T P Chí Containerisation Informa - Ci - 201405 PDF

www.containershipping.
com MAY 2014

Data Hub: Load Factors ..............................08
Data Hub: World Fleet Update ...............10
Trade Routes: Transatlantic ......................14
Equipment: Buy or lease? .........................36
EVERGREEN:
EMBARKING ON A
NEW GROWTH PATH
P32
CONFERENCE
HAMBURG HEADLINES:
NEWS FROM GLOBAL
LINER SHIPPING 2014
P40
CARRIERS
MEDITERRANEAN:
2013 BOX PORT
THROUGHPUTS
P16
MORE INSIGHT PORTS
THE
CAREFUL
OPTIMIST
LINER PRESIDENT
& CHIEF EXECUTIVE
MOL
THE
TOSHIYA K KONISHI
INTERVIEW
May 2014
THIS issue of Containerisation International has a distinctly
German flavour.
That is in part down to the fact that the merger between
Hapag-Lloyd and CSAV took another step forward this month
when shareholders in the Chilean shipping line gave their
support to the deal.
The merger now requires the approval of the Senate of
Hamburg and has to make it past regulators before it can be
completed.
Also, Containerisation Internationals Global Liner Shipping
Conference this year took place in Hamburg.
We have full coverage of the conference on page 40,
with the merger deal taking centre stage as speakers
agreed it would be a boost for the city by protecting jobs,
generating business and strengthening the local maritime
cluster.
However, it wasnt all good news for the city as shipping line
executives expressed their concerns for the Port of Hamburgs
future if a project to dredge the River Elbe is declined by
Germanys Federal Administrative Court.
The conference didnt just centre on Hamburg though:
CMA CGM executive officer Rodolphe Saad a last minute
addition to the speaker line up told attendees that the P3
alliance members had rented temporary offices in London as
they prepared for a July start and Maersk Line north Europe
region chief executive Karsten Kildahl told the conference that
eastbound Asia-Europe rates would need to increase as space
on these service was becoming tight at certain times of the
year.
Editor-in-chief Containers Janet Porter
(+44 (0) 20 7017 4617) janet.porter@informa.com
Editor Damian Brett
(+44 (0) 20 7017 5754) damian.brett@informa.com
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Incorporating
www.containershipping.com MAY2014
Data Hub: LoadFactors..............................08
Data Hub: WorldFleet Update...............10
TradeRoutes: Transatlantic......................14
Equipment: Buyor lease?.........................36
EVERGREEN:
EMBARKINGONA
NEWGROWTHPATH
P32
CONFERENCE
HAMBURGHEADLINES:
NEWSFROMGLOBAL
LINERSHIPPING2014
P40
CARRIERS
MEDITERRANEAN:
2013BOXPORT
THROUGHPUTS
P16
MOREINSIGHT PORTS
THE
CAREFUL
OPTIMIST
LINER PRESIDENT
& CHIEF EXECUTIVE
MOL
THE
TOSHIYA K KONISHI
INTERVIEW
an informa business
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Jan Dec 2011
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From Hamburg to Liverpool via Dubai,
Containerisation International is gathering the
best and brightest to discuss what the future
holds for the container shipping industry
A MEETING OF MINDS
The shake-up of the industry since the two shipping lines,
along with Mediterranean Shipping Co, announced plans to
launch the P3 Network also continued this month, with carriers
breaking their joint services with non-alliance members and
moving closer to their partners.
Containerisation International will continue its conference
flavour during the coming months as the Global Liner Shipping
Middle East and Indian Subcontinent has just taken place in
Dubai and we host a debate on the future of Liverpool as a
shipping destination on June 16.
Rest assured, Containerisation International will provide full
coverage of both events.
