Tag Archives: container trade

SHIPPING | Idle boxship capacity grows as winter chill sets in

Patrick Hagen | Lloyd’s List | 2010.10.26

SLOWER demand has seen the number of idle containerships rise and carriers expand extra slow steaming in a bid to absorb excess tonnage.

This is in line with recent announcements by carriers to cut capacity on the main trades during the winter season. Maersk Line just said it would reduce capacity on the Europe to Asia trade by 10%. Before, the Grand Alliance partners Hapag-Lloyd, NYK and OOCL announced that their Europe to Asia service Loop D will only offer bi-weekly instead of weekly sailings up to March 2011.

The number of unemployed boxships stands at 138 ships with a combined 289,000 teu, compared to 132 ships with 243,000 teu a fortnight ago, according to analyst Alphaliner. While the total is still quite small, the rise in the number of idle vessels is a clear sign that the winter slump has started to hit vessel employment.

Lower demand has already started to put pressure on charter rates. Charter rate indices such as Braemar Seascope’s Boxi or the Hamburg shipbrokers’ association’s ConTex reflect the downward trend.

A look at the recent fixtures done on the charter market reveals that most deals have been done only for periods of six months stretching over the winter season. Owners are prepared to accept lower rates to cover themselves during this period. However, a Hamburg boxship broker underlined that most owners were expecting rates to rise again after the Chinese New Year. Thus, owners were not prepared to charter vessels out for longer periods at current rates, the broker said.

He added that charterers also seem to believe in a rising market after the winter lull and thus are trying to secure tonnage. This has already led to deals which are favourable for shipowners. Wan Hai Lines for example extended charter contracts for two 1,700 teu vessels and agreed to retroactively raise the rate.

The charter contract for the sister vessels Otto Schulte and Karin Schulte, which belong to shipowner Bernhard Schulte, would have been valid up to March 2011 with a daily rate of $5,900 each.

Now, Wan Hai is paying $8,200 per day retroactively from October 1.

It is expected that extra slow steaming will increase as lines are avoiding sending surplus tonnage into lay-up. Alphaliner estimates that 56% of the services connecting the Far East and the US West coast have already adopted extra slow steaming. This figure is now due to rise.

Another way in which some carriers are apparently trying to prevent the lay-up of vessels is to add capacity to intra-Asia services. APL will deploy three 3,500 teu vessels, which would otherwise not be needed, to its new sling connecting Indonesia and China.

However, such moves will probably not be sufficient to absorb all surplus tonnage. A number of owners are seeking to relet vessels but have not yet found takers.

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MARITIME | Small boxships squeezed out by newbuilds

Leeway to switch vessels into lower-volume trades may be near its limit

Janet Porter | LLOYD’S LIST

CONTAINER lines may be running out of options to control the impact of large boxships now entering service by switching smaller ships to other trades.

The number of 8,000 teu boxships deployed on the Pacific has grown enormously in recent years as vessels of this size were replaced in the Asia-Europe trades by the new generation of super post-panamaxes.

Clarkson Research estimates that 65 ships of 8,000 teu capacity were being operated in the transpacific trades at the start of July, compared with just 10 in the summer of 2007.

The increase in deployment of larger vessels in the Asia-US trades also was accompanied by a reduction in deployment of other vessel sizes.

This was particularly noticeable in the 3,000 teu-3,999 teu vessel sector, Clarksons notes in its latest Container Intelligence Monthly, with a fall from 79 to 22 ships of that size during the three-year period. These vessels were transferred to smaller volume trades, laid up or sold for scrap.

That trend was also apparent in the Asia -Europe trades, where deployment of ships in excess of 8,000 teu rose from 117 in July 2007 to 209 by last month, while there was a decrease in the use of 3,000 teu-3,999 teu ships from 68 to 21. This cascading of ships onto smaller-volume trades partly reduced the impact of the influx of high-capacity boxships, says Clarksons.

