T P Chí Containerisation Informa - Ci - 20140708 PDF

www.containershipping.
com JULY/AUGUST 2014

Data Hub: Load Factors ..............................08
Data Hub: World Fleet Update ...............10
Trade Routes: Asia-South America ........14
Ports: APM Terminals ..................................20
UASC: THE STRATEGY
BEHIND ITS FLEET
EXPANSION
P30
EVENTS
TOC EUROPE: NEWS
FROM THE EXHIBITION
AND CONFERENCE
P36
CARRIERS
VALENCIA: SPANISH
PORT FACES CRISIS
OF OVERCAPACITY
P32
MORE INSIGHT PORTS
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THE
GRANT DALY
INTERVIEW
July/August 2014
STABILITY appears to be an alien concept in the container
shipping industry, which is once again going through another
period of upheaval following Chinas rejection of the P3
Network between Maersk, Mediterranean Shipping Co and
CMA CGM.
Within a few weeks, the top two had teamed up to form
the proposed 2M alliance, leaving CMA CGM to look for
alternative options in an industry where lines have to work
together to obtain the economies of scale and lower costs
needed to overcome inadequate freight rates and generally
unsatisfactory profits.
Alastair Hills analysis of first-quarter results in this issue
underlines just how poorly most carriers are performing.
But one consolidation effort seems to be going smoothly,
with Hapag-Lloyd and CSAV on course to complete the
amalgamation of their container activities by November.
In an interview with Containerisation International just
days before he stepped down as chief executive, Michael
Behrendt talks about how size matters these days, and why the
German line will be looking for more merger and acquisition
opportunities, probably in the Asia-Pacific region.
United Arab Shipping Co has taken a different approach
to growth, with a $2bn newbuilding programme that will
include 18,000 teu ships, catapulting the line into the top
10. In this issue, UASC chief executive Jorn Hinge talks to
Containerisation International editor Damian Brett about the
companys investment strategy, the importance of timing, and
having the confidence to order when market conditions are
weak rather than strong.
Editor-in-chief Containers Janet Porter
(+44 (0) 20 7017 4617) janet.porter@informa.com
Editor Damian Brett
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Reporter Linton Nightingale
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Incorporating
www.containershipping.com JULY/AUGUST2014
Data Hub: LoadFactors..............................08
Data Hub: WorldFleet Update...............10
TradeRoutes: Asia-SouthAmerica........14
Ports: APMTerminals..................................20
UASC: THESTRATEGY
BEHINDITSFLEET
EXPANSION
P30
EVENTS
TOCEUROPE: NEWS
FROMTHEEXHIBITION
ANDCONFERENCE
P36
CARRIERS
VALENCIA: SPANISH
PORTFACESCRISIS
OFOVERCAPACITY
P32
MOREINSIGHT PORTS
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CHIEF EXECUTIVE
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INTERVIEW
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Looking at the latest developments as the P3
Network is rejected and 2M alliance is proposed
KEEPING ABREAST
OF THE NEWS
Helping us keep abreast of everything that is happening
in the industry is Linton Nightingale, who joined the
Containerisation International editorial team a few weeks ago,
bringing experience of the ports sector, which is also going
through challenging times as carriers forge alliances with each
other and adjust their schedules accordingly.
In such a rapidly-changing marketplace, Containerisation
International is able to put these developments into context
and drill down behind the headlines. But we do not ignore
day-to-day events which are covered in detail online. Be sure
to keep in touch with all the latest news and analysis on
www.containershipping.com.
Janet Porter, editor-in-chief
Join us on:
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Containerisation International
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JULY/AUGUST 2014
www.containershipping.com CONTAINERISATION INTERNATIONAL 01
PROFITABILITY
PROSPECTS BLEAK
Logic suggests weaker players should
withdraw from the industry, but who?
P16
MIXED FORTUNES FOR
HONG KONG
P3 collapse may be good for the port, but
visits are being lost to other alliances
P19
July/August 2014
GLOBAL STANDARDS
FOR APM TERMINALS
Bigger ships drive the need for higher
productivity in strategy switch-up
P20
CLOSING THE GAP
How will new shareholders and a change
of management inuence the culture and
future direction of Hapag-Lloyd?
P23
DATA HUB
TRADE STATISTICS
Double-digit growth in deepsea import
volumes during the rst quarter means the
only way is up
P04
DATA HUB
LOAD FACTORS
Looking at the likely vessel utilisation rates
for key European trade lanes
P08
DATA HUB
WORLD FLEET UPDATE
Supply continues to grow ahead of demand
as boxship eet capacity increases and
inactive eet shrinks
P10
TRADE ROUTE
INTELLIGENCE
Investment is still needed in South American
ports to handle larger boxships coming on
to the Asia-South America trade lane
P14
20
We spend a lot
of time with our
people looking at
how we do things,
as well as what
we do
DATA HUB
PORTS CARRIERS
PORTS CARRIERS
02 CONTAINERISATION INTERNATIONAL www.containershipping.com
CONTENTS / JULY/AUGUST 2014
P26
GRANT DALY
VIEW FROM THE BRIDGE
LIVERPOOL IN FOCUS
Containerisation International debate
reveals industry interest in north-west port
P34
LONDON CALLING
The container industry descends on
the UK capital for TOC Europe
P36
NEWS ROUNDUP
From P3 to 2M
P41
Yildirim not surprised by P3 rejection
P44
OOCL opens appeal process over Courtenay
Allan manslaughter ruling
P46
July/August 2014
MAKING A
DIFFERENCE
Safmarine chief executive Grant Daly
talks about the importance of service
dierentiation
P26
THE ART OF
ORDERING
UASCs Jorge Hinge reveals the strategy
behind the lines newbuilding investment
programme
P30
CRISIS IN VALENCIA
The Spanish port is plagued by overcapacity
and declining volumes
P32
RISING RISK OF
CYBERCRIME
TT Club claims executive Mike Yarwood
investigates the extent of cybercrime
targeted at transport operators
P47
PRAGMATISM WINS
THE DAY
New container weight verication
measures are good news for all, says Chris
Welsh of the Global Shippers Forum
P48
BOX WORLD BRIEFING
VIEW FROM THE BRIDGE
CARRIERS
PORTS
EVENTS GUEST COLUMNISTS
www.containershipping.com CONTAINERISATION INTERNATIONAL 03
ISSUE 6/VOL 47
04 CONTAINERISATION INTERNATIONAL www.containershipping.com July/August 2014
DATA HUB
TRADE STATISTICS
SUPPLY/DEMAND INDICATORS
FOR CONTAINER SHIPPING
DATA PROVIDED BY:
IN THE April edition of Containerisation
International, MDS Transmodal described
the positive results observed in the last three
months of 2013, explaining that they were
mainly due to the early Chinese New Year.
Usually, this period is accompanied by
the pressure of sending out cargo before the
factory closure for the holiday season, and
in 2013 this pressure was worsened by the
fear of rollovers experienced by shippers the
previous year and the relatively short period
between the Christmas and lunar holidays.
In the same edition, MDST also questioned
whether demand would have weakened after
the Chinese New Year period and what level
of demand shippers should have expected for
the first quarter of 2014.
On the basis of trade data available in
mid-June, MDST estimates that exports from
Asia (excluding intra-regional trade), after
a remarkable growth of 8.3% in the fourth
quarter of 2013 compared with the same
three months the previous year, have grown
by a lower rate of 5% in the first quarter of
2014 compared with the corresponding
period of 2013, to 10.9m teu.
Similarly, between the first three months of
2014 and the same period last year, exports
from North America are estimated to have
increased by 7.6% year on year. Considering
the seasonality, this percentage appears
even more encouraging. For the year ahead
and based on the boosting performances
observed in the last few quarters, MDST
estimates that exports from North America
might grow by some 6% in 2014.
POSITIVE GROWTH:
THE ONLY WAY IS UP?
North Europe to North America Mediterranean to North America
Leading indicators: headhaul from north Europe 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
11 Beverages 188 184 189 194
78 Road Vehicles 174 175 186 194
89 Miscellaneous Manufactures 169 190 203 215
74 General Industrial Machinery 163 156 148 154
62 Rubber Manufactures 129 136 134 152
Overall headhaul index 100 105 105 111
Overall backhaul index 100 103 112 118
Leading indicators: headhaul from Mediterranean 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
66 Mineral Manufactures 118 139 149 162
82 Furniture 57 65 73 75
11 Beverages 51 52 47 49
05 Vegetables & Fruit, Nuts 50 52 58 60
North America to north Europe (000 teu)
North America includes US, Canada, Mexico, Puerto Rico and Greenland
Mediterranean North America (000 teu)
Mediterranean includes North Africa and the Black Sea
1,757
1,085 2,478
905 1,812
3.1%
1,183
9%
2,592
4.6%
958
5.9%
1,972
8.8%
1,201
1.5%
2,601
0.3%
948
-1%
2,072
5.1%
1,285
7%
2,762
6.2%
1,007
6.2%
2012
2012
2013
2013
2014
2014
2015
2015
North Europe to North America (000 teu)
North Europe includes northern Europe, Scandinavia and the Baltic
North America to Mediterranean (000 teu)
North America includes US, Canada, Mexico, Puerto Rico and Greenland
Underlying westbound trade grew by 3% in 2013 and is expected
to grow by some 9% in 2014.
Underlying eastbound trade grew by 5% in 2013 and is expected to
grow by 0.3% in 2014.
Of the leading headhaul commodities, road vehicles and misc.
manufactures show most growth.
Annual headhaul growth from 2013 to 2017 is forecast at 4%.
Service capacity westbound in the first quarter of 2014 is estimated
to have remained stable compared to the first quarter of 2013.
Y-o-Y in the first quarter of 2014, utilisation level is estimated to
have improved marginally but freight rates and profits are estimated
to have decreased (westbound).
Underlying westbound trade grew by 9% in 2013 and is expected
to grow by 2% in 2014.
Underlying eastbound trade grew by 6% in 2013 and is expected
to fall by 1% in 2014.
Of the leading headhaul commodities, mineral manufactures shows
most growth.
Service capacity westbound in the first quarter of 2014 is estimated
to have increased marginally compared to the first quarter of 2013.
to have decreased (westbound).
2012
2012
2013
2013
2014
2014
2015
2015
Double-digit growth increase in deepsea import volumes during rst quarter
Positive results are also estimated for the other dominant markets. For north
European and Mediterranean exports, MDST estimates an increase of around 4%
between the first quarter of 2013 and the same quarter this year.
Positive growth rates are expected to be seen throughout the year and at a global
level. MDST estimates that excluding intra-regional trade total loaded maritime
volume might grow by some 5%-6% this year.
The encouraging performances in trade data are estimated to have been
accompanied by positive performance on the level of utilisation experienced by the
shipping lines.
For example, in its interim report for the first quarter of 2014, Maersk Line has
reported improvements in both operational performances and utilisation levels.
MDST estimates a reduction in the gap between supply and demand as shown in
Graph A, which shows almost a balance in the first quarter of 2014 (2006 Q1 = 100).
For this edition, MDST focuses on the European trade lanes, which have reported
a double-digit growth increase in deepsea import volumes to north Europe and
the Mediterranean during the first three months of 2014 compared with the same
quarter last year.
Trade from northern Europe to America is projected to grow by 0.3% by the end
of 2014 and it is forecast to continue to grow at 6% per annum from 2014 to 2017.
Specialised machinery trade grew but general industrial machinery fell. Traffic in the
eastbound direction is expected to increase by 9% in 2014.
North Europe to Mid-East Gulf & Indian subcontinent Mediterranean to Mid-East Gulf & Indian subcontinent
North Europe to Mid-East Gulf & Indian subcontinent (000 teu)
Asia to EC South America (000 teu)
Mediterranean includes North Africa and the Black Sea
1,469 1,678
1,041 988
1,434
-2.4%
1,841
9.7%
1,079
3.7%
1,098
11.1%
1,584
10.5%
1,955
6.2%
1,248
15.7%
1,232
12.2%
1,699
7.3%
2,109
7.9%
1,329
6.5%
1,329
7.9%
2012
2012
2013
2013
2014
2014
2015
2015
Mid-East Gulf & Indian subcontinent to north Europe (000 teu)
Mid-East Gulf & Indian Subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh
Mid-East Gulf & Indian subcontinent to Mediterranean (000 teu)
Mid-East Gulf & Indian Subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh
Underlying eastbound trade fell by 2% in 2013 but is expected to
grow by 11% in 2014.
Underlying westbound trade grew by 4% in 2013 and is expected to
grow by 16% in 2014.
Of the leading headhaul commodities, food and paper show the most
growth.
Annual headhaul growth from 2013 to 2017 is forecast to be 7%.
Service capacity eastbound in the first quarter of 2014 is estimated
to have increased by 2% compared to the first quarter of 2013.
have remained stable, freight rates are estimated to have declined but
profits are estimated to have improved (eastbound).
Underlying eastbound trade grew by almost 10% in 2013 and is
expected to grow by 6% in 2014.
Underlying westbound trade has been growing by 11% in 2013 and
is expected to grow by 12% in 2014.
Of the leading headhaul commodities, mineral manufactures, animal
feeds and fruit & veg show the most growth.
Service capacity eastbound in the first quarter of 2014 is estimated
to have remained stable compared to the first quarter of 2013.
have improved, but freight rates and profit are estimated to have
declined (eastbound).
2012 2012 2013 2013 2014 2014 2015 2015
* Excludes intra-regional trade. ** CAGR Forecast. On the basis of trade data available in mid-
July the consultancy projects the following changes in underlying demand along the main trade
lanes for loaded containers for the forthcoming 12 months (4Q 2013 3Q 2014 as compared
with the previous 12 months). For explanatory notes that define how data has been organised
please see www.boxtradeintelligence.co.uk.
2011-
2012
2012-
2013
2013-
2017**
North America to Europe -6% +4% +4.1%
North America to Asia (Far East) +5% +8% +5.0%
Asia (Far East) to Europe -3% +3% +5.3%
Asia (Far East) to North America +6% +5% +3.4%
Europe to Asia (Far East) +1% +2% +4.6%
Europe to North America +6% +6% +4.7%
North America exports * +2% +5% +4.9%
North America imports * +6% +4% +3.7%
Asia (Far East) Exports * +3% +5% +5.2%
Asia (Far East) Imports * +7% +5% +5.2%
Europe & Med Exports * +5% +4% +5.2%
Europe & Med Imports * -2% +3% +4.9%
Intra Asia (Far East) +6% +4% +4.9%
Intra Europe +4% +6% +4.8%
Global overview +5% +5% +5.2%
Commodity 2012 2013 2014 2015
64 Paper & Paperboard 105 104 102 110
09 Miscellaneous Food Products 66 70 69 76
77 Electrical Machinery 60 55 58 63
28 Ores & Scrap 55 48 33 37
Leading indicators: headhaul from Mediterranean 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
08 Animal Feedingstuffs 285 325 279 351
66 Mineral Manufactures 174 182 171 189
27 Crude Fertilisers & Minerals 99 95 100 103
Underlying unitised annual trade growth rates
www.containershipping.com CONTAINERISATION INTERNATIONAL 05 July/August 2014
DATA HUB
TRADE STATISTICS
DATA HUB
TRADE STATISTICS
Trade from the Mediterranean to North America is projected to
grow by 1.5% by the end of 2014, with all leading commodities rising.
Growth from 2014 to 2017 is forecast at 6% per annum. Eastbound
traffic is forecast to fall by 1% in 2014.
Trade from northern Europe to the Gulf and Indian subcontinent is
projected to grow by around 10.5% by the end of 2014, with paper
and paperboard and food products following the trend, and is forecast
to grow at the rate of 5% per year from 2014 to 2017.
Trade from the Mediterranean to the Gulf and Indian sub-Continent
is projected to grow by 6.2% by the end of 2014, led by animal
feedstuffs and mineral manufactures. It is forecast to grow at the rate of
6% per annum from 2014 to 2017.
Trade growth from northern Europe to East and Southern Africa is
projected not to grow by the end of 2014. It is forecast to grow by 7%
per annum from 2014 to 2017.