Damian Brett, editor
Join us on:
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MAY 2014
www.containershipping.com CONTAINERISATION INTERNATIONAL 01
ONWARDS AND
UPWARDS
Box volumes at leading Mediterranean
terminals buoyed by economic recovery
P16
COUNTING THE COSTS
MOLs liner president and chief executive
Toshiya K Konishi on why he thinks the
worst is over for the box trades and dealing
with the fallout from the MOL Comfort
incident
P18
May 2014
OPPORTUNITY
KNOCKS
DP World set for an improved year but still
has to contend with larger vessels and the
growth of alliances
P23
OUR FRIENDS IN
THE NORTH
Free trade agreement between Canada and
Europe means new opportunities
P26
DATA HUB
TRADE STATISTICS
Asia-Europe trade remains dominant as
an increase in demand and fall in capacity
helps boost vessel utilisation
P04
DATA HUB
LOAD FACTORS
Looking at the likely vessel utilisation rates
for the key Asian trade lanes
P08
DATA HUB
WORLD FLEET UPDATE
Box lines struggle with surplus capacity as
newbuilding deliveries continue at a brisk
pace
P10
TRADE ROUTE
INTELLIGENCE
New alliances on the transatlantic trade lane
are set to dominate the market in capacity
terms
P14
26
Its not really the
size of ships
that matter, but
slot costs
DATA HUB
PORTS PORTS
VIEW FROM THE BRIDGE
PORTS
02 CONTAINERISATION INTERNATIONAL www.containershipping.com
CONTENTS / MAY 2014
P18
TOSHIYA K KONISHI
VIEW FROM THE BRIDGE
May 2014
NEW DAWN FOR
LIVERPOOL?
Containerisation International and Lloyds
List to hold debate to consider the future of
the port and Merseyside as a maritime hub
P30
THE GREEN LIGHT
Former number one box line Evergreen
embarks on a new growth path
P32
ASKING THE RIGHT
QUESTIONS
BMT oers non-industry investors the
answers they need when buying
terminal assets
P50
SOCIAL CLIMBING
Joining the digital conversation takes more
than just old-school marketing tactics,
says Agenda Strategies managing partner
Klavs Valskov
P55
ULTRALARGE SHIPS
SEE VALUE INCREASE
VesselsValue head of valuation Toby
Mumford takes a look at the divergence in
the value of containerships
P56
EVENTS
C
M
Y
CM
MY
CY
CMY
K
01662_CI_185X130_HR.pdf 2 2013/10/30 3:34 PM
GUEST COLUMNIST
NEWS ROUNDUP
How Maersk Line rose to the top
P33
London Gateway, Southampton get G6 calls
P34
Language problems contributed to CMA
CGM ship collision
P35
BUY OR LEASE?
Container lessors set to expand but prots
may be harder to earn, says Alastair Hill
P36
THE HEADLINES
FROM HAMBURG
The biggest names in shipping gather for
Containerisation Internationals annual
Global Liner Shipping conference
P40
CARRIERS
BOX WORLD BRIEFING
EQUIPMENT
CONFERENCE
SERVICES
GUEST COLUMNIST
www.containershipping.com CONTAINERISATION INTERNATIONAL 03
ISSUE 4/VOL 47
04 CONTAINERISATION INTERNATIONAL www.containershipping.com May 2014
DATA HUB
TRADE STATISTICS
SUPPLY/DEMAND INDICATORS
FOR CONTAINER SHIPPING
DATA PROVIDED BY:
MDS Transmodal estimates that global
container volumes (excluding intra-regional
trades) will increase by some 6%-7% year on
year in 2014, following on from an increase of
around 4% in 2013.
This month, MDST concentrates on the
Asian trades. Based upon trade data available
in mid-April, MDST estimates that the
transpacific eastbound and the Asia-Europe
westbound trades together accounted for
some 20% of the global container market in
the fourth quarter of 2013 (excluding intra-
regional trades) and are expected to remain
the two major trade lanes in the container
market in 2014.
