Maritime market updates

Weak demand for top 25 container ports

The top 25 container ports, which consist of 11 ports in China, seven in Far East, four in Europe, two in the US and one in the Middle East, witnessed a volume growth of only 4% in 2012, which is as against a growth of 8.7% in 2011 and 15.5% in 2010. In fact the growth slowed only to 2.8% during the second half of last year.

Indications are that the Far East to Europe route which includes the Indian Sub Continent would be the worst performing trade lane in 2013, primarily driven by the diminishing European consumer demand.

Maersk’s Line decision to suspend its AE-9 service would lead to several of its 7,000-6,000 Teu ships being unemployed in the next few months reflecting the gravity of the slump. Estimates of the container trade statistics reflect that full year throughput figures for 2012 on the Asia to Europe trade when compiled would fall by 500,000 Teu compared with 2011.



Hong Kong world’s worst performing major transport hub

The Port of Hong Kong ranked as the world’s third largest container terminal handled 23.1 million Teu last year, which is a contraction of 5.3% compared with 2011. This is the first time that Hong Kong recorded a decline in container throughput since 2009 when its volumes fell by 14.1%, which was at the height of economic crisis.

In December 2012 container volumes in Hong Kong declined by 11.3%, year on year. At the world’s busiest container port Shanghai, volumes increased by 2.5% last year to 32.5 million Teu which is a slow down compared with 2011 growth rate of 9%. The second placed Singapore, posted a modest rise of 5.9% in container throughput to 31.6 million Teu last year.



World’s largest container lines offices raided

As reported in the Lloyd’s Loading List, Russia’s Anti Trust Investigators have raided the offices of 12 leading container lines, which included the top three, Maersk Line, MSC and CMA-CGM. In a statement, Russia’s Federal Anti Monopoly Services (FAMS) listed the companies visited and had called for information relating to possible violation of law by marine transport service providers.

The FAMS statement further said: “Marine container transportation makes a significant impact upon developing international trade. In the recent years the share of container cargo in the total cargo turnover has reached 55% based on worldwide average data. Since cost of marine container transportation constitutes a significant portion of the price of goods, every increase of transportation costs directly affects customers across the globe.”

In 2008 European Union outlawed price fixing by shipping conferences and continues to monitor behaviour of shipping lines. Authorities in US, Europe and in Asia have carried out anti-trust investigation against shipping lines.



Maersk rules out acquisition and mergers

Maersk Line Chief Executive in a statement said that “it had no interest in expanding through mergers and acquisitions in the container shipping sector for the foreseeable future”. The Danish shipping lines rose to the top through a series of takeovers. The shipping lines is also scaling back its investments on further fleet expansion due to poor financial results.

Commenting on the possible merger discussions between Hapag Lloyd and Hamburg Sud Maersk CEO said the deal if it goes through would be an ‘isolated’ event and was unlikely to play the role of a catalyst for another round of mergers and acquisitions.



Container shipping lines pose mixed results

The Seoul listed Hyundai Merchant Marine (HMM) is expected to double its nett losses for 2012 to approx. US$ 922 million which is as against a loss of approx. US$ 450 million sustained in the previous year. The increase in losses has been attributed to higher operating costs, fuel costs and stronger won.

Maersk Shipping Line having posted a disastrous US$ 600 million loss in the first quarter of 2012 followed a slightly improved first half loss of US$ 372 million in 2012. However, the shipping line has now completely turned around with a better than expected US$ 489 million profit in the 3rd quarter of 2012 which includes Maersk Line, Safmarine, MCC Transport and Seago, reflecting more than 50% of the Danish Transport and Energy companies nett profit of US$ 933 million. However, what is alarming is that Maersk Line nett profit recorded only 2.4% return on capital invested.

Neptune Orient Lines (NOL) is back in the red in the 4th quarter of 2012 recording a loss of US$ 98 million and have reported an overall loss of US$ 419 million for the year 2012. NOL’s liner shipping business APL sustained a loss of US$ 279 million for 2012.

Meanwhile, CMA-CGM, the third largest carrier with its debt standing of US$ 5.7 billion of which US$ 4.6 billion owed to banks has positioned itself for an eventual initial public offering following the debt re-structuring program negotiated with banks. CMA-CGM Chief Executive said: “The finalisation of the debt restructuring, combined with new equity injection from FSI and Yildirim Group and the sale of 49% of Terminal Link, will allow CMA-CGM to operate with the required financial flexibility and constitutes key milestones before contemplating an IPO.”



Freight rates decline after Chinese New Year

Consequent to the pre-Chinese rush spot rates on the Asia-Europe sector have taken a significant dip. The Shanghai Container Freight index on the Asia- Europe and Asia to Mediterranean, declined by 7.8% and 8.7% respectively, to US$ 1199 per teu and US$ 1148 per teu. Downward trend was also witnessed on Asia-US West coast and Asia to West coast tariff by 3.3% and 2.5% respectively.

A spokesman at Drewry Shipping said: “Now that demand has returned to seasonal norms we expect rates to weaken further over the coming weeks.” It was obvious that carriers had to adjust capacity in the short term to prevent rate erosion, particularly, on the Asia-Europe trade. Meanwhile, major carriers have announced GRIs ranging between US$ 600-US$ 775 per teu on Asia-Europe commencing March 2013. In the past GRI attempts had limited success.



Tuticorin Court permits PSA to freeze Royalty payment

In a landmark decision Tuticorn District Court has permitted PSA to freeze its annual royalty payment to the Ports Authority. In accordance with the Concession Agreement, PSA had to pay US$ 1.92 per container in the first year of operation and subsequently raise to US$ 97.56 per unit, at the end of the 30-year contract.

This year the royalty payment would have reached US$ 49.91, which is said to be higher than the handling fee charged to its customers. Attempts made by PSA to increase tariff has been blocked by the Indian Tariff Regulatory Tank.





(The writer, a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK) and a University of Oxford Business Alumni. He is also a NORAD /JICA Fellow. He can be reached via email on [email protected].)