Trade from northern Europe to Australasia is projected to grow by
almost 7% by the end of 2014, being led by electrical machinery, and
is forecast to grow by 5% annually from 2014 to 2017.
For explanatory notes that define how data has been organised please
see http://www.boxtradeintelligence.com/articles/company.
North Europe to East & South Africa North Europe to Australasia & Oceania
North Europe to E&S Africa (000 teu)
North Europe to Australasia & Oceania (000 teu)
330
358
310 150
334
1.2%
354
-1.1%
291
-6.1%
136
-9.3%
334
0%
378
6.8%
275
-5.5%
124
-8.8%
362
8.4%
404
6.9%
265
-3.6%
133
7.3%
2012 2012 2013 2013 2014 2014 2015 2015
E&S Africa to north Europe (000 teu)
E&S Africa includes East and South Africa
Australasia & Oceania to north Europe (000 teu)
Australasia & Oceania includes Australia, New Zealand and Pacific Islands
Overall southbound trade grew by 1% in 2013 and is expected to
be flat in 2014.
Underlying northbound trade fell by 6% in 2013 and is expected
to do the same in 2014.
Of the leading headhaul commodities none show consistent
growth.
Service capacity southbound in the first quarter of 2014 is
estimated to have increased by 8% compared to the first quarter of
2013.
Y-o-Y in the first quarter of 2014, utilisation level, freight rates and
profits are estimated to have declined (southbound).
Overall southbound trade fell by 1% in 2013 and is expected to
grow by 7% in 2013.
Underlying northbound trade fell by 9% in 2013 and is expected
to fall by 9% in 2014.
Of the leading headhaul commodities, road vehicles, misc
manufactures and paper show consistency.
Service capacity southbound in the first quarter of 2014 is estimated
to have increased by 4% compared to the first quarter of 2013.
to have declined (southbound).
2012
2012
2013
2013
2014
2014
2015
2015
This data is provided by Box Trade Intelligence in collaboration with MDS Transmodal.
Much more detail is available directly from BTI (www.boxtradeintelligence.co.uk),
including tonnages and estimated teu at the country x country x 3,000 commodities level,
individual ship deployment and estimated revenue, profit, rates and utilisation at the
tradelane and individual ship level.
Commodity 2012 2013 2014 2015
78 Road Vehicles 28 29 19 23
26 Textile Fibres 19 19 19 21
08 Animal Feedingstuffs 17 15 17 18
72 Specialised Machinery 14 14 12 13
Commodity 2012 2013 2014 2015
72 Specialised Machinery 28 19 19 20
78 Road Vehicles 23 22 20 22
77 Electrical Machinery 17 16 13 14
Supply - based on actual data Demand - based on actual data
Demand seasonally adj
60
80
100
120
140
160
180
2
0
0
7
Q
1
2
0
0
8
Q
1
2
0
0
9
Q
1
2
0
1
0
Q
1
2
0
1
1
Q
1
2
0
1
2
Q
1
2
0
1
3
Q
1
2014 Q1
Supply Index=164
2013 Q1 - 2014 Q1
% change quarter on quarter
Supply=0.7%
Demand=5.7%
2014 Q1
Demand Index=156
2
0
1
4
Q
1
2
0
0
6
Q
1
Graph A: Global supply v demand and seasonally adjusted
demand index 2006 (Q1=100)
July/August 2014 8 CONTAINERISATION INTERNATIONAL www.containershipping.com
DATA HUB
LOAD FACTORS
CAPACITY REDUCTIONS
Damian Brett takes a look at the likely impact of supply and demand on some of the
key European trade lanes
Europe to Middle East Gulf & Indian subcontinent
The headhaul direction of this finely balanced trade lane looks set for a mixed year with a
good first six months undermined by a weaker second half.
Volumes are expected to increase by just over 7% this year but second quarter capacity
was up by 7.2% compared with a year earlier.
The trade lane is also affected by capacity decisions on Asia-Mediterranean services with
wayport calls in Middle East Gulf and Indian subcontinent.
This has come into play over the last
three months as larger vessels were
added to several services from Asia.
Dedicated services were also
improved, with larger ships allocated
to CMA CGMs service and Messina and
Bahri deploying extra vessels in their
loops.
All in all, capacity increased by
5.2% at the end of the second quarter
compared with the end of the first three
months.
3
Northern Europe to east coast of South America
Vessel utilisation
levels on this
trade lane
have suddenly
increased after
a large amount
of capacity was
withdrawn from
the market.
The capacity
withdrawal came
in the shape of
the axing of the Brazil Express service that was run by CSAV, CMA
CGM and Mediterranean Shipping Co.
While this service was cut, Alianca, Hamburg Sd and
Hapag-Lloyd have upgraded the Brazil River Plate Express service
with the addition of 9,700 teu-10,500 teu ships, which has
minimised the impact slightly.
This all adds up to a capacity reduction of 15.2% compared with
the end of the first quarter.
Meanwhile, volumes are expected to increase by around 3% this
year.
In terms of utilisation levels the reduction has improved the
situation for carriers with levels of 94% expected for the third
quarter and 88% for the fourth quarter.
1
East coast of South America to northern Europe
The shipping lines operating on this trade lane made a sudden
capacity withdrawal during the second quarter of the year, with a
CSAV, CMA CGM and MSC joint service removed from operation.
Larger vessels were added to another service, but overall
capacity has been reduced by 15.2% during the quarter. The
capacity reduction comes on the back of expectations for a slight
reduction in volumes on the trade lane in 2014.
As a backhaul trade, utilisation levels are expected to remain
fairly low, although
this trade lane is
better than most
on the reverse
direction and
load factors are
expected to reach
87% during the
fourth quarter.
2
2
1
4
East Coast South America to northern Europe:
average vessel utilisation
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Northern Europe to East Coast South America:
average vessel utilisation
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Europe to Middle East Gulf: average vessel utilisation
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
July/August 2014 www.containershipping.com CONTAINERISATION INTERNATIONAL 9
6
OUR METHODOLOGY: The freight rate forecasts shown in the tables are mainly based on projections of estimated average vessel utilisation in each trade lane, combined
with other relevant circumstances. The fuller the ship, the more likely rates will rise and vice versa. Cargo forecasts are based on the latest information from all sources available to
Containerisation Internationals editorial team. These will always be conservative, and only take account of normal seasonal variations. Fleet capacity information is derived from
Lloyds List Intelligence. Current shipboard capacity in each route is estimated by deducting space lost for broken stows and wayport cargo from the operating capacity offered on
every vessel in that tradelane. This is projected forward by estimating where newbuildings are likely to be deployed, as well as where replaced vessels are likely to be cascaded into.
Average vessel utilisation is simply one divided by the other. It should be noted, therefore, that the resulting freight rate trends only reflect what should theoretically happen if ocean
carriers continue acting according to form. They do not take into account dramatic changes in strategy, such as mass lay-ups, service consolidation and more hub and spoke operations.
Middle East Gulf & Indian subcontinent to Europe
Analysts are
expecting
volumes on this
trade lane to
increase rapidly
in 2014. MDS
Transmodal
is predicting
an increase
of 10.7%
compared with
2013 to 2.5m
teu.
Its growth prediction appears to be proving accurate. Figures for
the first five months of the year from Container Trades Statistics
show a 10.4% increase compared with the same period a year
ago.
However, as this is the backhaul trade, utilisation levels are not
expected to be the strongest this year. That said, the situation is
improving and load factors look set to reach 86% during the first
quarter of 2015.
4
DATA HUB
FREIGHT FORECASTER
NEXT EDITION: AMERICAS
DATA HUB
LOAD FACTORS
Asia to northern Europe
Load factors on the
Asia-north Europe
trade look set to
be strong over the
next 12 months as
volumes continue
to increase ahead of
capacity additions.
The latest figures
from Container
Trades Statistics
show that during the
first five months of the year, volumes have increased by 8.4% year on
year to just over 4m teu.
Meanwhile, second quarter capacity was up by 5.8% compared with
a year ago.
Since the end of the first quarter, carriers have increased capacity by
around 4.6% as shipping lines have filled gaps in services and brought
in new larger tonnage as they prepare for the peak season.
These changes include the CKYHE Alliance adjusting its schedules
to include Evergreen, resulting in larger ships of 13,800 teu joining the
CEM/NE5 loop.
The G6 Alliance continued to increase the size of ships on its Loop
7 service. Maersk Line and Mediterranean Shipping Co filled gaps in
services and the Danish carrier also added larger ships to its AE2 loop.
6
Asia to the Mediterranean
Carriers are
continuing
to carefully
manage capacity
on the Asia-
Mediterranean
route. For example,
compared with the
second quarter of
last year, capacity
has actually been
reduced by 2.4%.
Meanwhile, since the end of the first quarter, shipping lines have
added just 2.1% of capacity to the market.
This low increase in capacity is down to the fact that the CKYHE
Alliance rationalised its MD1 and MAP service into a single pendulum
operation utilising 10,000 teu ships. The new service also has
additional calls in the Mediterranean.
In terms of overall growth, unless extra services are launched
which seems unlikely total capacity in 2014 will only be slightly
higher than the 2013 level.
While capacity is being carefully managed, volumes are surging,
and Containerisation International estimates a 7% growth level for
the full-year 2014.
The strong volume growth and low-level capacity additions mean
that utilisation levels are expected to reach 90% in the third quarter
of the year.
5
5
3
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Asia to northern Europe: average utilisation rates
Asia to Mediterranean: average vessel utilisation
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Middle East Gulf to Europe: average vessel utilisation
0
20%
40%
60%
80%
100%
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
KEY: Green (84% and above): Carriers should be able to protect rates or even improve prices, unless the market has hit the top or sentiment dictates otherwise. Grey (80%-83%):
Freight rates should be fairly steady compared with the previous quarter unless market sentiment dictates otherwise. Red (79% and below): Carriers are likely to have a tough time
improving rates and prices could well decline compared with the previous quarter, unless the market has hit the bottom or sentiment dictates otherwise.
SUPPLY CONTINUES TO
GROW AHEAD OF DEMAND
The boxship eet capacity increased in June to reach 17.5m teu, reports James Baker
Teu Size range In service June 2014 Outstanding
Orderbook 2014
On Order 2015 On Order 2016+ Total vessels
on order
Total teu
on order
No Teu No Teu No Teu No Teu
0-499 322 88,650 1 250 3 260 - - 4 510
500-999 717 542,589 4 2,930 2 1,481 1 540 7 4,951
1,000-2,999 1,851 3,349,172 43 75,172 66 129,450 38 77,288 147 281,910
3,000-4,999 920 3,803,523 20 84,588 11 42,700 9 34,600 40 161,888
5,000-7,499 613 3,699,050 8 45,600 8 49,200 - - 16 94,800
7,500-9,999 353 3,037,532 24 211,952 60 541,684 25 231,648 109 985,284
10,000-12,999 72 793,348 9 97,686 17 178,362 11 112,020 37 388,068
13,000-15,999 145 1,965,301 8 108,000 23 323,850 25 352,500 56 784,350
16,000+ 12 212,490 9 160,680 31 556,910 1 18,800 41 736,390
Total 5,005 17,491,655 126 786,858 221 1,823,897 110 827,396 457 3,438,151
World Cellular Fleet June 2014 (excluding newbuild postponements and cancellations under negotiation)
MOl Loire was demolished in June. Lay-up and demolition cannot keep
pace with the number of larger vessels entering service.
Photo: Dietmar Hasenpusch
WHAT a difference a month
makes.
The last time this column
went to press, the P3 alliance
was awaiting its final approval
from Chinese authorities. A
few short weeks later and
Source: Lloyds List Intelligence
DATA HUB
WORLD FLEET UPDATE
the discussion is now over
whether the 2M vessel-sharing
arrangement of Maersk Line
and Mediterranean Shipping
Co will operate within the
confines of Chinas anti-
monopoly laws and how this
new partnership will affect the
industry.
To a certain extent, however,
this is all just a rearranging of
deckchairs. While alliances
may alter the competitive
landscape between lines, the
market overall remains the
same: too many ships and too
few cargoes.
Owners can find some relief
in the fact that the number of
vessels on the water has fallen
since the end of May. By the
DATA HUB
WORLD FLEET UPDATE
Vessels laid-up Week ending July 1, 2014
Notes: Lloyds List Intelligence monitors reported and AIS movements of commercial vessels worldwide. This extract identies vessels with no recorded
movement in the past 25 days.
Inactive teu
size range
Owner operator Chartered in /unknown Total % total fleet
No of ships Teu No of ships Teu No of ships Teu
0-499 16 5,647 76 17,512 92 23,159 25.9%
500-999 9 5,891 50 34,638 59 40,529 7.5%
1,000-2,999 16 23,342 41 66,400 57 89,742 2.7%
3,000-4,999 2 9,140 13 52,683 15 61,823 1.6%
5,000-7,499 2 11,104 3 17,946 5 29,050 0.8%
7,500-9,999 - - 1 8,600 1 8,600 0.3%
10,000-12,999 - - - - - - -
13,000+ - - - - - - -
Total 45 55,124 184 197,779 229 252,903 1.4%
Vessels delivered June 2014
Vessel name Shipyard Teu Reefer
plugs
DWT Knots Beneficial owner Operator Deployment
Matz Maersk Daewoo Shipbuilding & Marine
Engineering
18,270 600 194,284 23 A.P. Moller-Maersk Maersk Line Asia-Europe
Thalassa Niki Hyundai Heavy Industries 13,800 151,200 23 N.S. Lemos Evergreen Asia-Europe
OOCL Singapore Samsung Shipbuilding & Heavy
Industries
13,200 1,150 144,159 23.5 Financial Products
Group
Orient Overseas
Container Line
Asia-Europe
Hyundai Drive Daewoo Shipbuilding & Marine
Engineering
13,050 145,979 24.8 Hyundai Merchant
Marine
Hyundai Merchant
Marine
Asia-Europe
MOL Bravo Jiangsu New Yangzijiang
Shipbuilding
10,000 117,500 Washington Marine Mitsui O.S.K. Lines Asia-Europe
Hanjin Ami Jiangsu Yangzi Xinfu Shipbuilding 10,000 115,260 Washington Marine Hanjin Shipping Asia-Europe
CSCL Bohai Sea Dalian Shipbuilding 10,000 700 121,824 23.5 China Shipping China Shipping
Container Lines
Transpacific
Hanjin Namu Jiangsu New Yangzijiang
Shipbuilding
10,000 115,318 23 Washington Marine Hanjin Shipping Asia-Europe
Cap San Sounio Hyundai Heavy Industries 9,669 2,100 123,050 N.S. Lemos Hamburg Sd Asia-Africa
UASC Tabuk Hyundai Samho Heavy Industries 9,000 112,171 22 Embiricos Group United Arab
Shipping Co
Transpacific
Wide Bravo Hanjin Heavy Industries (Subic
Bay)
5,400 65,347 Unknown NYK Line Asia-South America
Wide Alpha Hanjin Heavy Industries (Subic
Bay)
5,400 65,152 22 Bernhard Schulte
Group
NYK Line Asia-South America
YM Excellence CSBC Corp 4,500 700 56,600 25.6 Yang Ming Marine Yang Ming Marine -
Kota Sabas Dalian No.2 3,900 51,500 Pacific
International Lines
Pacific
International
Lines
Asia-Africa
Niledutch Breda Shanghai Shipyard Company 3,800 47,000 22.7 Nile Dutch Nile Dutch Asia-Africa
Barry Trader Guangzhou Wenchong Shipyard 2,190 490 25,000 19 Lomar Shipping &
Management
MCC Transport Regional Asia
Nordlion Zhejiang Ouhua Shipbuilding 1,700 350 23,574 18.5 Reederei Nord COSCO Container
Lines
-
Lagarfoss Rongcheng Shenfei Shipbuilding 875 230 12,000 18.3 Eimskip Eimskip -
end of June, there were 12
fewer ships in the fleet but, as
usual, yet more capacity. The
aggregate nominal teu capacity
of the 5,005 vessels increased
by 78,500 teu to reach 17.5m
teu.
