Monday, 16 September 2013 00:00
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The top 10 Global Terminal Operators (GTO) measured by equity share handled 36% of the worldwide container port throughput, which is 223,700,000 teu out of the world’s throughput of 620,732,000 teu in 2012. As reported by Drewry, PSA was the largest GTO last year with a volume of 50,900,000 teu representing 8.2% of the world’s container port throughput. These figures indicate full, empty, import, export and trans-shipment containers.
PSA, which holds a 20% share holding in Hutchison Port Holdings, handled more than 30,000,000 teu at its home port in Singapore, whilst Hutchison Port Holdings handled 44,800,000 teu accounting for 7.2%. APM Terminals recorded a throughput of 33,700,000 teu with a share of 5.4%. DP World almost shared the third position with APM Terminals recording an all-time high throughput of 33,400,000 teu. Whilst cash strapped container lines are expected to sell off full or part ownership of their container terminals, there will be sufficient demand from Global Terminal Operators. With ultra large container vessels coming on stream for deployment on the east/west trade route, bigger ships currently used are bound to cascade into the north/south and regional routes where port facilities have to be expanded. The top 25 carriers owning container terminals, interest include APL, COSCON, China Shipping, Hapag-Lloyd, Hyundai, K-Line, MOL, NYK, OOCL, PIL, Wan-Hai and Yang Ming.
Rates to surge with rush to export
Shipping lines are expecting increase in volume on the Asia/Europe trade in the coming weeks leading up to October 2013 as shippers rush to export goods from China ahead of the National Day holiday which runs from 1-7 October. Whilst this would support attempted increase in freight rates, vessel utilisation also will reach up to 95%. In response to tightening of vessel capacity, Hapag-Lloyd has announced a general rate increase of US$ 500 per teu on services from East Asia to north Europe and Mediterranean destinations commencing 23 September 2013. Two weeks ago Shanghai Container freight index from China to North Europe slipped week-to-week by US$ 55 to US$ 1,183 per teu and during the same period freight rates from China to Mediterranean contracted by US$ 33 to US$ 1,211 per teu.
Will China relax outdated regulations on port tariffs?
The world’s busiest container port, Shanghai International, is lobbing the Chinese Government to relax the outdated regulations on port tariffs which do not permit individual ports to set their own prices. In an exclusive interview with the Lloyds List, the port’s Vice President said that the Ministry of Transport is investigating the issue and is expected to roll out a plan that will rationalise the pricing policy of rates. The Port Tariff Regulation implemented in 1997 has capped the handling charge for a 20’ dry container at US$ 69. According to an analyst, despite the regulations some ports in China have gradually increased charges.
According to local media, attempts to increase charges have provoked a strong backlash from state owned shipping lines such as COSCO Group and China Shipping Group. Due to the slowdown in Chinese exports and the global economic recovery Shanghai port volumes increased only by 2.5% last year to 32.5 million teu, which is substantially a slower growth rate from the 9% and 16% acceleration recorded in 2011 and 2010.
A tough outlook for Korean container shipping lines
Drewry Maritime Research has taken a negative view on publicly traded Korean container shipping lines. In a research note it says that losses incurred by these shipping lines have led to the deterioration of their financial health. It finds their share prices expensive and has stated that the companies have failed to generate sufficient cash flow to cover their operational needs and had relied heavily on short term debt capital from local markets. A senior analyst at Drewry Maritime Equity Research said, “Korean container shipping companies have their backs against the wall with mounting debts and piling losses.”
Drewry expects a large container shipping line to pose losses continually because of its weak fundamentals and high interest costs. It said, losses in the past two years have eroded the book value and the company’s ratio of debt to equity has increased up to over 6:1 as of the second quarter of this year.
The book value erosion between the years 2009-2012 has escalated up to 60% which will need years of profitability and massive capital increase to tide over the challenging freight market conditions. Notwithstanding the gloomy outlook posted by Drewry, these shipping lines have in the past shown tremendous resilience under difficult trading conditions and are expected to pull it through this time as well.
More cancellations of sailings
Lacklustre container volumes on all water routes between Asia and the east coast to North America may force carriers to cancel sailings over the next few months, unless capacity is reduced immediately. The rates from Asia to North America will continue to remain under pressure right through the end of the year, as reported in the Journal of Commerce. Month on month volumes from Asia to the east coast of North America were virtually flat from April through June with vessel utilisation rates dropping to 81% in July from 89% in June. Utilisation on routes from east coast North America to Asia slipped to 46% in June from 49% in May. In this background, increased cancellations of sailing are expected to help carriers better balance supply and demand.
US$ 1.4 b mega ship deal
United Arab Shipping Company headquarters in Kuwait has placed an order for five 18,000 teu container ships and five 14,000 teu vessels with South Korea’s Hyundai Heavy Industry at US$ 1.4 billion. Whilst the large vessels are expected to be delivered commencing in late 2014, 14,000 teu ships will begin in the first half of 2015. The contract for the new building includes the option for an additional 18,000 teu ship and six more 14,000 teu vessels. These new vessels have been designed with the option of conversion to LNG propulsion i.e., the engines are available to burn both marine fuel oil and liquid natural gas.
Terrorist attack on Suez Canal ship
According to press reports, a fully cellular container ship COSCO Asia has allegedly come under a terrorist attack whilst transiting the Suez Canal, a few days ago. The Lloyds List stated that the 10,000 teu, 2007 built container ship experienced a fire and an explosion in a container on board whilst exiting the Suez Canal. The head of the Suez Canal authority said that terrorist elements staged an unsuccessful attack in an attempt to disrupt the flow of vessels through the waterway. The Suez Canal is a vital global trade route connecting the Red Sea and the Mediterranean.
[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 Fellow of NORAD/JICA and Harvard Business School (EEP).]
