Wednesday, January 19, 2011

Clever Tactics Keep Container Freight Carriers Ahead Of The Game

Lessons Learnt in the Slump Buoy Shipping Lines
Shipping News Feature

WORLDWIDE – Yesterday the New World Alliance declared its intention to temporarily reduce capacity on selected Trans-Pacific Trade services to coincide with Lunar New Year factory shutdowns in Asia. To those who don’t know the NWA is a loose affiliation of three major container shipping lines, APL (part of Neptune Orient Lines-NOL), Hyundai Merchant Marine (HMM) and Mitsui O.S.K. Lines (MOL) and the reduction is expected to last around six weeks.

The tactic is another demonstration that the container carriers have learnt from their bitter experiences two years ago when cargo levels collapsed and rates tumbled. After a brief tariff war all the major players realised that this was a game it was likely none would win.

Winter deployment programs have now become routine for The New World Alliance carriers and the Trans-Pacific trade in general, where Asian exports slow significantly during the Lunar New Year holiday break. Factory closures sharply curb the production of finished goods which are a staple of the trade.

This year however the cut backs are likely to be stretched a little further as Alliance members claim the Lunar New Year factory closures this year are expected to be longer than usual, perhaps up to three or four weeks. This, however, is not the full story.

After looking at possible financial meltdown the ocean box carriers developed new ways of securing their future, not least the present trend toward slow steaming. With fuel prices rocketing faces paled in the offices of those who had gambled on traffic levels ever spiralling upward, confidence in their bold moves to order larger and larger vessels dissipating rapidly. Suddenly it was smaller ships required, not the leviathans being built in Korea and Denmark and a scramble to cancel or postpone orders developed.

Before long the queues of laid up ships stretched for miles and, with a return to some semblance of what is hopefully normality we now see vessels taking longer than ever to travel between ports. Some analysts this week have even referred to a shortfall of ships in the coming months although one gets the feeling this could easily be resolved if required by a heavier foot on the gas, container vessels now transit on average at a slower speed than has ever been noted for ships in their class.

As bulk freighters suffer, watching a steady fall in rates into the 1430’s this week on the Baltic Dry Index, and the oil tanker market feeling the strain in the same way, only canny management by the box boys will ensure their sector remains profitable, if not buoyant.

Photo: Courtesy of Washington United Terminals an affiliate company of HMM