New deliveries were led by
the latest of Maersks Triple-E
fleet, the 18,270 teu Matz
Maersk. New Triple-Es are
rolling off the slipway at the
rate of one a month, each one
with the nominal capacity of
four panamaxes, so it is easy to
see how the total fleet capacity
continues to grow.
Lay-up and demolition
just cannot keep pace with
the number of larger vessels
entering service. Of the 17
vessels joining the fleet in
June, 12 were post-panamax
or larger, with eight of those
having a nominal capacity of
10,000 teu or more.
At the other end of the
lifespan, the 16 vessels
demolished in June were all
panamax-sized or smaller and
all towards the end of their
serviceable life. The youngest
were 15-year-old feeder units
but the majority were 19-24
years old.
The number of vessels
returning to active service
after being in lay-up increased
in June, taking the number
of idle vessels down to new
lows, with only 1.4% of the
fleet now inactive. The fleet
in lay-up, primarily made up
of feederships, stands at 229
vessels comprising 253,000
teu.
The surprise here was that
of the 22 vessels that came
out of lay-up in June, eight
were panamaxes. These ships
accounted for 35,000 teu of
the 48,000 teu of capacity that
returned to service.
Despite this demand, the
value of panamax tonnage
DATA HUB
WORLD FLEET UPDATE
Valuations for post-panamax, panamax and handymax container vessels
Age Capacity (teu) June 19,
2014 ($m)
May 19,
2014 ($m)
Monthly change
($m)
June 19,
2013 ($m)
Yearly change
($m)
0 4,250 28.2 33.7 -5.5 36.4 -8.2
5 4,250 20.0 23.1 -3.1 25.5 -5.5
10 4,000 12.6 13.3 -0.7 15.7 -3.1
15 4,000 9.4 9.9 -0.5 9.8 -0.4
20 3,750 8.9 9.3 -0.4 7.7 1.2
25 3,750 8.9 9.3 -0.4 7.9 1.0
Panamax Source: Vesselsvalue.com
2014 ($m)
May 19,
2014 ($m)
Monthly change
($m)
June 19,
2013 ($m)
Yearly change
($m)
0 1,400 17.5 17.9 -0.4 21.1 -3.6
5 1,400 12.5 12.9 -0.4 14.5 -2.0
10 1,400 8.1 8.3 -0.2 8.6 -0.5
15 1,400 4.7 4.9 -0.2 4.7 0.0
20 1,400 3.6 3.8 -0.2 3.1 0.5
25 1,400 3.7 3.8 -0.1 3.2 0.5
Handymax Source: Vesselsvalue.com
Current and historical values for tankers, bulkers and containers.
Daily updated sales lists, vessel specications and ownership
information.
Data exports, valuation certicates, interactive charts and
automated alerts
2014 ($m)
May 19,
2014 ($m)
Monthly change
($m)
June 19,
2013 ($m)
Yearly change
($m)
0 7,000 66.0 65.1 0.9 58.2 7.8
5 7,000 47.7 48.0 -0.3 40.8 6.9
10 6,500 30.6 29.4 1.2 24.8 5.8
15 5,500 16.5 14.7 1.8 15.5 1.0
20 4,500 9.8 10.3 -0.5 8.5 1.3
Post-panamax Source: Vesselsvalue.com
Vessels demolished June 2014
Vessel name Built Teu Broken date Broken place Shipbreakers Previous Beneficial owner
Sunny Oasis 1995 4,743 17-Jun-14 Alang Indian Breakers Mitsui O.S.K. Lines
MOL Loire 1995 4,723 27-Jun-14 Alang Indian Breakers Mitsui O.S.K. Lines
MOL Tyne 1995 4,708 13-Jun-14 Alang Indian Breakers Mitsui O.S.K. Lines
Road 1993 4,229 16-Jun-14 Alang Indian Breakers Seafarers Shipping
New Orleans Express 1989 3,032 29-Jun-14 Jiangyin Chinese Breakers Hapag-Lloyd
Xin Ying Wan 1990 2,917 04-Jun-14 Zhoushan Chinese Breakers Hainan Pan Ocean
Fuji 1997 2,754 12-Jun-14 Alang Indian Breakers Conti Holding
MSC Hina 1995 1,438 28-Jun-14 Alang Indian Breakers Mediterranean Shipping Company
Xian Xia Ling 1993 1,100 05-Jun-14 Zhangjiagang Chinese Breakers China Shipping
Feng Xiang Ling 1994 1,100 10-Jun-14 Zhangjiagang Chinese Breakers China Shipping
Christy 1997 1,055 26-Jun-14 Aliaga Turkish Breakers Deepdale Shipping
Sea Breezer 1999 779 14-Jun-14 Alang Indian Breakers Ocean Shell Shipping
Umeko 1999 564 11-Jun-14 Jiangyin Chinese Breakers China Ocean Shipping
Lian Feng 1985 520 04-Jun-14 Zhoushan Chinese Breakers China United Lines
Khudozhnik N.Rerikh 1989 490 08-Jun-14 Chittagong Bangladesh Breakers Far-Eastern Shipping Company
Xiamen 1995 338 18-Jun-14 Alang Indian Breakers Yang Ming Marine
continues to slide, according
to data from VesselsValue. The
value of a new panamax has
fallen over 20% to $28.2m in
the year to the end of June.
Similar percentage declines
have been seen in vessels of
five and 10 years of age as
well.
This contrasts starkly with
larger vessels, the price of
which continues to surge. A
10-year-old, 6,500 teu
post-panamax has seen a
24% lift in value to $30.6m in
the year to June. New 7,000
teu vessels, which could be
had for $58.2m, are now
valued at $66m, an increase
of 13.5%.
DATA HUB
USING fewer but larger and newer ships is a
trend occurring across all routes to maximise
efficiencies and streamline service fleets.
A few years ago the average ship size on
the Asia-South America route was 5,000
teu and there were a total of 180 vessels in
operation on the trade lane.
Now the average ship size is 6,200
teu, with a total of 155 vessels. Using the
biggest ship for each route maximises slot
efficiency, while ensuring that the vessel
can call at all ports being served.
Half of the fleet on this route is now
less than five years old, compared with
the equivalent figure a year ago of 40%.
These newer ships also account for half of
the reefer slots available on the route and
should offer better fuel efficiency than
older vessels.
Lloyds List Intelligence predicts that
over the next few years larger, newer ships
of up to 13,000 teu currently on order will
be deployed on the Asia-South America
route. This is mainly due to the deployment
of ultra-large containerships on the main
east-west trades, leaving the super post-
panamax fleet of ships, between 8,000 teu
and 14,000 teu, to be cascaded on to
north-south routes such as Asia-South
America.
There are currently 149 super post-
panamax ships on order. Of these, 43%
are known to be operated by the main
Asia-South America carriers: CMA CGM,
China Shipping Container Lines, Hanjin,
Hamburg Sd, Mediterranean Shipping
Co, Cosco Container Lines, CCNI, Evergreen
and CSAV.
Investment is still needed in South American ports
to handle larger boxships, writes Sarah Bennett of
Lloyds List Intelligence
DESTINATION
SUPER POST
PANAMAX
According to a study by the United
Nations Economic Commission for Latin
America and the Caribbean, between 2016
and 2019 vessels of an average size of
13,000 teu will arrive at the east and west
coasts of South America, which is part of
a global trend of international trade in
search of economies of scale and economic
density.
In preparation for larger ships,
Chile-based Terminal Pacifico Sur Valparaiso
has purchased cranes with an outreach
of 62 m and a safe working load of 65
tonnes under a twin lift spreader. These can
accommodate ships with breadths of up to
62 m.
The use of reefer containers is an
important part of the South America-
Asia trade for transporting fresh fruit and
vegetables. There are a total of 120,000
reefer slots on board boxships on this
trade. CSAV, Hamburg Sd, Maersk and MSC
contribute the most reefer slots at 60% on
this route.
The majority of ships are between 5,000
teu and 10,000 teu, accounting for 89%
of the total trade route, with half of these
being between 7,500 teu and 9,999 teu.
The largest ship currently serving this
route is the 9,700 teu Cap San Maleas on
Hamburg Sds ASIA service, which will
DATA HUB
TRADE ROUTES
So far this year, 31 ships of this size
have been delivered and four of these are
deployed on the Asia-South America route.
The others are deployed on the main east-
west trades, while a few serve the Europe-
South America route.
As the 85 ships with more than 14,000
teu currently on order are delivered and
deployed on the main east-west trades,
more of the super post-panamax fleet will
be cascaded onto north-south trades such
as Asia-South America.
Infrastructure investment, however, is
required in South America to enable ports
to handle larger vessels and for intermodal
services to handle higher cargo volumes.
Figure 1: Teu range proportion among
Asia-South America operators
7,500-9,999 3,000-4,999
5,000-7,499
% of total Asia-South America (teu)
0
10
20
30
40
50
60
70
80
90
100
11%
46%
43%
TRADE ROUTE INTELLIGENCE
DATA HUB
TRADE ROUTES
soon be joined by two others with the
same specifications. There is still scope
for larger vessels as seven of the 15 fully
containerised services on this route still use
ships of 4,000 teu.
Six newly delivered containerships are
currently deployed on the Asia-South
America route. Four of these are between
9,400 teu and 9,700 teu , with three
operated by MSC and one by Hamburg Sd.
At the same time last year seven new, but
smaller, ships were deployed on the route
with between 4,300 teu and 5,000 teu. This
trend of newer, larger ships on the route is
likely to continue.
Maersk Line
MSC
CSAV
Evergreen Line
Hamburg Sud
CMA CGM
MOL
NYK
China Shipping
COSCON
K Line
PIL
Hanjin Shipping
CCNI
Wan Hai
HMM
Zim
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000
Figure 2: Weekly operated capacity on the Asia-South America trade route by line
Chile-based Terminal Pacifico Sur Valparaiso
has purchased new cranes in preparation
for larger ships.
THE first quarter of 2014 showed little
change from the general malaise evident
throughout 2013 for the majors in liner
shipping.
Overcapacity, despite some increase
in volume on the important Asia-Europe
trade, continues to impede progress
towards achieving sustainably better
rates.
Mergers and acquisitions, considered by
many to be an essential element of tackling
the industrys structural problems, are still
only represented by the Hapag-Lloyd/CSAV
tie-up, although the former has stated its
continuing interest, particularly in the Asia-
Pacific region.
The lines cost-cutting efforts depend
largely on bunker price reductions as most
other avenues for economies have long
since been exhausted.
The delivery of new tonnage continues
unabated and vessels on order represent
over 20% of current capacity, with Maersk
Line alone expecting delivery of a further
14 Triple-E class ships totalling 252,000 teu
during 2014 and 2015.
Delays to the Panama Canal expansion
have also postponed the benefits that
carriers were expecting to gain from using
larger vessels on services that transit the
transport artery.
Furthermore, the innovative and
progressive P3 arrangement between
Maersk Line, Mediterranean Shipping Co
and CMA CGM was rejected by Chinas
competition authority, preventing its
implementation.
Ongoing challenges
Continuing difficulties challenge the liner
shipping industry to survive and prosperity
is still some way off.
First-quarter volumes as shown in
Table 1 are for most of the major carriers,
with those issuing quarterly information
registering growth of between 2% and 9%
year on year.
Leading the increases were intra-Asia/
Australasia and Europe trades, with flat or
falling volumes on the Pacific and Atlantic
trades.
In the case of OOCL, the increases were
over 14% on intra-Australia and 9.7% on
Europe but a 1.1% decline on the Atlantic.
This performance is mirrored by
Hapag-Lloyd with substantial, and no
doubt welcome, growth in the Europe-
Asia (10.7%) and South America (8.9%)
Logic suggests weaker players should withdraw
from the container line industry, but who will blink
rst? Alastair Hill reports
PROFITABILITY
PROSPECTS
REMAIN BLEAK
ANALYSIS/COMPANY FINANCIALS
CARRIERS
OOCL APL CMA CGM Maersk CSAV Hapag-Lloyd ZIM
Volumes 1,352 785 2,800 4,400 446 1,399 617
Change Y-o-Y 8.9% 1.7% 5.8% 7.3% 2.3% 5.5% 2.0%
Table 1: Total volumes Q1 2014 (000 teu)
Source: Company reports
trades, offset by generally flat performance
elsewhere. CMA CGM reported 12% growth
in its intra-Asia/Australia business and 5.1%
on what is described as east-west trades.
However, revenues per unit, as shown in
Table 2, have seen significant falls as the
lines remain unable to implement rate rises
that actually stick. The figures for intra-Asia/
Australia demonstrate how the revenue per
teu experience on the other trades
has now spread to that route, hitherto
relatively unscathed by the problems
elsewhere.
At least unit revenue rates seem to
follow the laws of supply and demand that
apparently elude other aspects of the liner
industry.
Unless average rates per teu rise by at
least $100-$120 for the whole of 2014
and nothing else changes, many lines will
be unable to break even, let alone make
profits, so the outlook for 2014 remains
bleak. This also reinforces the perception
that the general rate increases introduced
on a regular basis by lines fail to hold
beyond the period immediately following
implementation.
The results summarised in Tables 3 and
4 reveal that total revenue and profits
have shown little improvement except
for Maersk and CMA CGM, where their
dominant market position and operational
cost advantages deriving from larger
vessels and more fuel-efficient ships have
brought benefits denied to many of their
competitors.
One can reasonably assume their
erstwhile P3 partner MSC has enjoyed
similar results, perhaps a factor in the
rejection by China of the proposed
combination. The position of both CSAV and
Zim is consistent with their wider problems,
but Hapag-Lloyd and APLs performance
suggests significant weakness in their
response to the sectors difficulties.
Steps to success
So what can the lines do to rebuild the
parlous state of their finances?
There are few steps left to them that
have not already been fully exploited.
Overcapacity remains the burning issue
in terms of industry structure and is
considered by most as something that
needs to be dealt with by the industry as a
whole.
Beyond the Hapag-Lloyd/CSAV
arrangement there have been no other
examples of consolidation. Many lines in
that middle ground outside the top five
to 10 lines and therefore just below being
a totally global operator should be more
open to some form of combination than
the giants, but there is no evidence of any
activity.
As many lines are owned or substantially
controlled by state entities, financial
discipline has generally come as a
secondary consideration where investment
and profitability are concerned and this
must determine their interest in seeking
success through corporate developments.
Despite this, many must feel that the
neglect of financial success cannot be
sustained indefinitely and the pressure
to combine, merge or take over can only
The delivery of new tonnage
continues: Maersk Line alone is
expecting delivery of 14 Triple-E
ships in 2014 and 2015.
CARRIERS
Revenue $1,026 $1,116 $1,407 $1,314 - $1,422 $1,213
Change Y-o-Y -6.6% -6.0% -2.9% -5.1% - -8.0% -5.4%
Table 2: Revenue per teu Q1 2014 ($)
*Each line reports profit differently so these numbers are not directly comparable Source: Company reports
Revenue $1,388 $1,878 $3,667 $6,463 $745 $1,554 $867
Change Y-o-Y 1.7% -4.5% 3.3% 2.4% -15.0% -5.9% -5.6%
Table 3: Total revenue Q1 2014 ($m)
Profit/loss - -$83 $97 $454 -$66 -$88 -$62
Table 4: Total profit Q1 2014 ($m)
build. One of the major independent
lines is reportedly engaged in a serious
examination of its future in the light of the
problems in the industry.
Without the economies of scale afforded
by operating 18,000 teu vessels, no one
will be able to match the performance of
the lines possessing such vessels. This will
drive further capacity increases leading
to continuing rate pressure ultimately
damaging the bottom line.
The response to capacity increases
should be more scrapping but, as with
mergers or acquisitions, most are reluctant
to take the financial hit of demolishing
relatively modern tonnage. Similarly,
cascading mid-range capacity vessels to
secondary routes merely increases the
rate pressure on those trades, which have
up until now escaped the worst of the rate
wars.
Can trade growth help? Global trade
growth forecasts for 2014 suggest
increases in the 3.5%-5% range, which is
below what is needed to absorb the deluge
of newbuildings hanging over the market.
Asia-Europe has shown a significant
increase in liftings this year of around 10%
year on year, which has been of immense
value to the lines involved. However, other
major trades remain subdued and the peak
season performance if, unlike the past
two years there is any discernible peak
season will need to be very good to
indicate any substantial turnaround.
