Wednesday, December 28, 2011

Worries For Container Shipping Lines Continue As Freight Levels Grow Slowly

Another Box Line Cooperation as Overcapacity Increases
Shipping News Feature

WORLDWIDE – With the news that there has been a strengthening of the ‘Green Alliance’ the world of container shipping is beginning to resemble a real life chess game with victory meaning salvation for the winners and extinction for the runners up. The latest news is that Taiwanese Evergreen Marine, the world’s fourth largest box carrier is to extend cooperation with the four members of the CKYH, the Green Alliance, without formally becoming joining the group. The move comes hot on the heels of the news last week that eight container lines would seek closer collaboration, plus earlier route sharing agreements between MSC and CMA CGM, numbers two and three in the containerised freight market respectively.

The overcapacity which has plagued the trade began when orders for new builds started to come off the blocks last year having been ordered in the heady days before the slump of 2008. Despite slow steaming measures which have meant up to a third more ships being utilised to carry the same tonnages of cargo, times have proved increasingly hard for the lines and this has led to the shedding of charter vessels where possible and the revision of routes.

Despite all the measures taken the price of scrap steel is such that it is now considered by many as cheaper for vessel owners to dispose of old stock at a loss than bear the cost of laying up vessels to await an increase in freight levels. Ships with capacity for over half a million containers are reportedly laid up at present and scrappage of above 20,000 TEU slots went ahead last month according to industry statistics, the highest ever. 2012 may be a very tough year for those whose fleets depend purely on container trade, hence this latest agreement, and despite all lines pruning operating costs where possible already, further savings are being sought by balancing more or less calls to maximise revenue against expenditure.

Whereas the start of 2011 saw many companies holding rates up to ensure profitability it appears that some lost their nerve and reduced contract rates, which are the prime target for any box line, before the years end in an effort to raise TEU levels. A statement from Evergreen today (mirrored by one from the CKYH members) demonstrates the current aim to reduce costs by optimising port service schedules saying:

“Evergreen Line hereby announces that together with CKYH-the Green Alliance, all parties intend to enhance highest frequency of service loops, expedition of delivery terms and full scale of port coverage in their services and agree to strengthen cooperation with one another in Asia-Europe and Asia-Mediterranean trade lanes from the second quarter of 2012.

“Although Evergreen Line will not be joining CKYH-the Green Alliance, and will maintain existing cooperation with China Shipping in Asia/Europe trade, the carriers will coordinate with each other to provide more intensive sailings to the level of eight service loops from Asian ports to Northern European base ports and four service loops from Asian ports to Mediterranean ports every week. The majority of the fleet operated in these total twelve loops will be ranging from 8,000TEU to 13,000TEU size.”

The existing members of the CKYH are COSCO, K Line, Hanjin Shipping and Yang Ming Line and all face direct competition from largest of the container lines Maersk, which has spent billions on its new generation of huge vessels the Triple E series. These giants were designed during busy times with the aim of lowering both the cost per TEU and a consequent reduction in emissions and fuel use, not something achievable when running with only a fraction of their capacity in use, hence the increased port calls, even slower steaming etc.

The CKYH syndicate added the rider ‘Green Alliance’ in 2010 to illustrate their own intention of presenting a cleaner and less polluting profile and, with the additional cooperation from Evergreen, the group will utilise vessels from March 2012 able to carry up to 13,000 TEU’s from the Far East to Europe on twelve separate weekly services. Analysts predict tonnages set to rise by a mere 3% in 2012 against a new build capacity of up to 10% (according to whose figures you believe) it seems bargain prices for importers will continue unless something dramatic happens.