Maritime Market Update

Maersk ultra large container vessels: Will it call on

South Asia?

As reported in Dynaliners, on 15 July, just two days after Maersk Mckinney Moller would have turned 100 years, the first of Maersk Line’s 20 18,270 TEU Triple E Class vessels will make its first port call at Busan, a few miles away from where the ship was built.  

The ship will be phased into Europe-Far East AE10 service and the port rotation announced is Busan, Kwangyang, Ningbo, Shanghai, Shenzhen (Yantian), Tanjung Pelepas, Rotterdam, Bremerhaven, Gdansk, Aarhus, Goteborg, Bremerhaven, Rotterdam, Tangier, Singapore, Yantian, Hong Kong and back to Busan.

Availability of sufficient traffic would be a critical determinant in the selection of port of calls. When all ships are phased in, the number of port calls will be far less and being able to handle approximately 6,000 moves per day with a port stay of 24 hours will be the benchmark ports will have to achieve.  

Meanwhile, China Shipping Container Lines has confirmed that it will operate its five 18,400 TEU new buildings in conjunction with similarly sized ships of UASC which is yet to be ordered. Reports indicate that due to China Shipping paying US$ 136.5 million for its 18,400 TEU Leviathans, Maersk Line has convinced the shipyard to reduce the price tag for its 18,270 TEU Triple E Class vessel by approximately US$ 5 million to US$ 185 million apiece.

Though Maersk Line has invested US$ 30 million in a twin engine configuration to save costs, it will be difficult to compete against the lower building cost of China Shipping. China Merchant International Holdings (CMHI), the operator of Colombo South Container Terminal, will make every effort to attract China Shipping Container Line to its container terminal when the vessels hit waters by early 2014.

Container shipping lines mitigate 1Q losses

The first quarter 2013 turnover of APL Container Shipping division dropped by 2% year-on-year to US$ 1.92 billion. Due to a book value gain on the sale of its head office in Singapore, though NOL Group posted a US$ 76 million net profit, it is however against the loss of US$ 254 million posted during the same quarter of last year.  

APL’s first quarter liftings dropped by 2.4% year-on-year to 1.54 million TEU. Hapag Lloyd’s liftings during the first three months of this year at 1.32 million TEU remained flat though its turnover increased by 3% to US$ 2 billion. However, the shipping line posted a loss of US$ 114 million during the first quarter of 2013 against a loss of US$ 162 million sustained during the corresponding period of 2012.

Regional Container Lines (RCL) posted a net loss of Thai Baht 358 million (US$ 21.1 million), which is a marginal improvement compared to a loss of Thai Baht 492 million recorded during the same period in 2012.  

Another carrier, STX Pan Ocean, recorded a loss of US$ 65 million during the first quarter of 2013 which is as against a loss of US$ 103.8 million recorded for the same period in 2012. Hyundai Merchant Marine, the second largest Korean container operator, minimised its net loss in 2013 to Won 99 billion (US$ 89 million) as against a loss of Won 999 billion sustained in the corresponding period of 2012.

Asia /Europe Freight increases by US$ 1,000: Can

it hold?

East/West trade freight rates have dramatically declined since April this year and as at today, the collective index reads US$ 2,000 per FEU as against estimated U$ 2,600 per FEU recorded at the beginning of the year.  

In mid-2010, the collective average rate was around US$ 3,200 per FEU, which is 60% higher than the average East/West rate today. Shipping lines are determined to arrest the freefall of rates and Hapag Lloyd has announced an increase of US$ 1,000 per TEU from Asia to North European ports effective 1 July. It has also announced the implementation of a peak season surcharge from Asia to North Europe of US$ 500 per TEU on 1 August applicable until 30 September.

Maersk Line has also announced a general rate increase of US$ 750 per TEU on the Asia-Europe West bound trade lane, effective 1 July. Can shipping lines sustain these rate increases without addressing fundamental supply-demand woes?

US import containers slowdown

Despite an increase of 3.3% to 1.4 million TEU in May compared with the same month in 2012, import box volumes destined to US shopping malls are expected to slow down. As reported: “The weak cargo increases expected over the next few months are consistent with other signs that the economy is slowly improving, but shows that retailers remain cautious when it comes to stocking their inventories.”  

The National Retail Federation and Hackett Associates cautioned that cargo import numbers did not co-relate directly with retail sales or employment because they accounted only for the number of containers brought into the country and not the value of the merchandise.

With consumer confidence low, employment struggling to recover and less cash in shoppers due to payroll tax hike, US shopping malls may witness “trickle to a standstill” which will adversely affect shipping lines.

Drewry’s latest Hong Kong-Los Angeles container rate benchmark is down to US$ 2,032 per loaded 40 foot container after losing another 4.3% in seven days. Spot rates, which cover only a small percentage of cargo shipped from Asia to the US but are widely used as a benchmark, are now more than 12% lower than in May 2010 when rates stood at US$ 2,337 in the corresponding week.

Floating port gets governmental approval

As reported in World Cargo, the world’s first proposal to develop a large scale floating logistics facility for remote areas has been granted ‘major project facilitation’ status by the Australian government.  The National Ports Corporation (NPC), a Western Australia based company run by the Lucido family and chaired by John Jenkin, a former chairman of the Association of Australian Ports and Marine Authorities, sought government assistance for its field support hub project.

The company was established to service the growing needs of the global energy sector, particularly in high growth regions where remote developments are reliant on inadequate, often non-existent shore based ports and supply bases.

The writer, a Maritime Economist, is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a NORAD /JICA Fellow