Geopolitical issues
Cost control, a contributor to stemming
losses, has been due largely to the effect
of falling bunker prices, which can amount
to in excess of 20% of operating revenue.
Most lines disclosed that bunker price
changes have been positive in the range
of 5%-7% in the first quarter of 2014,
representing around $40 per ton, leading to
an average price of some $590 per ton.
The effect of this on the fuel
consumption of a line such as CMA CGM
would be in the region of $50m per quarter
and therefore a significant contributor
to first-quarter cost reductions across all
operators before any BAF changes.
How much longer this will persist is
open to debate, particularly with current
geopolitical issues building in oil producing
regions and with the price of bunkers now
approaching 2013 levels.
There are also further bunker problems
in store from 2015 when the low sulphur
emissions regime in certain emission control
areas, such as the North and Baltic Sea,
undergo a massive change with major adverse
cost implications for shipping companies.
The outlook, therefore, remains gloomy
with the well-documented difficulties
persisting into 2015 and beyond, but it can
be expected that the erstwhile P3 members
will progressively draw further ahead of
their competitors. The capital employed
stated by Maersk and its share of global
trade suggests the industry has capital
employed of some $150bn-$200bn.
There must be better ways to invest
that capital than in container shipping
with its pitiful profitability, so logically
casualties are inevitable and one or two
players look vulnerable, but who will
blink first and when did commercial logic
enter the mix?
Falling bunker prices have contributed to
stemming losses. The effect of prices on fuel
consumption of a line such as CMA CGM would be
in the region of $50m per quarter.
CARRIERS
Alastair Hill is a qualified accountant with
over 30 years experience in the container
shipping and wider transport industry
having started with Sea Containers in
commercial and business development
positions . He has worked for K Line UK,
UTT (Interbulk) in the Far East and other
tank and dry box lessors and managers.
He is an independent consultant/interim
manager and has also worked in Qatar
and Guyana on development projects.
THE competitiveness of Hong Kongs port is
typically bemoaned by the citys business
constituents.
Hutchison Port Holdings, the port arm of
Hutchison Whampoa, sold the bulk of its
stake in Hong Kongs Terminal 8 in March for
$319m to Chinas Cosco Pacific and China
Shipping Terminal Development.
The sale renewed speculation that Hong
Kongs primo tycoon Li Ka-shing, who controls
Hutchison, had lost confidence in Hong
Kongs growth story. Hutchison Port Holdings
also spun off some of its operations, listing
them as a unit trust in Singapore in 2011.
Divestment from Hong Kongs port seems
reasonable, at least, given recent trends in
shipping that favour alliances. These pacts are
altering shipping traffic, adding some calls to
ports and sheering away others.
Hong Kong appears to the biggest loser
of these changes this year even if it has
dodged a much more dramatic reduction in
calls following the collapse of the P3 Alliance.
According to figures both from SeaIntel and
Alphaliner, weekly port calls of containerships
in Hong Kong drop by five a week when
schedules of existing alliances G6 and CKYHE
in 2014 are taken into account.
Five fewer calls can be absorbed, of course,
but the effect of the 2M will likely subtract at
least several more. One indicator is that the
now-derailed P3 would have cut 10 boxship
visits per week; some of that loss will likely be
retained in the 2Ms plans.
South Koreas Busan Port is second-hardest
hit, with a reduction of five port calls a week
under the G6, but with the CKYHE, there is an
addition of one call to a total of four per week.
That means the net loss under new alliances
excluding 2M will be four visits per
week. Tokyo loses three port visits this year,
compared to the last, all due to the G6.
In contrast, under existing alliances,
Singapore loses three port visits per week, all
under CKYHE schedules. There would have
been no reduction of port calls under the P3.
Hong Kongs problems are compounded by
number of factors, including the rise of competitive
ports like those at Shenzhen and Guangzhou
directly to the north, the slowing in export trade
from Southern China generally, and slowness to
respond by Hong Kong in making upgrades that
would allow the biggest new ships to visit the port.
Only 15 of the 24 berths can accommodate
ships between 11,000 teu to the largest
sizes of around 18,000 teu. Hong Kong plans
to dredge over the next two to three years
to allow 18,000 teu ships to transit, but
the Shekou Port in Shenzhen has already
completed dredging of its Tonggu Channel.
The collapse of the P3 alliance, following a
rejection of the intended groups application
to Beijings Ministry of Commerce, gave Hong
Kong a reprieve, at least until the impact of
the freshly announced 2M alliance between
Maersk and Mediterranean Shipping Co is felt.
But reprieves are relative. Volume figures
for Hong Kong have been dropping since
2011, when 24.4m teu in throughput was
recorded. Volumes in 2012 amounted to
23.1m teu. In 2013, in which the Hutchisons
port operations were hit by a strike, volumes
dropped to 22.4m teu. Hong Kong, long
the worlds third-busiest port, was pushed
into fourth place by Shenzhen port, which
recorded volumes of 22.9m teu in 2013.
CALL CHANGES/ALLIANCES
PORTS
Port CKYHE-AE G6-TP P3-AE/TP Total
Old New Old New Old New Old New Change
Chiwan - - 3 - 13 17 16 17 1
Taipei 1 2 - - - - 1 2 1
Tanjung Pelepas 6 4 - - 14 17 20 21 1
Yokohama - - 4 5 5 5 9 10 1
Dachan Bay - - 3 2 - - 3 2 -1
Dalian 1 1 - - 5 4 6 5 -1
Kobe - - 4 3 2 2 6 5 -1
Sendai - - 1 - - - 1 - -1
Tianjin 2 1 - - - - 2 1 -1
Kwangyang 1 1 3 3 5 3 9 7 -2
Nagoya - - 5 3 2 2 7 5 -2
Shekou 3 2 - - 1 0 4 2 -2
Xingang - - 1 1 6 4 7 5 -2
Singapore 13 10 3 3 20 20 36 33 -3
Tokyo 1 1 7 4 - - 8 5 -3
Nansha 3 2 - - 7 4 10 6 -4
Qingdao 5 4 4 2 11 9 20 15 -5
Yantian 11 8 7 6 27 26 45 40 -5
Busan 3 4 14 9 15 13 32 26 -6
Kaohsiung 6 4 9 5 4 4 19 13 -6
Ningbo 10 7 4 4 23 20 37 31 -6
Port Kelang - - - - 12 5 12 5 -7
Hong Kong 11 7 7 6 22 12 40 25 -15
Ports without changes 20 18 15 15 41 43 76 76 0
Grand total 97 76 94 71 235 210 426 357 -69
P3s collapse may be good for the worlds fourth-largest port, but ve boxship
visits per week have been lost to G6 and CKYHE alliances, reports Tom Leander
MIXED FORTUNES
FOR HONG KONG
Table 1: Weekly port call changes of alliance in 2014: Asia
Sources: Alphaliner, Seaintel
THE container shipping industry changes
rapidly.
In early June the world was preparing
itself for the start-up of the largest alliance
of box lines the industry had ever known
with the establishment of the P3 Network
of Maersk Line, Mediterranean Shipping Co
and CMA CGM.
By the middle of the month, the
alliance had been abandoned and the 2M
partnership was in the process of being
formed.
But it is not only the shipping lines that
are changing their approach as ships get
bigger and margins get tighter container
terminal operators are also in the midst of a
period of change.
APM Terminals is one such company.
Over the last year, the terminal operator
has implemented a far-reaching change of
strategy that it hopes will allow it to adapt
to demands for higher levels of productivity
while ensuring that it reaches its financial
targets.
Chief commercial officer Martin Gaard
Christiansen explains that each terminal
previously operated independently but it is
now developing global competencies and
driving standardisation across its facilities.
While being the chief commercial officer,
Mr Christiansen took an interim role as
chief operating officer for around a year
to develop the strategy and to give him an
insight into both sides of the business.
A key reason for me having that interim
role was to bring commercial closer to
operations, he says.
We very often reinvent the wheel locally
by not having a standardised process for
how we deal with the various operational
processes.
Now we are going much more towards
a global way of working when we find
out what works well in one terminal we take
that process and feed it out to the other
terminals.
One of Mr Christiansens priorities is
the difficult task of moving away from
the traditional transactional customer
relationship to a more solutions-based
understanding.
This is fuelled by the need for faster
turnaround times as the result of an
increase in the number of ultra-large
container vessels.
In general larger tonnage is being
deployed in all trades with a lot of changes
to the vessel-sharing agreements and
alliance set-ups and, as a result, ocean
carriers require a more stable, predictable
and efficient product, he explains.
That means the complexity of
operations are increasing for us and we
wanted to make sure we focus our attention
on what matters for our customers.
We need to move away from the more
traditional transactional approach between
the lines and the operator where the main
focus has been on the CY [container yard]
rates, and move towards selling time and
efficiency in the port.
It is also applying a more global
TERMINALS/APMT
PORTS
Bigger ships drive the need for higher productivity in strategy switch-up for
terminal operator, reports Damian Brett
APMT APPLIES
GLOBAL STANDARDS
Photo: APMT
TERMINALS/APMT
PORTS
approach to the maintenance of equipment
to improve reliability and therefore
productivity.
He says that while the change to a more
global approach is still at an early stage,
there have already been improvements in
performance.
From a commercial perspective the
challenge remains to convince customers to
pay more, in line with the new approach.
We have seen a shift where our
customers are acknowledging that there
is value in a more stable productivity, he
says.
It means shipping lines can start taking
buffers out of their scheduling. And if we
can demonstrate that we, on a reliable
predictable basis, are delivering that, then
we can have a different rate discussion.
And we will then contract incentives
and penalties around agreed service
parameters.
We are saying if we dont deliver the
product that we have promised then we are
willing to accept a penalty as long as there
is an incentive for us when we perform
better than contracted.
We have such mechanisms in some of
our contracts today, and it is the direction
we want to take the dialogue with
customers.
Improving transparency
Mr Christiansen says that to improve the
level of service it also needs to improve
the transparency between carrier and
terminal.
He explains that if the terminal
operator and carrier share more
information, then the terminal can better
prepare for the vessel arrival and if
there are issues at the terminal then the
shipping line can be alerted before the
vessel arrives.
He likens the situation to a
Formula One pit stop, with the driver
and pit crew sharing information in
order to make the stop as smooth as
possible.
One other challenge that comes with a
change of strategy is achieving internal
buy-in. It is not always easy to convince
the team from one terminal to change
the way they have been running the
operation.
The strategy has been building up
from an inclusive approach so weve
had the terminal teams and the subject
matter experts heavily involved in
building the strategy, he says.
That was very important to get
the buy-in, so its not a headquarters
imposed strategy.
APM Terminals biggest customer is
Maersk Line, which accounts for around
50% of its volumes, so it is important
that its sister company is prepared to
pay for the improved service levels that
the new strategy will bring.
A recent analysis by Alphaliner
suggested that APM Terminals had the
lowest earnings, before interest, tax,
depreciation and amortisation, of the
leading operators.
APM Terminals refuted the suggestion
that this low margin was caused by
Maersk Line paying lower port tariffs
than other lines. The terminal operator
says the margin is lower due to the fact
that its rivals have flagship terminals
with high port tariffs.
Meanwhile, APM Terminals says it
has a broader global portfolio with no
flagship terminal, and has a significant
presence in the US and Europe, with 22
of its existing terminals located in these
mature markets.
Nonetheless, the fact that Maersk
Line is the terminal operators largest
customer means its response to the
initiative is important.
Maersk Line has been quite open to
this concept for a while but others are
also opening up to this discussion, says
Mr Christiansen.
We need to get in earlier even
before the network is planned and
influence their port decision and that
requires that we have access to not only
the procurement organisation but also
the service and network organisation.
We have what we call a key client
managers set-up, where for each
alliance we have a number of key client
managers that support the alliances on
a global level. But you could say Maersk
Line was the first carrier that was open
to this different commercial approach.
Christiansen: We
are going much
more towards
a global way of
working.
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HAPAG-Lloyds imposing head office
overlooking the Alster lake in central
Hamburg is the epitome of traditional
values and a proud pedigree.
The prime location on the prestigious
Ballindamm, and spacious entrance hall
with its marble floors, columns and double-
height ceiling, are designed to impress.
But if that impression is of a company
locked in the past, then it would be a
misleading one.
For behind the classic facade, Hapag-
Lloyd is embracing change. Indeed, 2014
is on course to be a landmark year for
Germanys largest container line.
The city of Hamburg and other German
interests, including the freight-forwarding
entrepreneur and billionaire Klaus-Michael
Khne, may have fought hard to keep
Hapag-Lloyd out of foreign hands six years
ago, but this is not a company refusing
to adapt to a rapidly changing world.
Conversely, it is that willingness to be
flexible that has enabled the shipowner to
survive some tumultuous times.
Hapag-Lloyd was formed in 1970
as a result of the merger of Hamburg-
Amerikanische Packetfahrt-Actien-
Gesellschaft and North German Lloyd. But
the origins of those two lines go back much
further, with Hapag founded in Hamburg in
1847 by local merchants and NDL set up in
Bremen in 1857. Both lost their fleets twice,
after World Wars One and Two.
In more recent years, Hapag-Lloyd has
developed into one of the most successful
container lines in the world, with former
chairman Hans-Jakob Kruse who died
earlier this year instrumental in its
success.
Yet over the past decade, the Hamburg
line has lost ground to three other European
carriers: Maersk Line, Mediterranean
Shipping Co and CMA CGM. None of those
have such a long and illustrious history as
Hapag-Lloyd, yet the trio now dominates
the global container trades and seems to
be pulling ahead of the rest despite being
forced to abandon the P3 vessel-sharing
agreement after a veto from China.
The acquisition of CP Ships in 2005
pushed Hapag-Lloyd from 13th place to
number five in the world, but it has since
slipped back to sixth place. Moreover,
fleet capacity is only around a third of
that of either Maersk or MSC, despite a
newbuilding programme with a series of
13,200 teu ships recently delivered.
Yet more than ever, size matters, says
Michael Behrendt, who stepped down as
chief executive at the end of June.
Long gone are the days when a line could
be ranked, say, 14th or 15th in the world
and still make a very comfortable living as a
global operator or large regional player.
With little control over prices, carriers can
only improve their bottom line through a
tight grip on expenses, and that means the
cheapest slot-costs possible, best achieved
through economies of scale.
Hapag-Lloyds financial results have been
relatively lacklustre compared with industry
leader Maersk, with the line posting a loss
in the first quarter of the year. Admittedly,
several other carriers were also in the red,
but the Danish line is proving that it is
possible to make money, even in difficult
trading conditions.
So can Hapag-Lloyd reverse the trend
and close the gap on the industry leaders,
both in terms of profitability and fleet size?
CHANGES AT THE TOP/HAPAGLLOYD
CARRIERS
How will new shareholders and a change of management inuence the culture
and future direction of Hapag-Lloyd, asks Janet Porter
CLOSING THE GAP
Former Hapag-Lloyd chief
executive Michael Behrendt and
his successor Rolf Habben Jansen
pictured at a farewell reception
In Hamburg for the outgoing chief
executive and Ulrich Kranich.
Photo: Hapag-Lloyd
CARRIERS
CHANGES AT THE TOP /HAPAGLLOYD
Finishing touches
Having made it clear that Hapag-Lloyd
had to grow and that he had a hitlist
of merger or acquisition targets, Mr
Behrendt rounded off his 13 years as
head of the line by putting the finishing
touches to a merger with the container
shipping arm of Chiles Compaa Sud
Americana de Vapores to form what will
be the worlds fourth-largest container
line in terms of capacity, with some 200
ships totalling 1m teu.
The deal is not expected to be
concluded until November, once
regulatory clearance is obtained, but the
shareholders of each line have already
given their consent to the tie-up.
But that is unlikely to be the end of the
expansion drive, with Mr Behrendt saying
that the line will then turn its attention
to the Asia-Pacific region where it sees
the need to have a stronger presence.
Once the CSAV deal is completed,
Mr Behrendt will join the supervisory
board as chairman, replacing Jrgen
Weber, who decided to step down early
in order to ensure continuity during the
integration process.
