10 April 2024 (Lloyd's List) - ZIM’s elevation in the top 10 carrier rankings marks a step in its move to renew its fleet rather than a major effort to increase its size just for the sake of it.
Figures from Alphaliner show Zim this week rose above Taiwan’s Yang Ming to take the number nine slot with 712,647 teu, compared with Yang Ming’s 707,018 teu.
In the grander scheme of things, this single panamax-worth of capacity difference means little; the two carriers remain 100,000 teu away from HMM, their nearest rival, and neither have an orderbook that will further threaten the rankings.
Nevertheless, it demonstrates how Zim’s fleet renewal programme has seen it end up with a series of larger capacity vessels.
In a call with analysts following the company’s full-year 2023 results last month, Zim chief executive Eli Glickman said the newbuildings were part of a “fuel renewal” that was seeing the company increasingly adopt LNG as a transition fuel.
The line is halfway through taking on a series of 46 long-term chartered newbuildings, of which 28 are LNG-fuelled. Of these, 24 have already been delivered and another 22 are due during the remainder of 2024.
“The advantages of this fleet will shift Zim’s reliance away from older, less fuel-efficient ships to a cost- and fuel-efficient fleet,” Glickman said.
“Our core fleet will be modern, larger and better suited to the trades in which we operate. Our cost per teu is declining as we continue to take delivery of the newbuilding tonnage and redeliver expensive, Covid-era vessels.”
A third of the fleet would be LNG fuelled by 2025, he added.
But while the fleet capacity is set to grow as larger vessels come on line, the number of ships Zim operates — 132 boxships at latest count — is likely to remain static as it returns older, less efficient tonnage.
“We have a total of 30 vessels up for charter renewal in the remainder of 2024, compared to the expected delivery of 23 newbuildings during this period,” said chief financial officer Xavier Destriau.
“Another 37 vessels will be up for renewal in 2025. This gives us ample flexibility to ensure our fleet size matches the market opportunities.
“While we may continue to operate a similar or fewer number of vessels, our capacity has grown and will continue to grow in 2024. The newbuildings are replacing smaller vessels, less cost-effective tonnage, with larger, more cost-effective tonnage, thereby contributing to lower unit costs per vessel.”
Any of Zim’s vessels up for charter expiry in the coming year would not be renewed, he added.
In many ways this fits with Zim’s “asset-light” model it developed that allows it to flex its capacity according to market demand, although the newbuildings lose some of that flexibility with their long-term charter periods.
Nevertheless, Zim believes the strategy will continue to improve its fortunes, despite its reduced expectations for earnings this year.
“We always expected 2023 and 2024 to be a transition period,” Glickman said.
But he believes the new tonnage will make Zim more competitive when the recovery does come.
“ZIM is betting its new ships will win over new green-conscious customers and, crucially, lower unit costs,” said analysts at Alphaliner.
“In the interim, the company is dealing with unusually high unit costs, with many chartered ships signed at pandemic-era rates, such as the 9,000 teu Zim Shanghai, fixed to July 2025 at $72,700 per day.”