On the Pacific, the addition of 472,025 teu of capacity from new 8,000 teu vessels between July 2007 and 2010 was offset with the removal of 69% of that capacity via 2,000 teu -4,999 teu tonnage.

Similarly, capacity additions from ships of 8,000 teu or more in the Asia-Europe trades was balanced in part by the withdrawal of of 29% of that capacity via 2,000-4,999 teu ships.

The remaining capacity addition on these trades was absorbed where possible by slow steaming, and the addition of extra vessels into service loops.

But the scope to juggle the fleet this way so as to minimise the effect of the new super-sized ships now being built may be approaching its limit, Clarkson says.

“The continued ability to cascade is dependent on the number of smaller vessels available to redeploy from main lane trades,” Clarksons notes.

“With the number of 2,000 teu -4,999 teu vessels having declined between July 2007 and 2010 by 79% and 49% on the transpacific and Far East-Europe trades respectively, the successful absorption of further deliveries will likely depend heavily on increased demand.”

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CONTAINER | Argentina’s Maruba on the ropes — again


THE future of troubled Argentine line Maruba has once again been thrown into doubt after one of the company’s few remaining tonnage providers demanded the early return of its vessels.

German KG house and shipowner Gebab had chartered two 2,700 teu ships to Maruba, but pulled the vessels back after the stricken line was unable to pay the charter rates.

The move follows a series of financial problems for the line which is indebted to several key creditors including Textainer, a number of shipowner and container leasing companies.

Gebab has already signed new charter contracts with Orient Overseas Container Line for both vessels, the Maruba Europa and the Maruba Maxima, however Gebab is still demanding outstanding charter payments from Maruba.

Other German owners that have vessels chartered to Maruba are understood to be considering similar moves against the company.

A spokeswoman for German KG house and shipowner Hansa Treuhand confirmed that it was involved in “intensive talks” with the line over the 2,500 teu Maruba Pampero.

“We have not yet come to a decision regarding a potential withdrawal,” the spokeswoman said.

Munich-based KG house Conti, which also has two vessels chartered to the line, is understood to be holding talks with Maruba. Conti did not want to comment but insiders said that the company expected an agreement between Maruba and the shipowners to be signed within the next few days.

Maruba was recently reported to be in the process of discontinuing its Round The World Service, which it initiated back in March to replace the east coast of South America to Asia service. According to Containersiation International, Maruba was asked in May not to join the New Mesa service to the Mediterranean and exited the ECSA to northern Europe trade lane at the end of last year. The RTW service was supposed to keep the Argentine flag flying on at least the lucrative ECSA to Asia route but now even that has been pulled.

Given the dire financial predicament of the company, few now expect the line to survive in its current form.

Even the Argentine maritime union, Sindicato Obreros Marítimos Unidos, which is seeking to save Maruba through a lifeline of as much as $100m, has now accepted that the group has little future in the international container trades.

“I think that some routes will be abandoned. The workers are not accustomed to losing money and the competition is ferocious. We know that in some trades we cannot be competitive,” SOMU secretary-general Omar Suarez told Lloyd’s List.

Last month, Maruba’s board revealed to local media that it was open to receive an injection of $40m from maritime unions in return for a 30% stake in the company.

Despite the last ditch plans for a rescue, one German shipowner involved directly with Maruba told Lloyd’s List that the line was now widely expected to withdraw completely from container shipping given that it had no independent market access. At least two partners, among them CMA CGM, have already terminated business operations with Maruba.

The German owner suggested that Maruba could still survive, but only with a radical change in strategy, possibly to small scale bulk shipping.

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CONTAINER TRADE | Will oil ever be cheap again?

Mike Wackett | ci-online

Oil is the new tobacco. We crave it, but we are about to learn the full cost of the addiction.