Although little planning can be done
until antitrust authorities have given
the green light, the priority is to move
as fast as possible, with Mr Behrendt
hoping the two businesses will be fully
amalgamated within the year.
This will not be a democratic process,
with Hapag-Lloyd learning from its
takeover of CP Ships which it feels
went well and less successful industry
mergers such as that of P&O Containers
and Royal Nedlloyd, that one side has to
be in control.
In the case of the CSAV deal, the
headquarters will be in Hamburg, with
Valparaiso becoming a major regional
office, as the German line takes charge
and retains its national identity.
CSAV will become a major shareholder
in Hapag-Lloyd, with an eventual stake
of 34%. That will enable other investors,
who have been looking for an exit route
since coming to the rescue of Hapag-
Lloyd in 2008 after principal shareholder
Tui said it wanted to sell, to reduce their
interests.
The city of Hamburg, through the
Hamburger Gesellschaft fr Vermgens
und Beteiligungsmanagement
consortium, will be able to cut its stake
from almost 37% to just over 23%,
while Mr Khnes interest will go down
from 28.2% to 20.8%. Tui will own 14%
of the equity at the end of this process,
against 22% now.
The goal is to then have an initial
public offering within a year of the
merger, with a minority stake in the new
entity to be sold to new shareholders.
But the basic ownership structure will
still be very different from that of the top
three, which are each in the control of
powerful and hands-on families.
That is particularly the case for MSC
and CMA CGM, which are able to benefit
from a fast decision-making process.
Many in the industry are convinced that
the failure of most Asian lines to keep
abreast of their European rivals is down
to internal bureaucracy that prevents a
rapid response to market conditions or
investment opportunities.
Mr Behrendt rejects the idea
that Hapag-Lloyds more splintered
ownership, both now and in the future,
will be a handicap as it strives to catch
up with market leaders.
I am very happy with the time our
decision making process takes
when it was necessary to be fast, we
always could be, but some rules and
double-checks are needed. I like to be
spontaneous, but if I invest billions I
like to think twice, he said in a wide-
ranging interview with Containerisation
International.
Growth potential
Speaking just days before retiring from
the chief executive position and taking
a few months break, Mr Behrendt
considered whether Hapag-Lloyd and
Hamburg Sd would ever merge, after
two failed attempts, one as recently as
last year.
It could be possible, but it is not a
priority on our agenda, he said, with
CSAV now giving greater access to the
South American markets, which would
have been the main reason for teaming
up with Hamburg Sd.
Instead, the merger and acquisition
focus is likely to switch to the Asia-
Pacific region where Hapag-Lloyd sees
growth potential.
Asked if Hapag-Lloyd had been
invited to team-up with the other three
European lines to form what would have
been the P4 vessel-sharing agreement,
Mr Behrendt said there had never been
an approach. As a member of the G6
alliance along with five Asian lines,
Hapag-Lloyd is fully committed to that
consortium, he said.
Hapag-Lloyd is not only about to gain
a new major shareholder, but a different
team of senior executives as well, with
Mr Behrendt being succeeded by Rolf
Habben Jansen, the former head of
AP Moller-Maersks freight forwarding
subsidiary, Damco.
A Dutch national, he will also be the
first non-German to run Hapag-Lloyd.
He will be supported by Anthony Firmin,
who has taken over from Ulrich Kranich as
chief operating officer, and who is British.
So Hapag-Lloyd may on the face of
it remain a quintessentially German
company. But behind the scenes,
Ballin House is taking on a very
international flavour through its new
Chilean shareholder and foreign top
management that promise to bring
cultural diversity to this pillar of the
Hamburg establishment.
Ulrich Kranich,
Michael
Behrendt,
Christine and
Klaus-Michael
Khne at the
event in Hamburg
Photo: Hapag-Lloyd
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THE VIEW FROM THE BRIDGE
INSIGHT FROM THE CSUITE/GRANT DALY
A MAJOR challenge for modern container
shipping lines is how to differentiate
themselves from their competitors.
The growth of shipping line alliances
means that although a customer may book
space from one carrier, the container could
actually move on the vessel of another
shipping line entirely.
This makes it increasingly difficult for lines
to compete with each other based on the
reliability of services.
Instead, ocean carriers are competing
on the softer side, or people side, of the
business, differentiating themselves through
the level of customer service they are able
to provide.
Safmarine chief executive Grant Daly says
that this is nothing new for the AP Moller-
Maersk-owned carrier.
Changing times
Mr Daly, who is South African, has seen
a lot of changes during his time at
Safmarine.
He joined the shipping line in 1994,
prior to the takeover by Maersk in 1999,
after graduating from the University
of Stellenbosch with a Bachelor of
Economics degree.
He has worked in a variety of roles,
initially joining as part of a newly
established development team,
which was tasked with expanding
beyond the four trades it was active in at
the time.
He says it was a fantastic time to be
involved in the business because of the
rapid growth phase that the industry was
going through.
Mr Daly then moved to Belgium to
help with the integration of Belgian
MAKING A
DIFFERENCE
Safmarine chief executive Grant Daly talks to Damian Brett about the
importance of service dierentiation
shipping line CMB-T, which Safmarine
fully acquired in 1996.
Following the acquisition by AP Moller-
Maersk, Mr Daly moved to Singapore to
look after Safmarines Far East region
and to establish its own agency network.
He then moved to the Middle East for
six years, before returning to Singapore,
just in time for the global financial crisis.
Mr Daly describes this time as
challenging, and says it was a new
experience.
The focus there was on efficiency
and cost of operation, making sure
we maintained our customer focus
100%, and on getting our cost-to-serve
competitive.
He was there for two years before
being posted to the companys
headquarters in Antwerp where he
headed up the multipurpose unit.
Change of headquarters
Soon after his arrival in Antwerp,
it was announced that Safmarines
headquarters would be moved to
Copenhagen in 2012, where the AP
Moller-Maersk group is based.
It was during this move that Mr Daly
was made chief executive.
While the headquarters move could
be seen as another step towards
Safmarine being assimilated into the
Maersk group, Mr Daly insists the
opposite is true, stressing that the move
was only about creating efficiencies in
the back office.
The groups container business
consists of six brands, Maersk Line,
MCC, Seago Line, Mercosul, Sealand
and Safmarine, each offering its own
products, services and approach to
customers depending on the market they
are selling to.
However, they share IT platforms, work
processes and back office functions,
while Safmarine shares the Maersk Line
network.
Mr Daly says that since Safmarine was
acquired by Maersk 14 years ago, it has
delivered a profit every year apart from
2009 and 2011, when the industry was
hugely affected by the global financial
crisis.
Part of dealing with the pressure
we came under in 2011 was focusing on
our costs and our efficiency and being
more effective with our resourcing, he
says.
One opportunity we had, that
possibly others didnt have, was being
part of a bigger group meant there were
non-customer facing functions that
we could leverage, be that finance or
operations as two examples.
The profitability during that
period and the absolute need to make
sure that we focused on costs, while
not devaluing our focus on the
market and customers, is really what
led to that decision [to move
headquarters].
Its a move that we believe has
been a successful one. The business
performance in the last two-and-a-half
years has justified that.
He adds that the move should be
placed in the context that Safmarine is a
global operator, although it focuses on
two core regions.
Where we steer the business from is
not really relevant, he says.
INSIGHT FROM THE CSUITE /GRANT DALY
GRANT Daly joined Safmarine in 1994 after graduating from the
University of Stellenbosch with a Bachelor of Economics degree.
As part of a newly established development unit, Mr Daly was
tasked with expanding Safmarine activities into areas beyond the
traditional trade lanes.
In 2000, he relocated to Singapore as Far East regional manager
and in 2002 moved to Dubai as Middle East area manager.
In 2003, he assumed the role of regional executive for west
central Asia, responsible for Safmarine activities within the
Middle East and south Asia.
Mr Daly was then appointed as Safmarine regional executive
for the Asia region in August 2008.
In October 2010, he moved to Antwerp to become Safmarines
MPV (Multi Purpose Vessel Division) executive.
In February 2012 Mr Daly commenced his role as the chief
executive officer for Safmarine, based in Copenhagen.
PATH TO THE TOP
Business growth
Mr Daly and his colleague, Safmarine
global head of strategy and customer
insight Russell Gillespie, point out that
since Safmarine joined Maersk, volumes
have increased five-fold.
This would not have been possible had it
not been part of the wider group, they say.
Mr Daly says being part of the Danish
shipping conglomerate has also allowed
it to concentrate on developing the
customer side of the business.
It has had to differentiate from Maersk
Line for years, he says, even though they
share the same ships and network.
The difference [between Maersk Line
and Safmarine] really is in the customer
experience, he says.
We have the benefit of having
access to the best of both worlds. We
have access to arguably one of the best
product networks and infrastructures
available, but at the same time we
are focused entirely with our 1,100
Safmariners [the name given to
Safmarine employees] around the world
with our customer engagement.
We also see increasing operational
consolidation in the industry. You see the
G6 Alliance and the CKYHE expanding
and the challenge we all face is how to
differentiate yourself and that has been
our focus for the last 14 years.
I wont proclaim to have the answer
to that, but I think we have taken some
decent strides on how we tackle that.
So, how exactly does Safmarine
differentiate itself from its competitors?
Mr Daly says that the differentiation
really comes down to the behaviour of
its staff.
The activity and the commitment
of your people and importantly the
consistency of that approach is how we
differentiate, he says.
We spend a lot of time with our people
looking at how we do things, as well as
what we do. The what is the hardware; the
product and the network, but the how is
equally important and that really is where
the culture comes into play.
In order to create a Safmarine culture,
it has established principles that give
employees guidelines on how to behave
in the Safmarine way, implemented
e-learning programmes and staff are
given face-to-face training in classrooms
or at their desks.
The reefer sector, an area where
Safmarine is particularly strong, also
faces challenges.
Supply and demand is one of the
industrys main challenges, next to
the macroeconomy, and that has an
influence on price and over the past
decade there has been deflation in
freight rates, even though operational
costs have increased, he says.
Freight rates have, overall, come down
and reefer rates are no exception to that
in terms of the capacity that is available
and the conditions in the local market.
South Africa is a very big reefer
market in the Safmarine world and
the grape season has its challenges
with weather and labour strikes,
which influences utilisation and then
influences pricing.
On the flip side of that the citrus
It also uses social media to share
stories and best practice.
Mr Gillespie explains further, although
he says much of what it does is
unconventional for a shipping line.
One example is Safmarine employees
calling each other out, he says,
meaning that if someone does
something that doesnt fit in with the
Safmarine culture, other members
of staff will shout out thats not the
Safmarine way.
Its about how we engage with the
customer, or how we solve a problem,
Mr Gillespie says.
A lot of it is about the behaviour
because our competitors also have
good ships. And it comes down to the
behaviour and so we said lets do some
training on that.
We would create a scenario for
instance rolling a customers cargo
and ask how would you deal with that?
On one side, you are going to have to
deal with the processes and the systems
but on the other side, how will you
advise the customer?
Business performance
This year volumes have been continuing
to grow at a good clip, says Mr Daly.
We are fortunate in many ways in the
footprint we operate in and the focus of
our business. We have two core regions
that we focus on, being Africa and west
central Asia and Indian sub-continent, and
its the trade to and from those regions, not
exclusively the trade within those regions.
The growth in those core areas is
slightly ahead of what we would expect
global growth to be.
Africa is of course closer to 6%, China
has slowed down a bit but its growth rate
is higher than many of the other regions
at around 7%.
In terms of freight rates and vessel
utilisation levels, the story Mr Daly tells
is similar to that of the overall Maersk
picture, as it shares the network and its
financial results are rolled into those of
the various brands.
He says that industry-wide utilisation
levels are lower than past levels, and as a
result so are freight rates.
Meanwhile, Maersk hasnt increased
its container tonnage over the last two
years and volume growth means that its
utilisation levels have actually increased.
season is quite strong right now and we
are finding it a challenge to make sure
equipment is available and that then
increases pricing.
But with the future of the shipping
line based very much around its customer
service offering, how is the company
looking to develop in the years to come?
Mr Daly says the future is based on
ensuring service consistency as volumes
grow.
Our priority is understanding what it
is that makes that difference and making
sure that we have scalability in our
resourcing to ensure that our customers
receive a certain level of experience
from us, he says.
So, we are building scale and
developing the service delivery and
consistency to make sure we do those
things the Safmarine way.
On the rise: since Safmarine
joined Maersk, it has seen a
five-fold volume increase.
Industry-wide
vessel utilisation
levels are lower
than in the past,
says Mr Daly, and
as a result so are
freight rates.
WHEN it comes to ordering containerships,
timing is everything.
Order when the market is at its peak
and the company could end up paying too
much, pushing up slot costs, but conversely
it can be hard to find funding when the
market is at the bottom.
One company that knows all about
ordering ships is United Arab Shipping Co.
Currently, Lloyds List Intelligence ranks it
at number 17 in the world in terms of the
capacity of its live fleet, which stands at 55
ships for 329,649 teu.
At the time of writing, its orderbook stood
at 17 vessels representing 272,300 teu
six ships of 18,800 teu and 11 with a
14,500 teu capacity.
When it takes delivery of these vessels,
its fleet will be the tenth-largest in the
world and it will have access to some of the
biggest ships on the ocean its LNG-ready,
18,800 teu behemoths.
When asked about its future plans for
vessel orders, UASC chief executive Jorn
Hinge jokes that the line has spent all its
money. Right now we have no further
plans, he says. This is it now. It looks like
a huge order and it is a big order compared
with the size we are coming from.
Timing the order
Mr Hinge says that traditionally, UASC
has ordered at the top of the market, but
there has been a change in approach this
time round.
If you look back in history and see
how we have bought in the past, we have
always managed to buy at the top of the
market.
We have always bought when we
are making good money and of course
at that time ship prices are very
expensive.
Although he couldnt explain past
decisions, as he was not involved in
the process, he says that UASC was
not alone in ordering at the top of the
market.
At any company, it is easier to get
your boss to give you money when
things are going well, he explains.
But shipping is a cyclical industry
and if you want to maximise your asset
prices you should invest counter-
cyclically; in other words, when things
look bleak.
This is not easy to do as people will
question why you are investing money
when things are bad. We were not the
only ones, it is human nature.
He points to 2007 and 2008 when
shipowners bought ships like crazy
even though prices were high.
This view appears to be backed by
figures from VesselsValue.
The value of a 7,000 teu containership
largely considered one of the
workhorse ship sizes on the east-west
trades over the last few years reached
a peak in 2008 before declining in 2009
and then picking up again in 2010 and
2011.
UASCs chief executive Jorn Hinge reveals the strategy behind the lines
newbuilding investment programme to Damian Brett
THE ART OF
ORDERING
ANALYSIS/UASC
CARRIERS
USACs 14,000 teu containerships Ain Snan,
left, and Malik Al Ashtar, both built in 2012.
Figure 1: Value of 7,000 teu containerships
Source: VesselsValue and Clarkson Research
ANALYSIS/UASC
CARRIERS
This is in line with an increase in
year-on-year global volume growth in
percentage terms in 2010 and 2011,
before growth tailed off again in 2012
and 2013.
Vessel ownership
The carrier ranking table also points to
another interesting development linked
to Mr Hinges suggestion that it is better
to order counter-cyclically; the largest
three shipping lines all have a clear
majority owner, making it easier for them
push through vessel orders when the
time is right.
Conversely, shipping lines with a
disparate ownership structure may find
it harder to push orders quickly through
the corporate system, making it more
difficult to capitalise on opportunities
when they present themselves.
And it was recently revealed that UASC
now has a majority owner, with the
worlds biggest exporter of LNG, Qatar,
taking a 51.3% stake.
Previously, the company was owned
by Bahrain, Iraq, Kuwait, Qatar, Saudi
Arabia and the UAE, with no one country
having a controlling interest.
Mr Hinge says that ordering vessels
counter-cyclically also has other
benefits.
[At the market peak] the shipyards are
interested in simply building the same
ship every time, he explains.
If they could build the same ship
forever, they would be very happy
because that means lower costs and
higher profits.
