Shipowners may look to larger vessels to overcome their immediate cost challenges, but industry players have warned that bigger ships present a host of other challenges which the industry has to prepare itself for.
The implications of this shift up in size would have adverse implications on other shipowners and terminal operators, they said at the Asia-Pacific Maritime (APM) 2014 conference, reported Business Times Singapore.
The conference, being held at Marina Bay Sands, brings together the region's maritime community and showcases the latest in marine engineering and port technology.
Thomas Kriwat, the chief executive of Mercantile Shipping Co, suggested that the introduction of mega-container carriers-which raise the industry's capacity but keep freight rates down-could be a key reason the container shipping market is taking so long to recover.
He added that the emergence of large carriers has forced shipowners to review their pricing decisions. "We, as shipowners, have to adjust ourselves to the situation. My clear understanding is that capital markets still have to adjust to the freight markets."
He said that the process of consolidation could take quite a few years, and although shipowners are streamlining their businesses and raising their efficiency, "there is only so much we can do".
Hence, in terms of pricing, he said that shipowners need to ask themselves whether the transport service that they provide to the global economy is priced fairly.
The entry of these mega-vessels into Singapore and the region is also likely to affect smaller vessels and the feedering segment, a line of business for his company, he said.
Mahesh Sivaswamy, the chairman and chief executive of Transworld Group, agreed, saying: "From the feedering angle, which we are involved in, the cascading effect possibly comes to a stop somewhere at about 3,000 TEUs."
He said that the trend of alliances among carriers is worsening the situation for smaller carriers, with many of the shipping companies adopting the mantra, "Go big or go home".
"With this excess capacity, carriers will have to discount rates to enjoy economies of scale. This ultimately forces the smaller carriers out of the market," he said.
However, industry players warn that it is too early to write off smaller vessels, because infrastructure and functional needs still drive the demand for them.
Kriwat told the conference that a recent study by his company of 550 of the most important global container ports found that about half of them are accessible only to vessels with capacities of below 3,000 TEUs.
He added that the study showed that the market for smaller vessels was therefore still protected and that their importance would remain "for at least another 10 years".
Jeremy Nixon, the chief executive of NYK Line, pointed out that the introduction of mega vessels also had implications for infrastructure and support services. A lot of the current terminals are geared to handle 13,000-TEU capacity ships, which will become the standard size of ships in the long run.
However, vessels in the future may be built to have capacities of up to 23,000 TEUs; he noted that although these mega vessels may be only about 40m longer than mid-sized ships, their intake could be up to 20 to 30 percent more.
"This means the terminals will have to improve their productivity or they will not achieve economies of scale," he said. And this, he warned, could pose a big challenge to shipowners who may not be able to receive terminal productivity support despite having larger ships.
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