With a horrendous 60,000 barrels of oil a day estimated still to be gushing into the Gulf of Mexico, nearly two months since BP’s Deepwater Horizon oil rig exploded claiming the lives of eleven oil workers; blackly scaring the white-sanded coastlines, killing wildlife and impairing the livelihood of residents, questions are being asked within and without the oil industry about the safety of deep offshore drilling – a factor that ensures post-spill exploration costs will soar.

BP ceo Tony Hayward was ‘sliced and diced’ on Thursday by US Congressmen as he ineptly tried to deflect blame for the spill, following the British oil giant’s climb down the day previously in agreeing to a USD20 billion ‘uncapped’ escrow fund.

Indeed, Hayward was accused of ‘kicking the can down the road’ in his misguided PR disaster hearing attempt at stonewalling many of the questions from the emotionally-charged Senators, baying for the gaff-prone ceo’s blood.

Moreover, the USD20 billion compensation and clean-up cost could ultimately rise to USD100 billion, as no-win-no-fee ambulance-chasing lawyers in the US climb on the bandwagon in the belief that several Christmases have arrived at once.

Conscious of easing the current anti-oil sentiment in the US, BP’s peers, Chevron, Exxon Mobil, Petrobras and Royal Dutch Shell may publicly be saying that the accident was ‘preventable’, but privately they might just be thinking: ‘there but for the grace of God.’

Meanwhile, the Obama administration has imposed a minimum six-month moratorium on deep drilling offshore while the accident is investigated and the President figures out ‘whose ass to kick’ for the blowout on BP’s 5,000ft deep well.

And elsewhere, in the wake of the Gulf of Mexico spill, the oil industry is in reflective mood: oil firms are reviewing their technology and systems, in anticipation of a crackdown by regulators.

‘What’s happening now is that the industry is looking at how it does things, checking that they are following the correct procedures, and that they aren’t inadvertently straying from good practices, making sure all their equipment is functioning as it should be,’ UK Health and Safety Executive inspector Donald Dobson told the BBC in an oil disaster debate this week.

‘It’s making people go back and double-check things that they’ve taken for granted in the past,’ added the official.

According to the BBC review – which  centred on Aberdeen, Scotland, one of the world’s leading support centres for offshore drilling –  of particular concern in the light of BP’s nightmare is the increased risk of deep wells offshore vis a vis:

  • The sheer distance from rig to seabed means that the usual hydraulic systems – for example those used to shut off a well during an emergency – cannot be relied on to respond rapidly enough.
  • Waters deeper than 400m are beyond the reach of divers and although remotely operated vehicles are increasingly sophisticated, there are limits to their effectiveness.
  • Temperatures are so low at depth that if there’s a leak in the riser pipe – bringing oil to the surface – the icy waters could freeze the methane that flows with the oil and block the flow.

President Obama has described the Gulf of Mexico oil catastrophe as having an impact like the terrorist attacks of 9/11; since when the world changed forever.

If after the oil is finally stemmed from BP’s damaged Macondo well, as diversionary wells come on stream as predicted in August, and the clean-up and compensation claims progress smoothly, will the market regain its appetite for the ‘risk’ involved in deepwater production?

There is little doubt that post-spill, companies working offshore will be required to obtain more insurance; and that insurance will become dramatically more expensive and harder to get in the light of the expected avalanche of claims resulting from BP’s disaster.

It follows that the drive for oil exploration will hereon in become muted, as significantly higher costs are factored into production costs.

What does this all mean to the shipping industry?

Hitherto, oil prices have largely clung onto the coat tails of stock markets: soaring to USD147 a barrel in the mid-2008 boom times; plunging to USD40 a barrel as the market bottomed at the end of 2009, and hovering around USD80 in today’s fragile recovery.

However, several analysts are now predicting a spike in crude prices as increasing costs and stymied exploration combine to drive the price higher than warranted by reason of growth demand.

And with the daily fuel spend for a single post-panamax boxship nudging USD100,000 per day – even allowing for slow-steaming – ocean carriers will not want to be bitten twice by losses from soaring bunker costs and will pile on further surcharges in the direction of the downtrodden shipper.