So when the market is busy, they
have standard designs they are happy to
sell and if you start making requests and
asking to make changes they say please
step aside and let the next person come
forward.
This time we were able to come into
the market when the shipyards were
fairly hungry and therefore they
were willing to look at doing things
they would not normally do and of
course we were able to order at a
reasonable price, which we would not
have got if we ordered at the top of the
market.
All of them were willing to look at
new things and go out of the way to try
and fulfil the crazy ideas we had.
And thats why we ended up with
what we have; some very efficient ships
that are able to use LNG. This is all part
and parcel of entering the market at a
time when the shipyards are not too
busy.
All the benefits, half the headaches
Another key to ordering vessels
particularly ultra-large ships is making
sure you are able to fill them.
To get round this challenge UASC
partnered with China Shipping Container
Line, with the Chinese carrier ordering
five 19,000 teu ships.
This is enough for the carriers to
operate a string on the Asia-Europe trade
using vessels of that size.
He says: By creating this arrangement
with China Shipping, we still have the
benefit of having 18,000 teu ships, but
we only have half the headache.
You could say it is like having a 9,000
teu ship but getting the cost benefits of
having a 18,000 teu ship.
At present, UASC is keeping its options
open on what to do with the 14,000
teu vessels it has on order, although Mr
Hinge says they will probably be used on
the Asia-Europe trade lane as well.
So with the shipping line set to enter
the top 10 in the world in terms of
capacity, is this what motivated the
shipping line to expand its fleet?
We are not targeting the top 10 in
terms of capacity, he says Wed like to
be one of the most profitable, but size
isnt that interesting to us.
Its much nicer to make a nice return
on your investment than to be number
10 or 11 or whatever number. That
said, profitability and fleet size arent
exclusive. We have invested in bigger
ships to try and reduce our unit costs.
So we have invested a large amount in
bigger ships and technology. We will also
redeliver some ships of course. Today,
we have 30 panamax ships and we wont
have that many in the future, I hope.
Hinge: Shipyards
were willing to look
at new things and go
out of the way to try
and fulfil the crazy
ideas we had.
Source: Clarkson Research Services and VesselsValue.com
VALUE OF 7,000 TEU BOXSHIP
2008 2009 2010 2011 2012 2013 2014
0
20
-15
-10
-5
0
5
10
15
40
60
80
140
120
100
160
180
4
-9.2
13.1
7.2
3.2
4.7
5.8
V
o
l
u
m
e

g
r
o
w
t
h

%
$
m
Value of 7,000 teu boxship Global container volumes year-on-year growth
TEMPERS are fraying at Valencia as some
of the biggest names in shipping become
embroiled in lawsuits over terminal
concession agreements and allegations of
broken promises.
One of Spains top terminal operators
is taking legal action against the port
authority, with Mediterranean Shipping Co
at the centre of the various disputes.
But what is happening in Valencia
is symptomatic of a crisis engulfing all
Spanish ports, most of which are plagued
by over-capacity and declining volumes as
carriers switch to cheaper alternatives in
other parts of the Mediterranean.
At the heart of the problem is the lack of a
national strategy, say local business leaders,
leaving Spain with 28 separate port authorities,
each with their own investment plans.
In total, there are 46 ports, many quite
close to each other, and yet 75% of
container traffic moves through just three
Algeciras, Valencia and Barcelona.
With so much traffic handled by Spanish
ports consisting of transhipment cargo,
there is plenty of competition from other
facilities in the region, including Italys Gioia
Tauro, Maltas Marsaxlokk, Portugals Sines,
and Moroccos Tangiers.
These are mostly cheaper than Spanish
ports that, often burdened by high debt levels
and relatively expensive labour, are being
priced out of the market, according to the
regional offices of global liner companies.
Global carriers are looking for the
minimum deviation from the main Asia-
north Europe trade lanes, leaving Valencia
in a particularly vulnerable position
because of its location and high charges.
Costs have to be drastically reduced,
otherwise the volumes will move away, the
Valencia-based head of a major Asian line
told Containerisation International.
It makes more sense to discharge
transhipment cargo elsewhere and then
move containers by feeder to Valencia.
It is against this backdrop that Noatum
Ports, owned by the asset management
arm of banking heavyweight JP Morgan, is
seeking financial redress from Autoridad
Portuaria de Valencia which may have to pay
out several million dollars in compensation.
Noatum owns one of the two common-
user terminals in Valencia, acquired when
it bought the Spanish group Dragados in
2010. The other is run by TCV Stevedoring,
while the third container facility in Valencia
is MSCs dedicated terminal, MSCTV.
Noatum is challenging the right of MSCTV
to handle ships that are not controlled by
Like many of Spains ports, Valencia is plagued by overcapacity and declining
volumes as carriers switch to cheaper alternatives, reports Janet Porter
CRISIS IN VALENCIA
MEDITERRANEAN/VALENCIA
PORTS
Photo: APV
MEDITERRANEAN/VALENCIA
PORTS
the Geneva-headquartered line, claiming
that this contravenes the concession terms
set by APV.
APV insists that vessels belonging to
other companies are not allowed to use
the MSC terminal as though it was a public
terminal, but says ships belonging to MSC
alliance partners are still permitted.
The terms of the concession allow for
the handling of ships that are operated by
MSC or in service on MSC lines, according
to APV.
Noatum and TCV are contesting APVs
interpretation of the concession rights,
arguing that only MSC ships should be
allowed to use the private terminal. Both
have lost business as MSC moved more of
its own cargo through its own terminal or
via non-Spanish transhipment hubs, and
started to accept alliance partner ships at
MSCTV.
MSC has a wide range of port
investments through its subsidiary Terminal
Investments Ltd. Last year, the company
sold a 35% stake to Global Infrastructure
Partners for just over $1.9bn.
Under a 12-year contract with Noatum
Container Terminal Valencia, called
Marvalsa at the time when owned by
Dragados, MSC agreed to 900,000 moves
a year, of which 35% would be domestic
traffic. In return Marvalsa promised to
provide eight quay cranes and prioritise
800 m of berth for MSC.
However, MSC throughput has fallen
sharply over the past three years, with
moves down to just 590,000 in 2013. As
well as legal action against APV over volume
guarantees, this development is now the
subject of a separate arbitration between
MSC and Noatum, although neither side will
discuss the case at this stage.
There is a long history to this issue
concerning the MSC private terminal and
the objections of the public terminals, as
the public terminals correctly foresaw that
MSC would simply maximise all the volume
in its own terminal and leave behind the
worst cargo and overflow cargo in the
public terminals, Douglas Schultz, chief
executive of Noatum Ports and Maritime,
told Containerisation International.
That has left NCTV and TCV with a greater
share of less lucrative transhipment cargo
and empties.
For the past year, there has frequently
been a queue of MSC vessels outside the
port waiting for space at MSCTV, sometimes
for up to 36 hours, even though there is
capacity to handle them elsewhere in
Valencia, according to Mr Schultz.
However, the port authority argues
that it does not decide which terminal
should handle a vessel in the port under
its jurisdiction, or which quay a ship must
berth at. That decision rests with the
dictates of the free market, says APV.
The role of APV is limited to either
refusing berthing or suggesting alternative
berthing arrangements to those which are
indicated on the Unified Vessel Dispatch
Document, on account of, among other
reasons, matters concerning the regulation
of maritime traffic, technical difficulties,
incompatible goods, or the incompatibility
of the intended activity and the concession
titles that are said to cover it.
Noatums facility could handle up to 4.5m
teu a year, and yet current throughput is
around 1m moves. The company estimates
that MSC volumes through its Valencia
terminal amount to less than 50% of the
contract commitment in 2014.
In support of its claim, Noatum says it
has been assured by Maersk Line that none
of its vessels will be put under the control
of MSC. If so, Maersk ships would not be
eligible to call at MSCTV.
Noatum also contends that APV has
changed the guidelines covering the MSCTV
concession agreement, without consultation.
The company first wrote a formal letter
setting out its concerns last September
after a series of meetings, but was unable
to reach any sort of settlement, and so
instigated court action.
Noatum claims that APV has in effect
converted what is meant to be a private
terminal into a public facility. The latter
have their tariffs regulated by the port
authority, whereas MSCTV has no such
oversight, and can charge what it likes.
Although the planned P3 alliance
between Maersk, MSC and CMA CGM is no
longer going ahead, Noatum still wants a
clear ruling on the status of ships deployed
within a consortium, and whether or not
MSCTV is entitled to handle these.
Regardless of P3, the problem still
persists, says Mr Schultz, since non-MSC
vessels currently calling at MSCTV are
not deployed on east-west services that
P3 would have covered, but elsewhere
such as the Mediterranean-east coast,
South America and north Europe-east
Mediterranean trades.
And, of course, two of the P3 partners,
Maersk and MSC, are now planning to start
the 2M vessel-sharing agreement next year,
suggesting that disputes over who has the
right to handle whose ships have not gone
away.
Maersk E-class vessel at
NCTV. Noatum and TCV
are contesting APVs
interpretation of terminal
concession rights.
Schultz: There
is a long
history to this
issue... and
the objections
of the public
terminals.
LONDON may still be one of the worlds
premier maritime hubs, underpinned by the
diverse range of world-class professional
services available for shipowners, but most
container lines have moved their offices out
of the capital to less expensive locations
that are also closer to customers.
For many, Liverpool is the city of choice
for sales, marketing and back-office
activities, even if their ships do not call
there. The well-trained workforce with
plenty of shipping knowhow because of
Liverpools strong maritime roots along
with cheaper rents and lower overheads
than in the south, are undoubtedly helping
Merseyside to establish itself as an
important regional centre for the industry.
This summer has also brought additional
attention to the north-west because of the
International Festival of Business during
June and July, including a fortnight of
events focused on the maritime sector.
Vistors to Liverpool during this period
included UK Prime Minister David Cameron,
while Chancellor of the Exchequer George
Osborne contributed to the debate about
the need to create a northern powerhouse
of linked cities in the region that would be
able to create an industrial counterbalance
to Londons vibrant economy.
With the citys port also being
redeveloped in anticipation of much larger
containerships entering the Atlantic trades,
Containerisation International and sister
publication Lloyds List hosted a debate
in Liverpool to discuss the citys maritime
future.
The main question was whether it can
regain its place in the global economy,
given the potential impact on shipping
patterns of an enlarged Panama Canal,
the deployment of ships of 18,000 teu or
more and the creation of super-alliances
between carriers, notwithstanding Chinas
ban on the P3 Network between the big
three lines.
Another hot topic was the likely impact
of the low-sulphur fuel rules that will come
into effect next year. While UK east coast
ports will fall inside the emissions control
area, ships calling at west coast ports will
not be affected.
Sponsored by Peel Ports, the debate
attracted more than 60 business leaders
from the shipping and ports community
to the brand new 30 James Street hotel,
housed in the former headquarters of
White Star Line, owner of the ill-fated
Titanic. Shipping lines represented included
Maersk, Mediterranean Shipping Co, CMA
CGM , Evergreen, Hamburg Sd, CSAV,
NYK, Atlantic Container Line, Independent
Container Line, MacAndrews, Seago, Bibby
and Borchard.
Peel Ports chief executive officer
Mark Whitworth, ACLs president Andrew
Abbott, MacAndrews inter-European
trades general manager Mark Copsey and
MDS Transmodals managing director Mike
Garratt joined the panel chaired by former
APL senior executive David Appleton, now
principle of the consultancy firm Focus
Maritime, to discuss the key issues of the
moment concerning both Liverpool and the
broader industry.
Bigger and better
THE message from Peel Ports Mr
Whitworth was that Liverpools much-
anticipated 300m ($500m) second
container terminal, Liverpool 2, is on
course to open at the end of next year.
He said the construction works were
bang on time, despite one or two hairy
Containerisation International debate reveals industry interest in north-west port
LIVERPOOL IN FOCUS
THE DEBATE/LIVERPOOL
EVENTS
Mark Whitworth from Peel Ports explains
the benefits of Liverpool as ACLs Andrew
Abbott and Mike Garratt from MDS
Transmodal look on.
THE DEBATE/LIVERPOOL
EVENTS
moments during the storms that battered
the UK last winter.
Peel Ports hopes bigger ships of
up to 13,500 teu, expected to enter
the Atlantic trades once an expanded
Panama Canal is completed, will start
calling at Liverpool.
We need a deepsea container
terminal that will be able to
accommodate the largest vessels that
sail today, and we need to futureproof
that to ensure it can accommodate the
vessels of tomorrow, said Mr Whitworth.
That could include ships of 18,000 teu
or more, given a little time to prepare.
The biggest now are around 4,000 teu
because of lock restrictions.
Peel Ports plan is not just construction
of a standalone terminal, however, but to
make it the centrepiece of a much larger
Atlantic Gateway project, consisting
of an economic pipeline that brings
together Liverpool and Manchester, two
of the most powerful cities in the north
of England. These are already joined by
the Manchester Ship Canal, now owned
by Peel Ports.
The cream on the cake, said Mr
Whitworth, will be a wider Panama Canal
that will add a new dynamic and change
the thinking of deepsea shipping lines.
Quizzed about possible overcapacity
among UK ports, following the
recent opening of London Gateway
and expansion at Felixstowe and
Southampton, Mr Whitworth said the
planning behind L2 was never solely
about additional capacity.
It was about enabling the market to
behave much more naturally to enable
us to take back our natural market
share, he said.
This natural market share is something
that Independent Container Line chief
executive John Kirkland feels has been
key to his companys success in the city
and in the region.
We have been able to bring the
customers away from the southern ports
back to their natural gateway here in
Liverpool, he said.
ACL president Andrew Abbott, whose
ships call at Liverpool, joined Mr Kirkland
in giving a vote of confidence, not only
to the new terminal but the port as a
whole.
Liverpool today is probably our
David Balston from the UK
Chamber of Shipping joins
the debate.
best-performing port and probably
our most productive, and when you
operate ships like ACL does, when its
a combination of containers and ro-ro,
there are very few places in the world
that we can have them handled.
The labour situation is probably the
best we have in the whole of Europe and
certainly better than anything in North
America, making it easy to operate here.
Burning issues
LIVERPOOL and other west coast UK
ports should benefit from new emissions
regulations affecting the North and Baltic
seas, although these gains will be eroded
over time, panellists and delegates
concluded.
Speakers agreed that new restrictions
requiring ships to burn fuel with a
sulphur content of 0.1% in the Baltic
Sea and North Sea as opposed to
the current 1% limit would increase
demand for UK west coast services,
which avoid the need to burn the more
costly fuel.
MacAndrews Mark Copsey said:
Certainly we will need to burn different
fuel for our legs to the UK east coast and
the Baltic and it will mean that the west
coast UK ports will have an advantage on
their door-to-door cost structure.
Most of the business we do is door-
to-door, so when we increase the rates
for the southern ports, which we will
have to do, then we will see more cargo
go through the port of Liverpool.
However, one attendee questioned
whether the immediate gains could be
maintained, given shippers increasing
focus on environmental initiatives.
Debate moderator David Appleton
agreed, saying that although shipping
lines may initially take a short-term view
that services that do not need to burn
more expensive fuel will benefit from
the new regulation, shipper demand for
green services could reverse this trend in
the longer term.
This view was shared by Mr Whitworth.
Our customers are increasingly
demanding green solutions in a variety
of forms and in our view thats the right
thing to do, he said.
We could have a debate about
whether Liverpool will have an
advantage in the short term, but in the
long term my view is that it will probably
level out. Well be positioning ourselves
to provide greener solutions.
MDS Transmodal managing
director Mike Garratt asked how long
it would be before the Mediterranean
and Irish Sea were subject to the same
requirements.
Clearly [the requirement] is
inconsistent. Given that the argument
for the sulphur-exclusion zones is
human health, then clearly it is a little
strange that parts of Europe are not
included; why arent the Irish Sea and
Mediterranean populations as important
as the Baltic populations?
Mr Abbott questioned the sense of
imposing the requirement on shortsea
operators.
I can understand the rationale for
deepsea trades but not for the shortsea
guys because they are taking trucks off
the road. This will make it less tenable
for a shortsea operator because a trucker
wont have that extra cost.
