Maritime Market Updates

Slow steaming or a bit faster

Slow steaming or rather a bit faster again seems to be what 2M partners Maersk Line and MSC have decided for some of their North Europe-Far East services. They appear to have been scheduled at east bound speeds of 18-19 knots, only a little slower than the west bound to Europe head haul. Speeds in both directions will be identical for the AES service, which amongst others accommodates three Maersk Line Triple-E units and MSC’s 19,200 TEU biggest of all. The last time oil prices were at the same level as today, the ships would most probably have sailed at a speed of 25 knots, if they could have; the Triple-E has been built for a speed of 22/23 knots.  AES rotation is Rotterdam, Bremerhaven, Wilhelmshaven, Rotterdam, Felixstower, Tangier-Med, Algeciras, Tanjung Pelepas, Shezhen (Yantian), Shanghai, Dalian, Busan, Qingdao, Ningbo, Shanghai, Xiamen, Shenzhen (Yantian), Tanjung Pelepas, Algeciras and again Rotterdam. Ultra large container vessels omitting South Asian Ports has been clearly visible. 

 

Asia/Europe rates, is it cause for hope?

It has been a long time coming, but there was some respite for box lines operating the Asia-North Europe trade last week, after they finally managed to implement rate increases following 13 weeks of declines. Last week’s Shanghai Containerised Freight Index (SCFI) shows the partial acceptance from the market of the latest price push from the trade’s carriers, with freight rates climbing some $ 518 per TEU or 151% to $ 861 per TEU. The vast majority of lines, CMA CGM, Mediterranean Shipping Co and Evergreen included, announced general rate increases for 1 May and after the failure to push through price hikes the previous week. 

Indicators pointed to yet another failed set of GRIs, as seen in March and April, especially when some had already turned their attention to as far away as the start of next month with NYK Line for example proposing a GRI of $ 990 per TEU for 1 June. However, the decision by these lines to delay by a week their GRIs in line with fellow Asia-North Europe carriers MOL and Maersk Line, which announced GRIs of $ 850 and $ 700 per TEU respectively, proved fruitful on this occasion.

 With rates climbing last week on the SCFI, the weekly average for the 2015 now stands at $ 797 per TEU, although it is still some way down on the $ 1,168 average for the first 18 weeks of 2014. The previous week, rates on the Asia-Mediterranean trade rose 43.7% on the back of successful GRIs, yet carriers serving the route received a double boost last week after they climbed for a second time in seven days by a further 46.6% or $ 319 to $ 1,003 per TEU. 

 

Nepal, is it Death by Logistics?

The humanitarian logistics effort in Nepal is woefully short of funds, trucks, planes and helicopters. It is also being hindered by overly bureaucratic administrators and geopolitical tensions, even though thousands of families have still not received aid and the monsoon season is fast approaching. UN officials admit that they have still not even identified how many people in more remote mountain valleys need aid due to a lack of helicopters and the UN’s inability to secure access to military helicopters. 

After initially removing most red-tape, Nepali authorities have also now tightened customs at road borders. This has further delayed aid that has been sourced in India, flown into New Delhi for onward trucking or shipped into ports such as Kolkata. At Kathmandu airport, the only international gateway, capacity is scarce and tensions between India, US and Chinese military presence are palpable. Most of those on the ground believe the Civil Aviation Authority is under immense pressure from the various ‘Great Powers’ over landing permits. 

This is the most likely cause of the landing permit chaos, said one source. As the monsoon season closes in, the humanitarian relief effort is in danger of becoming a humanitarian logistics crisis. This could be death by logistics, said one source close to a major nation’s military effort. DHL’s Disaster Response Team has successfully launched a round the clock operations at Kathmandu airport, helping to clear backlogs by handling incoming freight on the apron, but it remains the only logistics major with a visible presence in Nepal despite the huge shortages evident in expertise and equipment. 

 

Shippers behaviour create congestion 

Shippers can help to significantly reduce cargo congestion at major airports by adjusting their behaviour attitudes and expectations according to senior freight forwarders. Doug Overett, UK Business Development Director at Ceva, told an air freight seminar at last week’s Multimodal exhibition and conference that while forwarders operated seven days a week, many cargo owners were still wedded to a five-day working week, contributing to uneven demand patterns and major unsustainable peaks in volumes on Fridays and weekends that put huge stress on finite space and resources at airport cargo facilities. 

If we look at the congestion points at the airport, it is driven by the five-day cycle of shippers, he said. It puts the pinch-points at the weekend, which puts pressure on the sheds and capacity. Overett said some customers had a more sophisticated approach, but believed that a lot would benefit from education about the impact of their current patterns and cycles on the air logistics chain. Forwarders try to be innovative, but perhaps we need to have a bit more understanding from the market place.

 

Return to Iran – Lines cautious

European shipping lines are likely to adopt a cautious approach over a possible return to the Iran market in the event of lifting of sanctions, a leading market analyst has told Lloyd’s Loading List.com. A preliminary deal reached earlier this month on the Islamic republic’s nuclear development program has triggered optimism that the lifting of trade sanctions is now in sight. BMI Research Head of Operational Risk Michelle Berman said that unlike their Asian counterparts, European companies may be holding back due to issues concerning reputational risk. 

Although many sanctions still remain in place, the maritime sector saw a roll-back in 2014 and the sector has already benefited with shipping companies starting to return to Iran, she said. Asian container lines have been quick off the mark among them, Wan Hai and PIL. She highlighted that even though some of the sanctions were removed last year, uncertainty remained. This led to some shipping companies toning down their risk appetite to break into Iran again for fear of having to exit the country a few months later if sanctions were re-introduced, Berman observed. 

She underlined that sanctions had dramatically impacted the import of goods into Iran. In the maritime sector, BMI Research estimates that in 2012 and 2013 container throughput at the port of Bandar Abbas declined by 29% and 25% respectively. Maersk Line stopped all port calls to Iran in October 2012 as the pressure of Western sanctions on the Islamic republic mounted. In a statement at the time it said, Maersk Line will maintain a dormant business entity in Iran and will look to resume business should the sanctions regime be eased. 

Asked by Lloyd’s Loading List.com whether the line was ready to re-activate operations in Iran and resume port calls in the country if the nuclear deal was ratified, a spokesman quoted a Maersk Group statement ‘In the event of lifting of international sanctions, Iran will have great potential for new commercial business activity’. 

 

Possible mergers and takeovers  

China Cosco Holdings, China Shipping container Lines, Sinotrans & SCS Holding and China Merchant Holdings have quickly played down suggestions they were to amalgamate their activities. We promise that we will not be planning such consolidation within three months, Cosco said on the Shanghai Stock Exchange. Does that sound very convincing?  Meanwhile, referring to recent rumours on its contended interest in merging with APL, OOCL said that a tie-up was theoretically possible but unlikely because integrating the two companies would be too challenging. 

However, if we were to merge, one of the G6 Alliance partners would be most likely candidate, he added. APL would actually fall inside that criterion. As reported, is the end nearing for State owned Shipping Corporation of India’s (SCI) container division? The company’s Chairman has given this segment another five to six months to become profitable. If not, it cannot be excluded that the company will exit the liner business.

(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).)