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            july 24, 2019

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CILF 2019

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Trend to upscale box ship capacity is not losing its appeal soon


Building scale will continue to be a key strategy for container shipping lines for "a fairly long period", says Cosco Shipping Holdings (CSH) executive director Zhang Wei, who believes it is a necessary strategy to establish global networks and enhance competitiveness.
"For whatever industry, ultimately your competence is the capability to consistently offer price-competitive products to your clients," Mr Zhang told a press conference, reported UK's Lloyd's List. "If you don't, you'll be eliminated from the market, even if you're in a monopolistic position."
CSH, the containership and port arm of China Cosco Shipping Group, is said to now control the world's third-largest box ship fleet through its acquisition of Hong Kong-based rival Orient Overseas International Ltd last year.
In August, OOIL revealed plans to raise its fleet capacity to one million TEU, up from 700,000 TEU by methods that include ordering mega-ships.
While he declined to elaborate on the company's newbuilding schemes, Mr Zhang said carriers' recent ordering spree of mega-ships was in line with efforts to provide "price-competitive" services and the strategy was not wrong per se, despite the trend to invest heavily in mega-ship capacity being a major factor behind the prevailing situation of supply outstripping demand.
"The challenging part is of course how to match the ordering with cargo demand."
His remarks were made in response to reports that the company is considering placing orders for more mega-ships. Industry sources earlier said OOIL was planning to build six 23,000 TEU ships in China after completing the disposal of the Long Beach Container Terminal.
"Technically, whether the 20,000 TEU ship is the right size for the industry remains to be seen," said Mr Zhang. "But scale-up will still be the long-term trend for our industry."
Shanghai-and Hong Kong-listed CSH posted net profit of CNY1.2 billion (US$183.3 million) for 2018, supported by CNY1.1 billion in government subsidies. Excluding one-off items, net profit declined by 80 per cent year on year to stand at CNY190.4 million.
In a separate development, Cosco Shipping Lines, the container shipping unit of CSH, signed a deal with Double Rich Ltd (DRL) to provide compliant fuel for the former's fleet to meet the International Maritime Organizations' (IMO) 2020 sulphur regulations. DRL is a joint venture between Cosco Shipping and PetroChina, reports Shipping Gazette.

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