total fleet, both in operation and on order, is 15,197,370 gt. The carrier’s total box capacity grew from 2.84 million teu in January 2017 to 3.15 million teu in January 2018, with an annualised gain of 10.8%. All this growth was achieved organically, according to container shipping analyst Alphaliner.

The analyst said MSC’s pace of growth should slow in 2018, with only 102,000 teu of newbuilding capacity due this year, comprising nine 10,700–12,200 teu neo-Panamax ships. However, MSC remains active on the charter market, fixing units of 8,500 teu this January. The Swiss-Italian carrier has also embarked on a vessel-lengthening program for its ultra large container vessels of 14,000 teu, which will be increased to 17,000 teu. 

The Geneva-based shipping line managed to secure substantial discounts for the construction of its 11 mega-ships from Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries (SHI), but only because it dropped plans to fuel the ships with liquefied natural gas (LNG). Sister company MSC Cruises, however, is going the LNG route with its order for two 200,000 gt LNG-powered cruise ships with options for an additional two vessels.

However, the chief executive officer of a global shipping line told Fairplay on the condition of anonymity, that MSC’s decision not to build full LNG-propelled ships was less of a gamble than CMA CGM’s plan to go ahead with the plan on its order for nine of the 22,000 teu giants.

“The global sulphur cap on marine fuel to 0.5% will be enforced from 1 January 2020, but there remain uncertainties around using LNG as bunker fuel. It may have been advisable for MSC to hedge its bets and go for an LNG convertible option,” he said. 

To provide global bunkering for an LNG-fuelled fleet will require huge investments in infrastructure, both in ports around the world and in the LNG supply chain, and in the production and transportation of the gas. But it will also require an acceleration of the adoption of LNG as a fuel by shipowners, and carriers opting for the cleaner propulsion systems will be hoping the marine fuel cap will speed up the process and quickly reach a critical mass.