MDST estimates that the two trade lanes
together increased by around 7% in the last
three months of 2013 compared with the
fourth quarter in 2012. Positive growth is
estimated for the container traffic loaded in
Asia for all other destinations, which overall
are estimated to have increased by some 8%
between the fourth quarter of 2012 and the
same quarter in 2013. For the near future
MDST forecasts trade from Asia might grow by
about 9% for 2014.
Focusing on the most dominant trade
lanes, if on the one hand demand has grown
in the last few quarters, on the other hand the
level of capacity has fallen, leading to more
comfortable level of utilisations for the lines.
From the preliminary results regarding the
first quarter of 2014, MDST estimates these
trends will remain for the rest of the year. For
instance, for the Asia-Europe westbound lane,
which is the busiest trade lane in the deepsea
ASIAEUROPE TRADE
REMAINS DOMINANT
Asia to North Europe Asia to Mediterranean
Leading indicators: headhaul from Asia 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
89 Miscellaneous Manufactures 1131 1133 1274 1328
77 Electrical Machinery 664 705 759 797
83 Travel Goods & Handbags 598 605 587 611
76 Telecom & Recording Equipment 594 586 712 725
69 Metal Manufactures Other 584 599 591 624
Overall headhaul index 100 102 111 116
Overall backhaul index 100 100 101 107
Commodity 2012 2013 2014 2015
65 Textiles & Made-Up Articles 401 442 509 535
83 Travel Goods & Handbags 283 298 320 333
69 Metal Manufactures Other 259 275 295 309
Asia to North Europe (000 teu)
Asia includes NE and SE Asia
Asia to Mediterranean (000 teu)
9,397 4,250
4,661 1,593
9,586
2%
4,482
5.5%
4,666
0.1%
1,695
6.4%
10,414
8.6%
5,079
13.3%
4,694
0.6%
1,739
2.6%
10,872
4.4%
5,325
4.8%
5,007
6.7%
1,890
8.7%
2012 2012 2013 2013 2014 2014 2015 2015
North Europe to Asia (000 teu)
North Europe includes northern Europe, Scandinavia and the Baltic
Mediterranean to Asia (000 teu)
Mediterranean includes North Africa and the Black Sea
Underlying westbound trade grew by 2% in 2013 and is expected
to grow by 9% in 2014.
Underlying eastbound trade was stable in 2013 and is forecast to
grow by 1% 2014.
Of the leading headhaul commodities all show some growth by
2014.
Annual headhaul growth from 2013 to 2017 is forecast at 5.2%.
Service capacity in the first quarter of 2014 is expected to be 3%
below the first quarter last year.
Year-on-year in the first quarter of 2014, estimated utilisation,
profits and rates are expected to increase.
Underlying westbound trade grew by 6% in 2013 and is expected
Underlying eastbound trade grew by 6% in 2013 and is forecast to
grow by 3% in 2014.
Of the leading headhaul commodities all are showing signs of
growth.
Year-on-year in the first quarter of 2014, estimated utilisation,
profits and rates are expected to increase.
2012
2012
2013
2013
2014
2014
2015
2015
Increase in demand and fall in capacity helps boost utilisation
container market, MDST forecasts that utilisation levels may reach 85% in the first
quarter of 2014.
However, despite the simultaneous increase in demand and cut in capacity,
freight rates after an early April jump following the general rate increase
announcements have continued to fall. Both the Asia-Europe and Asia-
Mediterranean components of the Shanghai Containerised Freight Index have
decreased during the last few weeks, reaching a level of $1,077 per teu for North
Europe and $1,182 per teu for the Mediterranean in late April, before a May 1
rally.
As illustrated in Graph A on the next page, with index 2006 Q1=100, the marginal
increase in the level of global capacity estimated for the fourth quarter of 2013,
combined with a decreased estimate in demand, has led to a widening in the gap
between supply and demand to 24 points, versus 21 observed in the third quarter
of 2013.
