¡¡¡¡Despite the glum global economic situation and pessimistic prospects for the container shipping market, most of the world's top 10 container liners are still keen on ordering a large number of new or big vessels, with the only exceptions being Hapag-LIoyd Container Liners, which is planning to sell out the entire company, and Evergreen Marine Corp. Ltd. (Evergreen), which has always been a prudent and conservative market player. To others' eyes, these liners are doing something rather ambitious, even risky.

¡¡¡¡Liner giants: busy with shipbuilding

¡¡¡¡Maersk is far from being the only one ordering a succession of new vessels, and Evergreen seems pretty "alternative" for remaining so prudent.
¡¡¡¡Maersk: go against the market trend
¡¡¡¡In late June, Maersk ordered eighteen 4,500-TEU vessels. On July 4th, aiming at the frozen goods market, it again set orders for sixteen 7,450-TEU vessels. Earlier this year, Maersk ordered seven 4170-TEU ships, whose speed will be up to 29.2kn, with daily fuel consumption at 260 tons. From these moves, Maersk has shown a full confidence in the supply of high-tariff goods.
¡¡¡¡According to statistics from AXS-Alphaliner, by June 2012 when the newly-ordered 34 carriers with a total of 200,200 TEU are completed and delivered, Maersk will possess 655 vessels altogether, having 2,536,307TEU in capacity. Put another way, in four years Maersk will enlarge its capacity by 30%, a move which others have suggested "goes against the market trend".
¡¡¡¡Although Maersk has maintained its composure in ordering new ships, even keeping the order in Odense Shipyard a "secret", each of its steps has triggered more speculations: hasn't this leader felt enough to buying more ships?
¡¡¡¡Evergreen: staying prudent as usual
¡¡¡¡Evergreen is the most prudent one among the major liner enterprises, which is proved in its showing little attempt for higher ranks, never getting engaged in mergers and acquisitions and only ordering vessels below 7,000 TEU.
¡¡¡¡As early as in March 2006, it was reported that Evergreen plans to order 20 7,000-TEU vessels. In August 2007, from Tacoma Port on the U.S. West Coast there came reports of an Evergreen 7,200-TEU vessel at anchor. However, on its own webpage, the biggest ship announced up to June this year was still the 5,652-TEU U-boat. The 7,000-TEU vessel is probably in name of one of its subsidiaries. Or at least by March2007, Evergreen had no 6,000-TEU-plus ship in possession. During the second half of 2007, with 600,000 TEU in hand, Evergreen has managed a stable seat as the 4th among the top 20, where it is able to wait however without being raced out.
¡¡¡¡At the same time, Evergreen is more or less wavering at its policy of "ordering no big ships". The so-called "big" used to mean 6,000 TEU, but was later limited at 7,000 TEU, and currently 8,000 TEU. In June this year, Wang Longxiong disclosed in a meeting that Evergreen will have 70 more 8,000-TEU vessels built provided shipbuilding prices return to a reasonable level.

¡¡¡¡More than one factor pointing at an adverse market

¡¡¡¡It seems to have come to a conclusion of the negative expectations on the global economic situation as well as the container shipping market. Specific reasons may be generally listed by their time sequences: the United States suffered the sub-prime mortgage crisis, the U.S. economy slumped, the US dollar continued to depreciate, oil prices continued to skyrocket, RMB appreciation accelerated, China's economic growth rate slowed, China's export growth rate declined, and Pan-Pacific shipping routes reached excess capacity, with Asia-Europe route capacity also saturated.
¡¡¡¡Over the past five years, every time there have appeared some negative symptoms in the container shipping market, cargo owners (including importers and exporters, consigners and consignees, the shippers) and some shipping investment research institutions will quickly present pessimistic views. Nonetheless, more optimistic views will later be cast by shipping companies including ship owners, operators and carriers. Out of several such contests in five years, shipping companies have won the most.
¡¡¡¡But the negative prospects this time are absolutely different from those in the past. As recently as in early July of 2008, a number of frustrating events occurred.
¡¡¡¡For one, Maersk removed the popular route AE5, which used to gather a weekly capacity of about 4,000 TEU. Jacques Saade, Chairman of CMA CGM has warned in the public: "At least in the following 18 months, I am afraid that the entire container shipping industry is to be dragged by the slowing down economy in Europe and the US." He also said that the world economy is experiencing a real slowdown, and there could be no sign of recovering until the end of 2009. Thus Saade has become the first ship owner to publicly express concerns about prospects for the container shipping market.
¡¡¡¡Additionally, from the end of June to early July, despite rent of the new 3,586-TEU vessel-Nord Winter-dropping to USD 30,000/day, it was still abandoned by CMA CGM and was finally leased to ZIM for as low as USD 28,000/day. On July 1st, FEFC has tried for the last tariff rates rising on Asia and Europe routes collective, however because of the falling utilisation rate of shipping space, cargo owners have eventually failed in the negotiations.

