Date: Tuesday, January 31, 2023
Source: Bloomberg
The tiny landlocked town of Mayview, Missouri, is an unlikely namesake for one of the world’s largest ships.
It’s a rural hamlet of some 200 people where the Old School Store & Bar welcomes Nascar fans with specials on Busch Light, where Michelle’s Place next door serves fried chicken dinners on Sundays, and where utility poles fly faded banners that say, “May the Spirit of Mayview Live On.”
So why did Copenhagen-based A.P. Moller-Maersk A/S name the pride of its fleet, a 399-meter-long (1,309-foot) vessel, the Mayview Maersk?
The company has a tradition of honoring its founders. In 1910, Arnold Peter Moller was married in Mayview, where some of his in-laws lived, and the couple’s home in Denmark was dubbed Villa Mayview.
While it has other categories to choose among—geographic locations, precious stones, royalty and words with a “positive bearing and value”—the 119-year-old company often considers family connections when selecting names for its ships, says Henning Morgen, an in-house historian at Maersk. “It’s a procedure, but it’s a very informal one because it’s also about the culture of the company.”
Part marketing, part projection of national or corporate pride, the naming of commercial vessels is an ancient ritual that remains distinct to each company. But over the coming two years, the industry will share a common challenge: the need for hundreds of new monikers.
Looking to invest record profits made during the pandemic into craft that burn cleaner fuel, container lines went on a buying spree at South Korean and Chinese shipyards, where construction can take 18 months or longer. Many of those new vessels will start arriving in 2023, a year in which many analysts are predicting global trade will stagnate due to a combination of shocks, including the risk that some of the biggest economies will tip into recession. The World Trade Organization is forecasting volumes will grow by just 1% this year, a sharp deceleration from the estimated 3.5% last year.
According to Drewry Maritime Research’s most recent tally, the order book stands at more than 900 ships, with deliveries this year alone expected to add 1.4 million TEUs (twenty-foot equivalent units, a standard measure of cargo capacity). That’s equal to about 5% of the current global total. New capacity is expected to increase by a record 2 million TEUs next year and 2.1 million in 2025 to reach 27.2 million, up almost 50% from a decade earlier, according to Drewry.
Although some aging vessels will be dispatched to scrapyards, and some orders can be delayed, the industry faces a self-inflicted problem of oversupply that could keep shipping costs in check and kick off another round of consolidation—particularly if, as many are predicting, major developed economies sink into economic downturns.
“There is no way that carriers can allow all of the scheduled new-build capacity to arrive as planned,” says Simon Heaney, senior manager of container research at Drewry. “They will have to delay, demolish, layup and void sailings to tame the overcapacity burden.”
Ocean freight rates for containers have fallen 80% from their pandemic peaks and will likely stay near current levels, or they could drift lower given a supply-and-demand balance that’s turned against ship operators, according to Lee Klaskow, a senior logistics analyst with Bloomberg Intelligence.
“Demand growth will be flat at best this year, and supply is expected to increase by mid-to-high single digits, according to where the order book stands today,” Klaskow says. “This may result in depressed rates into 2024.”
Leading the splurge is Mediterranean Shipping Co., which overtook Maersk a year ago as the world’s biggest container line. The two announced last week that in 2025 they’ll break up a vessel-sharing alliance signed eight years ago so they can chart different courses—MSC as an ocean juggernaut, Maersk as a more diversified end-to-end logistics provider. Their order books reflect the diverging tacks.
According to Alphaliner figures, MSC’s order book stands at 133 ships, compared with its existing fleet of 721 owned and chartered vessels. Maersk has just 29 ships on order to complement its fleet of 701. MSC, based in Geneva, is taking deliveries this year of the biggest ships ever built, each with room for more than 24,000 containers—or 33% more capacity than the Mayview Maersk.
At MSC, ships are named after family members of its employees. CMA CGM mixes Parisian pride—the CMA CGM Louvre and the CMA CGM Champs Elysees entered service recently—with names reflecting Greek mythology as in the 2021-built Apollon and Zepyhr.
Taiwan’s Evergreen Marine Corp., which operated the Ever Given when it beached itself in the Suez Canal in 2021, likes consistency; its flotilla also includes the Ever Burly, the Ever Superb and the Ever Useful.
To be sure, companies don’t spend a few hundred million dollars on a new container ship to make a quick fortune. Matson Inc., based in Honolulu, announced plans in November to purchase three new vessels for about $1 billion. Chief Executive Officer Matthew Cox says Matson expects they will be used for 40 years, complementing its current fleet of ships, which have names that pay homage to Hawaii.
The International Maritime Organization, a UN regulatory agency based in London, has no guidelines on the naming of ships but it does have rules for assigning ships permanent identification numbers.
It’s the names, not the numbers, on ships that stick with customers of ocean-shipping services, says industry veteran John McCown, the founder of Blue Alpha Capital, which tracks US port volumes and container liner profits.
“The names still have relevance for shippers, and when they are reviewing schedules and making a booking, the name of the vessel is fairly important,” says McCown. He’s doing preliminary research into how the process works in order to have a military cargo vessel named after his former mentor, industry pioneer Malcom McLean.