If the P3 Network gets the go-ahead from regulators, it will enjoy a cost advantage over the G6 alliance not only because of the larger average size of its ships, but also because its fleet is younger, according to a new analysis from SeaIntel Maritime Analysis.
The younger of two ships of equal capacity can be significantly more fuel efficient due to technology advances. According to SeaIntel, the 13,000-TEU ships ordered by Evergreen in 2012 use 30 percent less fuel than a vessel of comparable size ordered just a few years earlier.
“Newer vessels are significantly more fuel efficient than older ones,” SeaIntel said.
Following the announcement last spring of the P3 Network, an alliance of the world’s three largest carriers, SeaIntel reported that on the Asia-Europe trade the P3 will deploy larger tonnage than the G6 and the CKYH alliances, the other major alliances operating on east-west trades. Now it’s saying that on top of that, the age of ships in the respective groupings will also work in the P3’s favor in a global sense, though not necessarily on individual trade lanes.
“Our analysis shows that if the P3 alliance gets approved, the unit cost advantage because of their larger vessels will be even larger than initially assumed, at least when compared to the G6 alliance, as the P3 carriers on average deploy significantly younger vessels,” SeaIntel reported in its weekly Sunday Spotlight.
In four east-west trades – Asia-Europe, Asia-U.S. West Coast, Asia-U.S. East Coast and North Europe-U.S. East Coast – the G6 carriers’ current deployed ships are 7.6 years old, while ships operated by P3 carriers are 6.7 years old.
The analysis is based on the currently deployed ships by carriers in the alliances, as it’s not known yet which exact ships would be deployed by the P3 when the alliance becomes operational. The age differentials differ widely across the individual trades, which is significant as the competitive advantages would tend to play out within individual markets rather than globally. For example in Asia-Europe, the P3 carriers – Maersk, Mediterranean Shipping Co. and CMA CGM – operate ships that are 5.4 years old on average, while the G6 carriers’ ships are 3.6 years old. The G6 includes APL, OOCL, MOL, Hapag-Lloyd, NYK Line and Hyundai Merchant Marine. In the Asia-U.S. West Coast market, the P3 carriers’ ships are 7.7 years old, versus nine years for the G6.
The issue of cost advantage is critical. Carriers with lower cost structures will be more profitable than the competition and will have a greater ability to withstand periodic collapses in rate levels, a frequent occurrence given high rates of volatility in trades such as Asia-Europe and the trans-Pacific.
The size of ships is critical in this respect. A main reason for the P3 Network being created was to maximize the vessel size the three carriers will deploy on east-west trades, thus driving down per-container costs. SeaIntel reported last year that as of the second quarter of 2014, the average size of P3 ships on Asia-Europe – 12,675 TEUs – will be 12 percent larger than ships deployed by the G6 and 27 percent larger than ships deployed by CKYH, comprised of Cosco, K-Line, Yang Ming and Hanjin. A year later, in the second quarter of 2015, when taking into account new vessel deliveries such as additional 18,000-TEU Triple E ships delivered to Maersk, the P3’s average ship size in Asia-Europe will grow to 14,125 TEUs, 21 percent larger than the G6 and 24 percent larger than the CKYH, SeaIntel said.
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