Industry leaders in the container markets have placed multi-billion dollar orders for the world’s biggest vessels to meet growing demand in Europe and the United States for Chinese manufactured goods.

Maersk in February ordered 10 of the world’s largest container ships for $1.9 billion and took options on 20 more vessels of a similar size to capitalise on expected growth on the benchmark Asia-Europe route.

Norway-based The Containership Company has announced it will suspend its container shipping operations on poor cargo volumes and excessive competition, industry group Alphaliner said. Others are poised to follow. 

US-based container shipper Horizon Lines warned last month it could also be forced to seek bankruptcy protection for not being able to comply with its debt agreements.

The global container market is poised to consolidate in the next few years as A.P. Moller Maersk and other major shippers roll out bigger vessels, potentially forcing smaller rivals to drop out of an already oversupplied market.  Medium-sized container firms warn that a move by the majors to flood the market with mega ships could spark a “rate war” similar to 2009 when the market plummeted and most firms fell into the red in one of the industry’s worst downturns.

“We believe that the largest shipping companies will continue to expand the scale of economies of the industry,” said Thomas Knudsen, Maersk Line’s chief executive for Asia Pacific Region, at an industry conference in Singapore.

“As we drive these scales of economy, it will be difficult for the smaller carriers in these industries to compete. That will drive consolidation.”    

Maersk, the world’s top container shipper which holds a 15 per cent share of the container market, is expanding its fleet by around 8 per cent annually to keep up with economic growth.

“We are not doing this aiming at taking market share,” Maersk Chief Executive Nils Andersen told reporters at an industry event. He agreed that consolidation would be the most likely outcome.

Bigger is better

Due for delivery from 2013, Maersk’s 18,000 twenty-foot equivalent unit (TEU) container vessels would surpass the current largest box ship of 15,000 TEUs, also owned by the company.

Switzerland-based Mediterranean Shipping Company and French privately held CMA-CGM, which are the next two biggest container shippers after Maersk, are also looking to expand their fleet with ships above 10,000 TEUs, analysts said.

About 50 mega container ships with 10,000 TEU capacity or more are expected to be delivered this year, making up nearly half of the total new capacity of 1.35 million TEUs due for 2011, according to the leading industry consultancy group Alphaliner. The orderbook showed 59 mega ships for 2012.

“Bigger is better if you can fill the ship,” said Randy Chen, special assistant to the president at Taiwan-based Wan Hai Lines.

“If your ships are not full, you need to put the vessels away for the short period of time to make sure the revenue covers the costs.”

But major shippers were unlikely to idle new ships, placing the burden of plummeting freight rates on smaller rivals.