In so far as the individual trade lanes covered in this edition are concerned,
trade between Asia and Europe is estimated to have grown in 2013; by some
2% to North Europe and by 5.5% to the Mediterranean. Positive results are also
expected for the near future. For 2014, MDST forecasts an 8.6% rise to North
Europe and 13.3% to Mediterranean. Electrical equipment, textiles articles
and miscellaneous manufactures are the principal commodities exported
westbound.
Asia to Mid-East Gulf & Indian subcontinent Northeast Asia to Australia & Oceania
Asia to Mid-East Gulf & Indian subcontinent (000 teu)
Northeast Asia to Australia & Oceania (000 teu)
Northeast Asia includes China, Hong Kong, Taiwan, Japan, North Korea & South Korea
7,215 1,320
3,204 1,257
7,831
8.5%
1,331
0.8%
3,406
6.3%
1,208
-3.9%
8,871
13.3%
1,509
13.4%
3,849
13%
1,271
5.2%
9,378
5.7%
1,565
3.7%
4,107
6.7%
1,343
5.7%
2012
2012
2013
2013
2014
2014
2015
2015
Mid-East Gulf & Indian subcontinent to Asia (000 teu)
Mid-East Gulf & Indian subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh
Australasia & Oceania to northeast Asia (000 teu)
Australasia & Oceania includes Australia, New Zealand and Pacific Islands
Underlying westbound trade grew by 9% in 2013 and is forecast to
grow a further 13% in 2014.
Underlying eastbound trade grew by 6% in 2013 and is expected to
grow by 13% in 2014.
Of the leading headhaul commodities textiles shows the most
growth.
above the first quarter last year.
Year-on-year in the first quarter of 2014, estimated utilisation and
profits are expected to increase and rates are expected to decrease.
Underlying northbound trade fell by 4% in 2013 but is expected to
grow by 5% in 2014.
Underlying southbound trade grew by 1% in 2013 and is expected
There appears some growth in all the leading headhaul commodities.
Year-on-year in the first quarter of 2014, estimated utilisation
is expected to remain substantially stable, rates are expected to
decrease and profit is anticipated to improve.
2012 2012 2013 2013 2014 2014 2015 2015
* Excludes intra-regional trade. ** Forecast. On the basis of trade data available in mid-April
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% +7% +5.1%
Asia (Far East) to Europe -2% +3% +5.3%
Asia (Far East) to North America +6% +5% +3.5%
Europe to Asia (Far East) +1% +2% +4.6%
Europe to North America +6% +6% +4.8%
North America exports * +2% +5% +4.9%
North America imports * +6% +4% +3.8%
Asia (Far East) Exports * +3% +5% +5.3%
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% +4.9%
Global overview +5% +4% +5.0%
Commodity 2012 2013 2014 2015
66 Mineral Manufactures 551 544 555 594
62 Rubber Manufactures 481 506 526 565
Leading indicators: headhaul from NE Asia 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
62 Rubber Manufactures 121 119 119 122
82 Furniture 94 94 114 117
69 Metal Manufactures - Other 88 91 101 105
Underlying unitised annual trade growth rates
www.containershipping.com CONTAINERISATION INTERNATIONAL 05 May 2014
DATA HUB
TRADE STATISTICS
DATA HUB
TRADE STATISTICS
Trade between Asia and the Gulf and Indian subcontinent
continues to expand. MDST recorded an 8.5% annual growth rate for
2013 on the westbound direction and 6.3% in the opposite direction.
Increasing industrialisation in the Gulf can be expected to sustain
eastbound growth but at lower levels in the long term. Electrical
equipment and rubber manufacturers are both growing strongly
westbound.
Trade between northeast Asia and Australasia (northbound) is
estimated to have decreased by 3.9% in 2013; however MDST
forecasts an increase of more than 5% in 2014. Southbound traffic
is estimated to have grown by 0.8% in 2013 and is forecast to grow
13.4% in 2014.