Container rates face period of
unprecedented volatility
EXCESSIVE container shipping supply
will continue to drive volatile and bearish
freight rates on key trades for some time,
and a new round of orders for vessels as
large as 24,000 teu could further disrupt
the market, analysts told delegates
attending Junes Container Supply Chain
Conference at TOC Europe in London.
Martin Dixon, head of research products
at Drewry, said that growth in global
demand of 3% last year was forecast to
accelerate to 5% in 2014 and 2015 and
6% in 2016, but that this would not be
enough to balance supply growth.
The industry will fail to reach any sort of
equilibrium until 2016, he said. The impact
of this, Mr Dixon added, is that carriers will
be forced to miss more sailings and impose
frequent general rate increases, while
also working through alliances to reduce
capacity.
Average freight rates fell 6% last year
and we anticipate further falls this year, he
said.
He added that carriers have been
managing this loss of revenue by curbing
unit costs. Overcapacity will plague the
industry for several years to come and
unprecedented freight volatility will
continue.
Moffatt &Nichol maritime transport
consultant and conference moderator John
Fossey also predicted that excess capacity
would continue for the next two years.
Rates are falling and continuing to fall, he
said. But what is more worrying is volatility.
Higher and lower rates, peaks and troughs
make planning harder.
Ocean Shipping Consultants project
director Andrew Penfold said the
concentration of new orders on larger
vessels was of most concern to those
seeking more stability as it is prompting
a cascade effect into secondary regional
deepsea trades.
Since 2010, we have seen a rapid
increase in the average size of vessels on
north-south trades. Generally speaking, the
ports and terminals in these markets have
not been ready for these vessels, which has
resulted in upsets to schedules, he said.
He also predicted that the size of the
largest vessels in the global fleet would
continue to grow.
The technical jump from the largest
18,000 teu-class vessels now in operation
to 24,000 teu ships is negligible and Mr
Penfold predicts that vessel sizes will need
to expand only marginally to around a
length of 430 m and a width of 62 m.
This, he said, would have a limited impact
on draught because average box weights
are light.
The main technical challenges to making
a major jump in boxship size are ensuring
that such vessels are easy to manoeuvre
and that quay walls are strong enough for
the container gantries needed to handle
them.
Larger ships could mean fewer mainline
ports of call, larger feeder vessels and more
hub-and-spoke systems and liner alliances,
Mr Penfold added.
A new round of orders, perhaps not now,
but maybe in 2016 or around then, he said,
would skew the supply-demand forecasts
of most analysts and add to the freight-rate
volatility already disrupting global container
shipping markets.
Linton Nightingale covers the major talking points raised at this years TOC
Europe conference as the container industry descends on the UK capital
LONDON
CALLING
CONFERENCE/TOC EUROPE
EVENTS
Speakers address
delegates at TOC
Europe.
EVENTS
P3 decision shows why shipping needs
a global competition body
THE decision by Chinas Ministry of
Commerce to reject the proposed
P3 alliance highlights the shipping
industrys need for a global competition
authority.
That is the view of Anthony Woolich, a
partner at Holman Fenwick Willan and
competition law specialist, who believes
that a competition authority responsible
for the key decisions affecting the
industry is becoming a necessity, given
its global nature.
The P3 deal is a classic example
of how the industry would benefit
hugely from there being a worldwide
competition authority, Mr Woolich told
this years conference.
Having one authority looking at a
transaction in one language with one
timetable is far more efficient for
everyone concerned. Weve seen over
the last decade or so several examples
of international deals that have been
passed by some competition authorities
across the world but not by others.
As globalisation increases so does the
case for having a worldwide competition
authority. Shipping is a global industry
to come, the same could be achieved
at worldwide level, as what we have at
the moment is different procedures,
rules, timetables and different languages
making things very difficult for
business.
Russias ports use cheap bunkers to win
box calls
SHIPPING lines are adding port calls at
Russian ports to benefit from cheaper
fuel prices, according to speakers at the
conference.
Delo Group chief financial officer
Andrey Bubnov said Triple-E class vessels
had called at the ports of Vladivostok
and Vostochny in search of cheaper
bunker fuel.
Delo owns logistics company Global
Container Services and stevedore
Deloports.
Novorossiysk was also benefiting from
increased calls because of the trend, Mr
Bubnov said.
The bunkering factor is becoming
more and more important. The larger
the ship sizes, the more bunker fuel
they can take on board both in absolute
and relative terms, he said. If you
see a comparison of Novorossiysk and
and therefore the competition law of
each relevant jurisdiction needs to
be satisfied, so even if you pass the
competitions tests and satisfy
authorities in the US and Europe, as in
the case of the P3 alliance, you may still
fall foul of competition laws in other
jurisdictions.
With the P3 not only did they fall
foul of the Chinese authorities... but
they were still waiting for consent from
Korea.
Mr Woolich added that despite the
competition authorities meeting in
December to discuss the proposed
P3 vessel-sharing agreement, their
subsequent decisions show that
this does not necessarily deliver a
co-ordinated approach.
We are still some way away from being
able to have a worldwide competition
authority, he said.
But I do envisage that there could one
day be an authority with representatives
from all the main trading blocks that
would make a world decision, just as the
European Commission makes a decision
on the very largest mergers affecting
Europe.
I would like to think that in the years
Visiting the stands
at TOC Europe.
EVENTS
Istanbul, you can see there is a $200
per tonne difference between two
neighbouring ports.
Mr Bubnov said that in mid-June,
intermediate fuel oil 180 cost around
$452 per tonne in Novorossiysk,
compared with $646 in Istanbul, $629 in
Singapore and $630 in Rotterdam.
Dynamar senior shipping consultant
Dirk Visser said five services were
bunkering in Vostochny, two from CMA
CGM, two from Maersk Line and one from
Zim. These services use vessels of 4,300
teu-8,800 teu, he said.
Mr Bubnov added that the search for
low-cost bunker fuel was part of a trend
for increased competition on Russian
trades, led by Maersk
Line, Mediterranean Shipping Co and
CMA CGM. He noted how the three
carriers control more than 50% of the
market.
He said Maersk Line and MSC were
also offering fixed transport tariffs for
six months. Prices were pitched at, or
just below, the breakeven point of their
competitors.
The carriers were able to do this by
integrating trade flows from various
international markets into single Russian
services.
He gave the example of a feeder
service to St Petersburg that groups
together citrus fruits from Morocco,
bananas from Ecuador and furniture from
Scandinavia.
These carriers transhipment hubs
were also closer to the Russian market
with Maersk Line utilising Gdansk and
MSC Istanbul and they had the larger
vessels on the market to gain better
economies of scale.
At St Petersburg, for example, Maersk
Line, MSC and CMA CGM used vessels
with an average size of 2,700 teu
compared with a market average of
1,500 teu.
However, other carriers are fighting
back by launching joint feeder services
and extending their intra-European and
intra-Mediterranean services to Russian
ports and drawing their hubs closer to
Russia.
Evergreen and Cosco Container Lines
are utilising Piraeus for transhipment.
The lines are also expanding into
intermodal services, offering port-to-
door tariffs, in partnership with Russian
logistics companies.
In terms of container volume growth,
speakers said the Russian market
continued to have a mixed performance
last year, ports on the Pacific and
Black Sea growing by high single- and
double-digit levels and ports in the
Baltic Sea reporting largely flat
volumes.
Mr Bubnov said Delos Nutep terminal
in Novorossiysk suffered a decline in
volumes during the first part of the year,
as a result of the roubles depreciation,
but was catching up quickly.
Conversely, exports increased by
around 27% on-year this year in
Novorossiysk and by 28% in Vladivostok.
Larger containerships will push
terminals to up their game
THE growing number of larger vessels
serving the major trades will increase
pressure on terminal operators to
maintain high levels of productivity and
efficiency, according to a top maritime
analyst.
Addressing the audience at TOC
Europe, Ocean Shipping Consultants
project director Andrew Penfold said
operators will have to lift their game if
they are to remain competitive.
Relatively little investment can
transform the ability of a port to handle
larger vessels and turn them round
adequately, he said.
As larger vessels come in, if a terminal
is not productive or it is not efficient
then the pressure will be on to drop that
call or reduce the price of the service
offered.
Mr Penfold said box terminals will
need to offer a minimum of 30-35
moves per hour per crane. If the
terminal operator cannot deliver this, for
whatever reason, then it is going to be in
trouble, he said.
Therefore, many terminals will be
under increasing pressure to have the
infrastructure in place to handle the
worlds largest vessels or make better
use of their existing facilities, explained
Mr Penfold.
However, container terminal and
operators seem to be dealing with
this pressure rather well. According to
the latest Journal of Commerce Port
Productivity report, all 20 of the worlds
most productive terminals of which
half are in China increased their levels
of productivity last year.
Drewrys Martin
Dixon speaks at this
years conference.
C
M
Y
CM
MY
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CMY
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01662_CI_185X130_HR.pdf 2 2013/10/30 3:34 PM
EVENTS
TRADE shows provide exhibitors with an
ideal platform to launch new products and
initiatives to the wider industry.
TOC is no exception, with a host
of companies showcasing European
technology and innovation at this years
show.
Finnish crane manufacturer Kalmar
announced that it had received an order
for six hybrid straddle carriers from
Antwerps MSC Home Terminal, due to
be delivered later this year. This follows
on from an order for seven of the hybrid
carriers from Kalmar that the terminal
received early 2014, including one new-
generation hybrid unit.
During the first month of their operation,
MSC Home Terminal managed to reduce
its straddle carrier fuel consumption by
37% when compared to conventional
diesel-electric models, which if repeated
throughout the year would help to cut
carbon emissions by as much as 97 tonnes.
Kalmar also took the opportunity to
discuss the success of its port automation
project alongside Navis at DP Worlds new
London Gateway facility. The two parties,
both part of Cargotec, have provided
what they refer to as the operational
backbone of the terminal, where container
handling equipment consisting of Kalmars
automated stacking cranes and shuttle
carriers have been fully integrated with
Navis N4 terminal operating system.
At the time of going to press, Kalmar
system had expanded to 20 ASC modules
each with two cranes and 28 shuttle
carriers, all integrated with the Navis
N4 TOS and supported by two Kalmar
reachstackers.
Meanwhile, Belgian-based Camco
Technologies unveiled its new millimetre-
resolution camera solution designed
specifically for terminal quay cranes.
The Boxcatcher uses optical character
recognition technology to read the IMDG
class or IMO code of each container as well
as detecting the presence of a seal.
Fitted on a linear-table on either the legs
or the beam of the crane, the Boxcatcher
follows the moving container during the
loading and discharging cycles taking
high resolution stills of the containers
credentials in the process. Camco confirmed
that it already has a number of contracts to
equip the system at terminals across the
globe including two facilities operated by
APM Terminals, one in Mexico and the other
at its new Maasvlakte2 terminal.
Elsewhere, Gaussin Manugistique
revealed a number of products from its
Automotive Terminal Trailer range that it
feels have the potential to replace onsite
tractors in the not so distant future. In a
public demonstration, with pyrotechnics
and space-age sounds to boot, the Gaussin
team demonstrated the lifting capabilities
of its brand new ATT and Automotive
Intelligent Vehicle, showing the laying and
removal of a container on a docking station.
The French firm also confirmed that it
had recently secured a deal to supply 30
hybrid-drive ATTS in Italy through its local
affiliate Lenderlease.
Finally, the Port Equipment
Manufacturers Association, after two years
in the development stages, introduced
its new standardised interface between
terminal operating and equipment control
systems for container handling equipment.
PEMA hopes that its standard interface
will simplify the integration between
equipment manufacturers, vendors and TOS
suppliers.
At TOC Europe, Finnish crane manufacturer
Kalmar announced that it had received an
order for six hybrid straddle carriers from
Antwerps MSC Home Terminal.
Industry exhibitors took the opportunity to showcase their latest
innovations at the TOC Europe trade show, reports Linton Nightingale
SHOW AND TELL
BOX WORLD BRIEFING
CARRIERS
THE ongoing P3 saga has had
a number of twists and turns
over the last two months.
First came the news that
Chinas Ministry of Commerce
had rejected the alliance of
shipping giants Maersk Line,
Mediterranean Shipping Co
and CMA CGM.
The US Federal Maritime
Commission had given
the alliance permission to
go ahead, although it did
intend to introduce a special
monitoring programme, while
Brussels said it did not plan
to investigate the alliance
before its launch.
MofCom concluded that
P3 would have been a close-
knit alliance, in contrast
to the loose tie-ups seen
in existing practices, and
that it would eliminate
effective competition in
the market, and may further
raise the entry barrier to the
international liner market,
which may prevent any new
competitive force... growing.
In the case [of P3], the
participants integrate all
of their capacity in the
east-west trades through a
network centre, which makes
itself essentially different
from traditional shipping
alliances in aspects including
the form of co-operation,
operational management
and cost sharing, MofCom
said in the official ruling that
blocked the worlds biggest
container alliance.
MofCom said that the three
lines combined would have
retained a capacity share of
46.7% on the Asia-Europe
trade lane, with Maersk
Line, MSC and CMA CGM
commanding 20.6%, 15.2%
and 10.9% respectively.
Just as the industry
was understanding the
implications of this
development, Maersk Line
and MSC announced that
they would launch a vessel-
sharing agreement named
2M on the Asia-Europe,
transatlantic and transpacific
trade lanes.
The worlds top two lines
said the 10-year deal would
cover all three east-west
trade lanes and include
approximately 185 vessels
with a capacity of 2.1m teu
on 21 strings.
The size of the new alliance
is somewhat smaller than the
P3 that would have consisted
of around 255 vessels of
2.6m teu on 29 service loops.
Maersk will be contributing
some 110 ships, accounting
for 55% of total 2M capacity,
with all of its Triple-E ships
scheduled to be deployed
in the new arrangement.
MSC will provide around 75
ships with a nominal 0.9m
teu capacity to make up the
remaining 45% share.
Of the 21 strings, six
will cover the Asia-North
Europe trades: four the Asia-
Mediterranean trades; four
the Asia-US west coast: two
the Asia-US east coast route:
three the north Europe-US
trades; and two the
Mediterranean-US trades.
2M represents another
positive step in our continual
drive to enhance our
operational network in terms
of scope, scale, efficiency
and reliability, said MSC vice
president Diego Aponte.
Our customers will be
able to enjoy these benefits
alongside the world class
customer service that has
FROM P3
TO 2M
Following the failure of the P3 Network, Maersk Line and MSC have announced
a new tie-up without CMA CGM, report Damian Brett and Janet Porter
Maersk will be
contributing
some 110 ships,
accounting for
55% of total 2M
capacity, with
all of its Triple-E
ships scheduled to
be deployed in the
new arrangement.
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Expert speakers include
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Robbert van Trooijen
CEO Latin America &
Caribbean, Maersk Line
Howard Finkel
Executive Vice President Trade Division,
COSCO Container Lines Americas
Camila Camacho Rocha
Area Manager Latin
America, FloraHolland
Enno Koll
Head of Latin America,
PSA Panama
Giovanni Benedetti
Commercial Director, Sociedad
Portuaria Regional Cartagena (SPRC)
Juan Carlos Hernandez
Global Equipment and
M&R Manager, Chiquita
Poul Hestbaek
SVP - Latin America West Coast
& Caribbean, Hamburg Sd
Richard Jordan
SVP & Regional Head of
Logistics Americas, Panalpina
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BOX WORLD BRIEFING
been the cornerstone of our
business since our formation
in 1970.
Maersk Line chief executive
Sren Skou meanwhile said
that the two lines shared
the same ambition of the
most efficient and effective
operations possible.
We will continue to
provide our customers with
competitive and reliable
container shipping in the
east-west trades at attractive
prices, he said.
To do so we have to
be innovative and take
out cost, while keeping a
product that is best in class
for our customers in terms
of coverage, frequency and
reliability.
Our agreement with MSC
is a step towards achieving
all of these objectives in the
east-west trades.
Vessels deployed in
the VSA will continue to
be owned or chartered,
and operated, by the two
individual lines and the
agreement will not include
joint marine operations as it
would have done for P3. Each
party will execute their own
operations including stowage,
voyage planning and port
operations.
