Maritime Market Updates

Global unemployment concern shipping

By 2017 approximately 211 million people will be out of work according to the International Labour Organisation (ILO). The number of unemployed workers worldwide has increased by 28 million in the last five years leaving 197 million people without jobs as at 2012. This is an indication of a crisis in labour markets of both developing and advanced economies. In 2012 four million people joined the unemployment fold, and this figure will swell by another 5.1 million workers this year to 202 million.  Unemployed job seekers surpassed the all time record of 199 million unemployed in 2009.

According to the ILO report, the unemployed numbers does not include the hordes of people who have stopped searching for work and dropped out of the labour market entirely, ‘masking the true extent of the jobs crisis’.

In its half yearly world economic report released by IMF, the global economic growth is expected to reach 3.5% this year, marginally up from 3.2% in 2012. The demand for carriage of goods is a derived demand, and derived out of the demand for trade which in turn depends on consumption.  Especially in the developed world wage suffering has placed pressure on consumer spending. Approximately 73.8 million job seekers are in the age group of 15 to 24 and are struggling to find employment.  The youth unemployment rate is expected to increase to 12.9% in 2017 from 12.6% now. The global jobless rate is expected to remain at 6% through 2017.

Container ship owners pray for market uptake

According to the latest report compiled by Lloyds List Intelligence (LLI), there are approximately 333 container ships jobless representing 6.6% of the global cellular fleet.

The number of idle ships is not a true reflection of the perilous state of the shipping industry considering the fact that many ship owners have chosen to subsidise the running costs of their ships hoping that the market will pick up.  There are around 165 ships inactive up to 1,000 Teu in vessel capacity, of which 108 vessels have been mothballed for more than 90 days.  Most of these feeder vessels have been built before the oil crisis, hence not fuel efficient and is not wanted in today’s’ US$ 600 per ton world.

The number of idle vessels is expected to rise after the Chinese New Year and it could spike significantly if owners decide to no longer subsidise the operating costs of their ships. It was an eye opener to many that 14 container ships which Clause, Peter Offen’s Bankers wanted to sell were earning a charter income of only US$ 6,000 per day, while finance and operating costs amounted to three times that number.  During the last crisis in 2009, around 600 container ships were laid up. Laying up a ship whether it is hot available for fast re-commissioning or cold kept electrically dead comes with a cost.

Peak season surcharge from Asia to Europe was it a flop?

The Peak Season Surcharge (PSS) announced by major carriers on the Asia, Europe trade prior to the Chinese New Year commencing on 20 January could not hold due to surplus capacity.  MSC who started the ball rolling announcing US$ 300 per Teu PSS effective on 24 January had to withdraw the increase.

“Presumably they have decided that there is a better chance of achieving a rate hike at the beginning of March”, a broker said in an indirect reference to Hapag Lloyd’s recent announcement to levy a US$ 750 Teu Asia Europe rate increase on 15 March.  However, some carriers managed to recover an increase of US$ 250 Teu, on Asia-Europe in the run up to the Chinese New Year.  The implementation of the proposed March GRI and its recovery would depend on how strong the demand growth would be after the Chinese holidays and whether carriers could manage over capacity through higher vessel utilisation.

With an additional 40 ships of at least 10,000 Teu expected to be delivered this year, carriers will have a difficult time deploying them without further afflicting damage to supply/demand balances.

The schedule pattern of services as it stands today, indicate that implementing a GRI effectively will be a tall order. On a positive side Drewry is forecasting global demand to increase by 4.6% this year which is however, subject to several caveats such as the ability of the fast growing North/South trades to prop up the deficiencies elsewhere.  It has to be recognised that the head haul compounded annual growth rate of the three core East/West lanes from 2008 to 2012 has been only 0.4%.



Maersk Line barely two months after re-activating the AE-9 loop on its Asia North service has suspended its service due to continued disappointment in load factors.

Maersk Line top performer but MSC most improved

According to SeaIntels’ container carrier schedule reliability report which is based on 10,000 monthly arrivals in more than 200 ports across 32 trade lanes, Maersk Line was ranked No. 01 at 91% followed by Hamburg Sud and APL against an average score of 81%.  The report also indicated that MSC had recorded the biggest improvement in reliability increasing its performance level by 11%.

SeaIntel concluded that schedule integrity varies significantly across individual trades thus shippers should look at specific trade data and not the global performance.

However, elsewhere as reported by Drewrys’ on time performance report Hanjin Shipping had surpassed Maersk Line as the most reliable major carrier. In the SeaIntel full years’ report Hanjin was ranked seventh.

DP World global throughput per annum tops 50 million Teus

Dubai based DP World handled a throughput of 56.1 million Teu, across its global terminal network in 2012.

The Dubai based container terminal specialist with significant interests in India said, increased volumes were driven by good performance in Americas, Asia Pacific and the Middle Eastern regions where increased productive and efficiency attracted greater volumes.

In a report filed the operator said that with planned new capacity on track in Santo, Brazil/Jebel Ali and London gateway, the company is well positioned to make further progress in 2013.

DP World which operates the Port of Vallapadam on the southern tip of India is desperately trying to increase its market share on Indian trans-shipment traffic.

Indian subcontinent

From April to December 2012, 11 Indian major ports handled a throughput of 5.8 million Teus which is a contraction of 1%.

In the two main container ports Nhava Sheva and Chennai, the decline was 2% and 1% respectively. Meanwhile, the recently launched port in the East Coast of India Krishnapatnam is gathering momentum with Maersk Line extending its Far East/India East Coast Chennai express to cover the port.

Despite withdrawal from Nhava Sheva’s fourth 4.8 million Teu container terminal project, PSA and ABG may be allowed to participate in the new tender for the same facility which is now been split into two.



The 10 largest container carriers to and from the US, witnessed their 2012 nine month lifting rise by 6% year on year to 14.85 million Teu. Maersk Line regained its No. 1 position taking over from MSC with a significant 12% growth.

G6 Alliance capacity reduction on Asia/North Europe will continue

Shipping Lines within the G6 Alliance have announced that it will not reinstate the Loop 3 Asia/Europe service which was suspended in October 2012.

Accordingly, they will maintain the current five Loop structure for its Asia/North service in 2013.

However, the Alliance has made adjustments to accommodate port calls from the Loop 3 service. The G6 Alliance members are MOL, APL, Hapag Lloyd, Hyundai Merchant Marine, NYK and OOCL.

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