Friday Nov 15, 2024
Friday Nov 15, 2024
Monday, 9 December 2013 00:00 - - {{hitsCtrl.values.hits}}
A case in point is the huge delays associated with the Government’s attempt to build the fourth container terminal at India’s largest port, Jawaharlal Nehru Port Trust (JNPT). While there is considerable potential for those terminal operators that have stepped into the country, port operations have very often been extremely challenging and very complicated.
Principally, this is attributable to the country’s port tariff system which applies in the main ports and is based on a complicated formula linked to return on capital. In essence, all interest parties have had to declare, when the tariffs are fixed, what percentage of their revenue will be apportioned to the port authority, a system that has become complex when port operation commences.
The system has long been viewed as being restrictive, hampering growth and non investor friendly. It is implemented and administered by the very unpopular Tariff Authority for major Ports (TAMP), a Government appointed agency, which will still play an important role though now under new guidelines.
In fact TAMP will continue to issue a so-called “Reference Tariff” that will apply to each commodity and/or group of commodities and service and/or category of services provided in each port.
TAMP has responsibility for the country’s 12 major ports including JNPT, Chennai and Kolkata, which are ultimately controlled by the state.
The main terminal operators have petitioned the Government for a long time to change systems, as they have invested heavily in new equipment, boosted productivity levels in the ports and argued that this has contributed to the country’s growth. However, they have not been able to raise tariffs, as they have wanted, to help pay for the improvements carried out.
The Government, on the other hand, has exercised strict control over the system because of its determination not to allow operators to increase tariffs to a level that might penalise the country’s importers and exporters and the wider population in general. The challenges the Indian ports industry is grappling with is obviously a concern for transhipment hubs relying on Indian traffic
Perilous state of container shipping
The dire state of container shipping is clearly illustrated by the overview of revenues per TEU for those companies publishing their liftings as per Dynaliners. Between January and September 2013, they all earned less revenue per container as against what they achieved during the same period in 2012.
Overall, only five (of nine) carriers recorded a healthy operating profit per TEU carried. The other four lost between US$ 5 and US$ 50 per TEU.
Further, the first nine months of 2013 overview of the financial results of 18 main container liner operators shows a mixed picture. While, due to lower freight rates, most carriers saw, despite more liftings, their revenues decline, a few of them (CMA CGM, China Shipping, Coscon, Evergreen and Hapag-Lloyd) escaped this fate. However, as can be concluded from the high losses of the Chinese carriers, this was no guarantee for a profitable operation.
The large carriers (Maersk Line and CMA CGM) and the niche operators (Wan Hai and SITC) performed well.
The Japanese companies (“K” Line, MOL and NYK) were profitable, but this was mainly due to their involvement in other (shipping) segments.
The Taiwanese (Evergreen, Yang Ming and Wan Hai) had a good third quarter, but in two of the three cases their nine months results were still 
negative. Overall, the South Korean operators (Hanjin and Hyundai) posted the highest losses, with US$ 359 million and US$ 402 million respectively.
The results of MSC are, as always and regrettably, a well hidden secret as stated by Dynaliners.
ILA concern
about P3 network
Incomparable with each other, both the Asian Shipper’s Council (ASC) as well as the International Long Shoremen’s Association (ILA) have spoken out against the proposed P3 Network of CMA CGM, Maersk Line and MSC. While ASC expects that the new alliance will bring unwanted greater market volatility (if that is possible at all), ILA thinks that the new consortium would present an unprecedented risk of anticompetitive practices and drastic consolidation (for the port workers, affecting their families).
GSF also raises concerns on P3 network
On 26 November 2013 the GSF tabled a further series of questions on the P3 Global Alliance with the Federal Maritime Commission (FMC) in Washington DC, in response to the Commission’s Notice of 19 November 2013 accepting further public comment on the P3 Network Sharing Agreement.
The GSF has asked the FMC to pursue the questions with the P3 Agreement lines as part of its analysis into the competitive impact of the Agreement on the market and raised a number of questions outlining concerns by shippers on the potential competitive effects of the P3.
GSF Secretary General, Chris Welsh said: “The P3 Network Vessel Sharing Agreement is unprecedented in its scale and scope, many of the provisions of which are open-ended according to the Agreement filed with the FMC.
In the view of the GSF this may affect the commerce of the United States in its import and export trades. In light of this we believe the Agreement warrants very careful scrutiny and sincerely hope that the questions we have posed will assist FMC staff and Commissioners in its’ evaluation of the P3 Agreement.”
Transpacific rate increase, can it hold?
In two stages the Transpacific Stabilisation Agreement (TSA) recommends its 15 members to increase rates from the Far East to the US by US$ 500 per 40’ box. The first US$ 200 will be added effective 20 December, with a further US$ 300/40’ following on 15 January 2014.
According to the World Container Index (WCI), rates from Shanghai to Los Angeles slipped from US$ 2,156 at the start of the year to US$ 1,782 per 40’ box last week (albeit with number of interim ups-and-downs). The recently recommended USD 400/40’ rate increase effective 15 November was only partially successful, achieving approximately USD 80/40’.
Europe-Far East rate increase wiped away
Nearly half, well just 46%, of the 1st November rate increase gain of USD 753/TEU, was lost on 22 November, according to the SCFI/Shanghai Containerised Freight Index of Shanghai-Rotterdam spot rates when it contracted by USD 345/TEU. Why are carriers offering spot rates at all, if these, time and again, only serve to spoil their rate levels across the board, questions Dynaliners Weekly.
[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).]