¡¡¡¡Stable cargo supply, forward-looking liners

¡¡¡¡Since the market prospects are unfavourable, why are liners still choosing to go against the trend?
¡¡¡¡Steady-going total cargo volume
¡¡¡¡A cycle of four to five years would be indispensible when forecasting the container shipping market, i.e. it is somewhat difficult to make a long-term decision based on recent situations.
¡¡¡¡Consequently the global economy as a whole is still ascending, though perhaps a bit unbalanced at the moment.
¡¡¡¡In other words, the total volume of global goods will not be reduced, but the increase in cargo transport volume will be smaller, growth slower. Conversely, if the global economy tends to grow better, then the total GDP will not only increase at a  substantial speed, but also will rapidly promote a rise in cargo transport volume.
¡¡¡¡Notable scale results
¡¡¡¡Before a stable total volume is achieved, the major challenge will be nothing less than the competition among all liners when the capacity has exceeded actually transported volume. Then who will be able to survive the severe test?
¡¡¡¡Of course it is those who can reduce tariffs to attract consignors. The only way to reduce the tariffs without any loss is to reduce costs. And in many possible options, the most feasible one is to pursue a scale effect. For example, the costs of a single box on a large container carrier is significantly lower than that regarding a smaller one, which is why many major shipping liners are ordering large vessels. Early March this year, the world's top three container liners--Maersk, Mediterranean Shipping and CMA CGM-joined their efforts through a shipment space sharing agreement to remove four former Pan-Pacific routes. Instead, three new routes have been opened in the same area (Far East-West of the US). By using fewer but larger boats, the original availability allocated has not been reduced but space utilisation rate been increased. Thus, the scale advantages of 8,000-TEU ships are fully played, with lowered speed, less fuel consumption, and reduced costs of a single box together successfully making up for more investment into ordering new ships. In the current declining market and the downturn of shipping prices, they manage to find their own way out to retain as many customers, therefore maintaining the leading positions.
¡¡¡¡A protracted war full of variables
¡¡¡¡He who stays longer will have a bigger percentage to survive. Shipbuilding is merely one of the ways to maintain strength. For those large container liners, the situation will become better if there is support from listed companies with good assets or even from the government. Typically, backed up by Maersk Group who has highly profitable assets like oil fields, Maersk Line has survived several years of loss with constant mergers one after another.
¡¡¡¡There is more supply than the demand. If we consider the competition among container liners as sports game (a kind of football match without time limits), then he who stays longer is sure to win out. Certainly, the market is always full of variables. On the one hand, it is not without any chances to convert this current market trend. No company, no matter how big the scale, will have easy days if the downturn in container shipping persists. On the other hand, though it is high time some large liner companies showed their strength, this does not mean that small and medium-sized companies are willing to be easily taken. Some of them may also survive by specialising and employing their "special advantages".

¡¡¡¡The author's view
¡¡¡¡Despite of the ups and downs in the market, in the long run, major container liners must have their own reasons for ordering big ships. The question of how big the ships could be is worth discussing. What Zhang Rongfa has suggested should be noted. And for controlling the number of new ships, it is crucial and sensible for shipping companies to give a rational and realistic assessment of how vulnerable they could be towards challenges. Finally, it is a topic beyond our current discussion if some new big ships fail in fully displaying their potential or relating resources are wasted due to human-induced improper management and application.