Trade growth between North Asia and Asean countries is dominated
by the southbound direction, with an estimated annual growth of
1.4% in 2013 (traffic growing particularly in textiles goods). That rate is
expected to become negative by 0.3% in 2014. Growth northbound is
estimated to have been 1.2% in 2013, but is expected to increase to
some 6% in 2014.
Trade from China to Asean countries expanded rapidly in 2013
(11.6%) and growth is expected to be nearly 22% in 2014. Asean
trade to China was up 9% in 2013 and is forecast to be 14.4% in
2014.
Finally, trade between China and North Asia eastbound is
estimated to have grown at a modest 2.1% in 2013 and can be
North Asia to Asean China & Hong Kong to Asean
North Asia to Asean (000 teu)
North Asia includes Russia, Taiwan, Japan, North Korea & South Korea
China & Hong Kong to Asean (000 teu)
2,106
3,957
1,940 2,625
2,135
1.4%
4,415
11.6%
1,964
1.2%
2,860
9%
2,128
-0.3%
5,379
21.8%
2,087
6.3%
3,271
14.4%
2,241
5.3%
5,698
5.9%
2,182
4.6%
3,440
5.2%
2012 2012 2013 2013 2014 2014 2015 2015
Asean to North Asia (000 teu)
Asean includes SE Asia and Myanmar
Asean to China & Hong Kong (000 teu)
Asean includes SE Asia and Myanmar
Overall southbound trade grew by 1% in 2013 but is expected to
decrease in 2014.
Underlying northbound trade grew by 1% in 2013 and is expected
Of the leading headhaul commodities, most showed some
growth.
Overall southbound trade grew by 12% in 2013 and is expected to
grow by 22% in 2014.
Underlying northbound trade grew by 9% in 2013 and is expected
Of the leading headhaul commodities, textiles and mineral
manufactures are showing most growth.
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.
Leading indicators: headhaul from N Asia 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
78 Road Vehicles 167 162 154 163
26 Textile Fibres 160 156 157 162
57 Plastics In Primary Forms 139 143 145 153
Leading indicators: headhaul from N Europe 000 teu. Italics = projected
Commodity 2012 2013 2014 2015
66 Mineral Manufactures 357 384 542 568
05 Vegetables & Fruit, Nuts 228 245 287 310
Supply - based on actual data Demand - based on actual data
Demand seasonally adj
60
80
100
120
140
160
180
2
0
1
3
Q
4
2
0
0
6
Q
2
2
0
0
6
Q
3
2
0
0
6
Q
4
2
0
0
7
Q
1
2
0
0
7
Q
2
2
0
0
7
Q
3
2
0
0
7
Q
4
2
0
0
8
Q
1
2
0
0
8
Q
2
2
0
0
8
Q
3
2
0
0
8
Q
4
2
0
0
9
Q
1
2
0
0
9
Q
2
2
0
0
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Q
3
2
0
0
9
Q
4
2
0
1
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Q
1
2
0
1
0
Q
2
2
0
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3
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0
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4
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1
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2
0
1
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0
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4
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3
Q
1
2
0
1
3
Q
2
2013 Q4
Supply Index=169
2012 Q4 - 2013 Q4
% change quarter on quarter
Supply=4.5%
Demand=6.7%
2013 Q4
Demand Index=146
2
0
1
3
Q
3
Graph A: Global supply v demand and seasonally adjusted
demand index 2006 (Q1=100)
expected to grow by 5.2% in 2014, whilst westbound is estimated
to have fallen by 1.9% in 2013 with a smaller decline in 2014
(-0.9%).
May 2014 8 CONTAINERISATION INTERNATIONAL www.containershipping.com
DATA HUB
LOAD FACTORS
UTILISATION BOOST
Damian Brett takes a look at the likely impact of supply and demand on some of
the key Asian trade lanes
2
Asia to West Africa
VESSEL utilisation levels on services from Asia to western Africa are set for good second and third
quarters, reaching an average of 86% in the April-June quarter and 92% during the July-September
period.