Neither does the VSA
include any commercial tasks
or responsibilities. Each party
will continue to have fully
independent sales, pricing,
marketing, and customer
service functions.
A joint co-ordination
committee will monitor the
network on a daily basis.
Maersk Line and MSC
have already given notice to
CMA CGM, with whom they
currently cooperate in several
vessel-sharing agreements
in the east-west container
trades, as they gear up for the
launch of the new alliance
next year.
Mr Aponte told
that six months notice
had been given, although
that could be shortened by
common consent.
Maersk Line will be
terminating eight separate
vessel-sharing or slot-
exchange agreements with
CMA CGM, with whom it had
built up a strong working
relationship in recent years.
The two are together on four
Asia-US loops, with MSC also
a partner in two of those.
The services that will be
affected by VSA terminations
are Maersks TP3/TP9 loop
from Asia to the US via the
Suez Canal; the TP2 and
TP8 transpacific loops that
involve MSC as well, and TP5
on which Maersk sells slots to
CMA CGM.
CMA CGM also co-operates
with Maersk on services
between Asia and the
Mediterranean.
The French lines
Bosphorus Express serving
the Black Sea and the
Phoenician Express covering
the Adriatic, involving
partnerships with Maersk,
and two others, marketed as
AE11 by Maersk and MEX1
by CMA CGM, and the AE20/
MEX3 rotation will also be
disbanded.
Following the
announcement, two
questions were being asked:
what will CMA CGM do and
will China approve the new
tie-up?
Crucially the 2M carriers
wont seek regulatory
approval from MofCom as it
does not fall under the scope
of Chinas Anti-Monopoly
Law.
2M is a purely operational
VSA . Therefore, most of the
regulatory considerations
relate to filings with maritime
authorities in various
jurisdictions, Maersk Line
said.
In China, the VSA will be
filed with the Ministry of
Transport.
The move could be seen
as partly pre-emptive, as
clearing the hurdle of Chinas
primary anti-monopoly
authority could have in effect
prevented other parties from
launching lawsuits against P3
under the same regulation.
With regards to CMA CGM,
the French line had not
commented at the time of
going to press.
But it is expected to team
up with other global carriers,
probably ones with which
it already has a working
relationship.
Pundits have suggested
that it would make sense
for CMA CGM to form a
partnership with United
Arab Shipping Co and China
Shipping, as they both have
ultra-large vessels on order
so would be able to offer the
same economies of scale.
MSC will
provide
around 75
ships with a
nominal
0.9m teu
capacity
for the 2M
alliance.
Photo: Dietmar
Hasenpusch

BOX WORLD BRIEFING
CARRIERS
Robert Yildirim:
aware of the
challenges P3
would face in China.
ZIM has finally completed
its restructuring following
18 months of intensive
negotiations with creditors,
shareholders and the Israeli
government.
The Haifa-headquartered
shipping line announced in
July that it had completed
its restructuring when Israel
Corp invested $200m of
equity into the company.
The deal will also see Israel
Corp, which had a 99.7%
stake in the shipping line,
swallow $238m in debt and
cut its shareholding in Zim to
32%.
Furthermore, the company
will also be required to
provide a liquidity line of
$50m.
Meanwhile, lending
banks, shipowners and
bondholders have agreed
to convert approximately
$1.4bn of Zims total $3.4bn
debt and liabilities into a
68% ownership stake in the
shipping line.
The remaining $2bn
consists of debt secured by
vessels and unsecured notes
listed on the Tel Aviv Stock
Exchange with a maturity of
nine years.
Zim said it had also
restructured its charter
payments to shipowners,
which will see them reduced
by 46% overall.
Zim chief executive Rafi
Danieli, who is understood
to want to step down
following completion of
the restructuring, said: The
Israel Corps willingness
to forego its shares and
transfer them to the creditors
has been a significant
contribution to the
restructuring, and the $200m
investment enabled the
successful conclusion of the
process.
Damian Brett
CMA CGM shareholder Robert
Yildirim was not surprised by
Chinas rejection of the P3
Network.
Mr Yildirim, president and
chief executive of Yildirim
Holdings, said that having
worked in China for more
than 20 years, he was aware
of the challenges that the
three carriers would face in
convincing Beijing to approve
the P3 Network.
He said he expected
Beijing to force the carriers to
accept certain conditions that
were in the interests of China
and likened the situation
to Glencores merger with
Xstrata, where the deal was
approved on the condition
a project in Peru was sold to
a Chinese company and the
merged entity supplied the
country with a certain volume
of copper concentrate.
He added that the P3,
even though it had not been
approved, had a positive
impact on container shipping,
by forcing the G6 and CKYHE
alliances to expand and
improve their offering. Since
spoke to him, the 2M Alliance
has also been launched.
Mr Yildirim also spoke
about his investment in
CMA CGM, which amounts
to a 24% stake following a
2011 purchase of $500m
in convertible bonds and an
additional $100m injection
in 2012.
The investment period in
the company is five years,
running to January 2016. At
the moment Mr Yildirim and
the Saad family are still
considering their options,
which include the Saad
family buying Mr Yildirims
stake, selling it as part of an
IPO or selling it to a third
party.
It seems the Saad family
favours buying back his
Yildirim not surprised by P3 rejection
stake, he said. Overall, he
said he was happy with his
investment in the shipping
line.
The investment is doing
very well, he said. The
company has produced some
fantastic results and I am
going to stay until the end
of my investment period
and then well see what will
happen.
The margins are some of
the highest in the industry.
The restructuring of the
company went well and thats
why we are positive and I am
happy that I have been part
of the company during the
restructuring and the growth.
Both sides will be the
winners in the end. The
company was struggling
and now it is back where
it was before and it has
gained a lot of value back
and I am making money on
my investment that was
the whole idea behind the
investment.
Damian Brett
CARRIERS
Zim completes restructuring
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BOX WORLD BRIEFING
ORIENT Overseas Container
Line has opened appeal
proceedings against a French
court ruling that found the
Hong Kong line guilty of
corporate manslaughter
following the death of
Courtenay Allan in 2003.
The company issued a
statement saying it had filed
an appeal in order to keep
the process open, pending
the release of the court
judgment.
Although the Le Havre
court fined OOCL 50,000
($64,000), it did not release
details of the decision at the
same time. OOCL had 10 days
in which to appeal.
Mr Allans three sons, who
have fought a long battle
for a legal verdict after their
father was killed in a lift
accident on board OOCL
Montreal, had urged OOCL
not to appeal in order to draw
a line under their 11 year
campaign for answers.
In its first comment since
the guilty decision, OOCL
said: We find it difficult to
reconcile the verdict with
the results of investigations
made by various independent
experts. The company goes
on to say that for the past 11
years, we have sought the
truth behind the cause of Mr
Allans death.
To date, none of the
independent experts,
including the French court
surveyor, were able to
identify the person that had
interfered and tampered with
the lift system, OOCL said.
The company had invited
the French magistrate to
expand the courts enquiries
to include the shipbuilders as
well as the lift manufacturers,
but unfortunately to no avail,
OOCL continued.
Mr Allan, OOCLs
transatlantic trades director,
died after falling down the
lift shaft from the bridge of
the vessel while attending
a customer reception in Le
Havre. The elevator car failed
to arrive after being called,
leaving a void in the elevator
shaft.
His sons issued a statement
soon after OOCLs appeal
decision saying they were
shocked by OOCLs U-turn,
given that only last week
the company said it sought
closure in the case.
Janet Porter
OOCL opens appeal process over
Courtenay Allan manslaughter ruling
REGULATION
THE European Commission
has extended the regulation
governing liner shipping
consortia for another five
years after a lengthy review
into whether an industry-
specific exemption from
antitrust rules was still
needed.
Brussels has now
confirmed that the maritime
consortia block exemption
Brussels to extend liner consortia rules
will remain in place until
April 2020. The existing
regulation was due to expire
next year, and questions had
been raised as to whether
container lines still needed
their own set of rules rather
than be treated the same way
as most other industries.
After a public consultation,
the commission said it had
concluded that the exemption
has worked well, providing
legal certainty to agreements
which bring benefits to
customers and do not unduly
distort competition, and that
current market circumstances
warrant a prolongation.
The regulation allows
shipping lines with a
combined market share of
below 30% to enter into
co-operation agreements to
provide joint cargo transport
services.
Such agreements usually
allow liner shipping carriers
to rationalise their activities
and achieve economies of
scale that benefit customers.
Calls for the threshold
to be raised to at least
35% were rejected,
however.
Janet Porter
REGULATION
Courtenay Allan (inset)
died in an incident on
board OOCL Montreal.
RISING RISK OF
CYBERCRIME
Mike Yarwood, TT Club claims executive,
investigates the extent of cybercrime
targeted at transport operators
AS INVASIVE cyber-technology
becomes more widely
available, a greater risk to
legitimate trade is emerging
and exposing operators in the
supply chain to economic and
commercial damage.
Criminal organisations are
increasingly hacking into
operators IT systems from
anywhere in the world. The
threat to security potentially
affects every type of business
in the container trade from
ocean carriers, port terminals
and handling facilities to
inland depots, railheads and
truck operators. The very
nature of a freight container
makes it prone to attention by
criminals.
At TT Club, we have
previously highlighted the
increasing trend in the
fraudulent use of internet
clearing sites. Recent reports,
however, have identified
another approach regarding
IT-based theft.
Going beyond simply
misleading other operators
into thinking they are dealing
with a legitimate company
through the use of internet-
based clearance websites,
it has been established that
cybercriminals may access
and take control of operators
IT systems, extracting or
manipulating valuable data.
We have seen a number
of incidents which at first
appear to be petty break-
ins at office facilities. The
damage appears minimal
nothing is physically removed.
More thorough post-incident
investigations reveal that
the thieves were actually
installing spyware within the
IT network of the operator.
More typically, criminals
identify targets (generally
individuals) where the system
cybersecurity is inadequate,
making operational executives
who travel extensively
particularly exposed.
The type of information
being sought and extracted
may be release codes
for containers from port
and terminal facilities.
However, spyware can record
movements, keystrokes, and
even download and print
documents and screenshots to
an external source.
In the instances discovered
to date, the cybercriminals
have apparently been
focused on specific individual
containers, taking steps
to track the units through
the supply chain to the
destination discharge port.
Once the container has
arrived, the perpetrators
intervene, collecting the
required release data from
the unsuspecting operators IT
systems, ultimately facilitating
the release of the container
into their custody and control.
The known incidents are
thought to have been related
to drug trafficking, creating
a means of importing illegal
substances through the supply
chain unnoticed.
A particular area of risk is
the road delivery element of a
container move. Over a period
of time a criminal organisation
can effectively build a profile
of regular routes and parking
locations. Similarly, by
accessing a terminal operators
container control system,
a criminal organisation can
achieve its ends by altering
the location of a particular
container within a facility or
even make it appear that it is
not at the terminal at all.
The ensuing losses can give
rise to very large financial
exposures, let alone the
commercial and reputational
damage. The increased
sophistication of such cyber-
attacks make it challenging for
operators to build effective
defences.
Boards and managements
need to articulate a clear risk
culture and deliberately follow
through the process. In many
cases, the human element
is both the strongest and
weakest link in the armoury.
Education is key to success,
making individuals across all
disciplines of the organisation
aware of the threat and of
the risk-management policies
implemented to defend your
organisation. In many ways the
source of the threat emanates
from an organisations culture.
The potential for individual
or contractor malfeasance
may be thoroughly mitigated
by others alertness,
thorough training and
effective procedures (such
as segregation of duties and
whistleblowing).
Vigilance and due diligence
in day-to-day operations
the more physical side
are clearly vital, together
with general security of
IT installations. However,
it would also be wise for
operators to investigate the
means of a greater degree of
protection from and detection
of hacking and spyware
activity. A well-informed
and transparent relationship
between risk-management
teams and IT departments
within an organisation is of
paramount importance.
We would recommend that all
operators consider the following:
1. Be clear and define who is
responsible for cybersecurity
within your organisation.
2. Understand the cyber-risk
to your business, conduct risk
assessments as to what data
you hold and what may be of
the greatest potential value.
3. Make an active decision
on risk. Set your risk appetite
and communicate it to all
departments within your
organisation.
4. Plan for resilience. How will
you know if your business is
being attacked or targeted and
once identified how will your
business react to overcome
the threat?
Spyware installed inside company
IT networks helps cybercriminals
unlock a multitude of information.
Photo: TACstock1/Shutterstock.com
GUEST COLUMNIST
GUEST COLUMNIST
CONTAINER WEIGHT VERIFICATION
PRAGMATISM WINS THE DAY
New measures planned for 2016 are good news for all, says
Chris Welsh, secretary general of the Global Shippers Forum
REGULATORS commonly bear
the brunt of much stick and
opprobrium from industry for
not listening or understanding
the implications of their
policies and therefore getting
it wrong.
That cannot be said of
the International Maritime
Organization Maritime Safety
Committee, which in May
commendably approved a
container weight verification
compromise proposal earlier
adopted by the IMO sub-
committee dealing with
containers and dangerous
goods.
That is good news for
carriers and the wider
maritime supply chain, but
also for shippers upon whose
shoulders the changes fall for
implementing new provisions
to verify the gross mass
weight of the container before
shipment.
Its a win-win all round: the
measures will substantially
enhance maritime safety while
at the same time introducing
some much-needed
improvements in supply chain
processes and standards.
While some thought the
proposals were unnecessary,
there has been a gradual
realisation that it is in
everyones best interests
to tackle the problem of
misdeclaration, not least by
quality shippers currently
working within rigorous
health and safety and quality
management systems.
The real success of the
IMO proposals has been
the recognition of the
complexity of implementation,
particularly in application and
enforcement.
On the face of it, what could
be simpler? All the shipper
needs to do is weigh the
goods, packaging, dunnage
and add the tare weight of the
container and verify the total
gross mass weight with the
shipping line.
Thankfully, regulators
soon cottoned on to the
fact that few shippers have
on-site weighing capability,
and that the supply chain
internationally is not currently
geared up to cope with the
sheer volume of containers
to be processed through
container terminals.
Many of these issues still
need to be bottomed out, but
the flexibility offered by the
verification methods adopted
by the IMO provides the
opportunity to overcome these
implementation difficulties.
In that regard, it is pleasing
to see wider recognition
of the flexibility provided
by the calculated weight
method, the so-called method
two verification option
championed by GSF, which
won support from the main
global maritime industry
stakeholder groups and
government experts in the
IMO.
The method two
verification option is likely
to be the most practical
choice for high-volume
and regular shippers. Early
discussions with regulators
and the other main players
in the maritime supply chain
including carriers, freight
forwarders and terminal
operators suggest that a
relatively simple certification
regime could be implemented
at limited cost. The main
cost would be the set-up
and maintenance of an
accreditation scheme and
database by enforcement
agencies for certification of
shippers using the method.
The benefit of such an
approach is that enforcement
agencies will be able to use
existing traceable and audit
based systems such as System
Application Programmes
currently relied upon by
businesses and in some
cases government agencies
for accurate information
covering a wide spectrum
of business and compliance
activities, such as providing
accurate data to support
business systems such as
consignment orders, invoicing
and compliance with other
regulatory requirements.
Such systems can be used for
building mixed consignments
but also for homogeneous
products including beer, spirits
and mobile phones.
The beauty of such a system
is that, once accredited,
the shippers verification
methods will be subject to
an enforceable certification
regime which carriers can
rely on. All parties in the
supply chain will have the
opportunity to check a
government database to verify
that the shipper presenting
the cargo for shipment has the
appropriate arrangements in
place for providing an accurate
verifiable weight which is
traceable and subject to an
audit-based scheme enforced
by the relevant enforcement
agency.
This opens up huge
opportunities for improving
and enhancing communication
systems within the maritime
supply chain. In other words,
there could be real commercial
benefits for standardisation
and digitisation of commercial
and shipping documents,
leading to reduced costs,
eradication of errors, improved
accuracy and the speeding up
of documentary processes and
procedures.
In the meantime, shippers
need to start seriously thinking
about implementation as
the new weight verification
measures are due to enter into
force from July 2016.

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