President Obama – a smoker himself – hiked tobacco tax as one of his first acts in office, a popular move; but fuel rises stemming from an overly severe punishment of oil majors may not be quite so opinion poll boosting.


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CONTAINER TRADE | Learning from the crash

“WE HAVE learned our lesson.” How many times has that promise been heard in the aftermath of some shipping crisis? And how quickly have such reassurances been forgotten?

In the container trades, lines have always responded to some wild swings in freight rates by insisting it would never happen again, and that trade stability was their ultimate goal. But in a highly charged marketplace and with ships to fill, it never takes long for one carrier to break ranks and start cutting rates in a bid to expand trade share. Very soon, they are all at it, and a full-scale price war is raging.

Why not? That is what markets are all about. Shipping lines are no different from any other corporate entity. They are in business to survive, not to protect the competition through gentlemanly behaviour.

But the crash of 2009 was like no other, forcing lines to take actions that not only helped some weaker carriers stay afloat, but also will become valuable management tools.

Owners and operators took the unprecedented step of laying up tonnage, including brand new vessels collectively worth billions of dollars. These ships are now returning to service, but will quickly be withdrawn if market conditions falter again. Even easier is to adjust ship speeds. Slow steaming was something lines were slow to adopt, but they now understand just how effective this is in both rapidly cutting costs and absorbing capacity.

So, just possibly, lessons really have been learned this time round.


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SHIPPING | The Shippers strike back

The following article comes from Containerisation International. To me, it shows that the box shipping industry may have left the worst of the crisis behind as far as finances are concerned, but there is at least one crucial issue to be solved: the eroded relationship between carriers and shippers.

It would be a good time to remember that, while market turbulences and money come and go, people stay around for quite some time. And, in the end, it is with people we all have to deal, sooner or later.

To end with a brighter note, Adam Rashid’s ‘favourite’ IPS was a precious little piece of humor — and a welcome sign of hope.

Enough of digressing! Here it goes:

The ‘greed and fear crisis’.

This is how Marcus Lever, the head of global ocean freight at Hellmann Worldwide Logistics, described the recent (some might say ‘ongoing’) crisis in the container liner shipping industry.

Addressing Containerisation International’s 12th Annual Global Liner Shipping Conference in London, he referred to the 2008/mid-2009 period as the most destructive he had ever seen.

‘It was like being on a helter skelter with all of us being unhappy riders,’ he said. ‘The crisis was born out of both ocean carriers’ greed and fear. There were shipping companies that dumped freight rates and attempted to fill their ships at any cost as they saw the economic downturn as a way of increasing their market share.

‘Out of fear, there were those which followed suit to protect their share of the trade. We had a market in free fall and a market that has tested everything, including relationships.’

It was a point also expressed by Adam Rashid, head of Sony’s supply chain solutions in Europe. In his presentation, he highlighted how exceptionally low rates had been made available for his annual contracts in early 2009, only for some carriers to rip them up after six months, saying ‘we are dying, we can’t carry on like this, you must pay us more’.

Both Rashid and Lever expressed unhappiness about the way freight rates were being hoisted back up. In particular, the Hellmann executive, was annoyed at the increasing use of surcharges.

He said: ‘The English language contains around 540,000 words, but is always willing to absorb more and liner shipping companies are doing their very best to add to it through their latest terminologies.

‘We are being by more acronyms. While ocean carriers can take credit for BAF and CAFs [respectively bunker adjustment and currency adjustment factors] now we have SCS (Suez Canal surcharge), APS (Aden piracy surcharge), ERS (Emergency revenue surcharge), CRPS (Cost recovery programme) and there are many many more. But my favourite is the IPS (If possible surcharge).

Lever stressed that in such an unstable market, ‘there had been no winners’. For the long-term good of this industry, we need each other and we must find better ways of working together.’

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