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Maersk CEO: “No intention of building larger ships”

Soren Skou, CEO, Maersk

PortandTerminal.com, March 6, 2019

Long Beach, CA – Speaking yesterday at TPM, the giant container conference in Long Beach, Søren Skou, the CEO of AP Moller-Maersk, told delegates that he had no intention of building larger container ships.

Skou said investments going forward would be elsewhere rather than on so-called megamaxes, a ship type he likened to Airbus’s A380 aircraft, which has proven to not be a commercial success. Skou observed that megamaxes are only suited for a few ports around the world.

The case for larger container ships

Container ships have grown bigger at a rapid pace over the last decades, faster than any other ship type. In one decade, the average capacity of a container ship has doubled. The rationale for larger container ships seems clear. Larger container ships generate cost savings for carriers through economies of scale and decreased maritime transport costs for shippers.

The case for not making container ships any larger

Increasingly, a growing number of industry and academic voices are saying that we have reached the point of peak, rationale container ship size. In a report for the OECD International Transport Form titled “The Impact of Mega-Ships”, a number of factors where identified that suggest that the case for ever larger ships is becoming difficult to make. Two of their main points in the report follow as does a Tweet by one its authors, Olaf Merk at the OECD.

Economies of scale of shrinking: The cost savings of the newest generation of container ships are four to six times smaller than the savings from the previous round of upsizing.

There is overcapacity in the industry: The massive ordering of new mega-ships has resulted in oversupply of container ships, which will most likely dampen some of the cost savings due to larger ships, as low demand results in fewer savings per transported container.

Maersk’s decision to stand-down on increased ship size

For a brief period of time in 2017, the Madrid Maersk was the largest container ship in the world

Soren Skou’s decision to have Maersk stand down from the container ship arms race makes sense for Maersk and the entire industry. Whether or not other shipping companies follow his lead remains to be seen.

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