As the year progresses, utilisation levels will decline in line with a seasonal slowdown, slipping to
78% in the final quarter of the year and 83% at the beginning of 2015.
However, utilisation levels are stronger than last year on the back of impressive cargo growth, and
projections show volumes are expected to increase by 11.6% year on year in 2014 and by a further
8.2% in 2015.
Shipping lines continue to add capacity to the trade lane, but it is not enough to outstrip demand
growth.
In terms of service developments since Containerisation Internationals analysis of the trade
lane in February, Maersk Line and CMA
CGM have now fully combined their direct
services.
But this hasnt affected overall capacity;
while one small loop was discontinued, larger
ships are being used in three of the four
remaining services.
Also, NileDutch has added some larger
vessels to its service and PIL has filled two gaps
in its services, although a third loop is still not
weekly. Capacity for 2014 is estimated to be
8.8% ahead of 2013.
3
Asia to west coast North America
Peak season
transpacific west
coast utilisation
levels of 88%
are expected to
put carriers in a
good position
to increase
rates compared
with the second
quarter.
Carriers are
also set for a good fourth quarter with load factors remaining above
the 80% mark. Utilisation levels are also expected to be stronger
than last year as analysts have forecast volumes will increase by
around 5% while capacity additions are being carefully managed.
During the first quarter of the year, carriers decreased capacity
on the trade lane by 0.3%; Coscos Cosea loop was suspended but
larger ships were introduced on several other services.
Also, following the Chinese new year, gaps in several service were
filled.
For the full year, carriers are expected to increase capacity by
2.4% as they adopt a cautious approach to service additions as
they await Chinese regulators response to the P3 Network and G6
Alliance expansion.
1
Asia to west coast US: average utilisation rates
0
20%
40%
60%
80%
100%
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Asia to West Africa: average vessel utilisation
0
20%
40%
60%
80%
100%
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
1
May 2014 www.containershipping.com CONTAINERISATION INTERNATIONAL 9
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.
Northeast Asia to Oceania
Demand growth on
services from north east
Asia to Oceania is set
for a strong year with
analysts projecting a
double-digit percentage
increase in carryings.
While volumes are
projected to expand by
more than 10%, our
projections show capacity
will increase by the lower
amount of 7.6% year on year in 2014.
This will result in improved vessel load factors compared with last year,
but it is not expected to be enough of an improvement to lift utilisation
levels above the 80% mark.
During the first quarter, carriers increased capacity by 4% as gaps
were filled in Australian loops following the Chinese new year. There are
still some gaps in other services, but these are expected to have vessels
introduced in time for the southbound peak season.
4
DATA HUB
FREIGHT FORECASTER
NEXT EDITION: AMERICAS
DATA HUB
LOAD FACTORS
Asia to east coast North America
As with services from Asia to the North American
west coast, carriers are adopting a cautious
approach to capacity additions to the east coast
as they await to see if the P3 Network is approved
by regulators.
Over the first quarter, carriers increased
capacity by 1.1% as larger vessels were deployed
and gaps in other services were filled. For the full
year, capacity is expected to increase by 2.6%
compared with 2013.
Meanwhile, demand is expected to grow by
around 5% year on year in 2014.
2
3
1
4
Asia to east coast US: average vessel utilisation
0
20%
40%
60%
80%
100%
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Northeast Asia to Oceania: average vessel utilisation
0
20%
40%
60%
80%
100%
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
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.
BOX LINES STRUGGLE
WITH SURPLUS CAPACITY
Newbuilding deliveries continue at a brisk pace, reports James Baker
Teu Size range In service April 2014 On Order 2014 On Order 2015 On Order 2016+ Total vessels
on order
Total teu
on order
No Teu No Teu No Teu No Teu
0-499 335 92,625 2 251 2 210 - - 4 510
500-999 724 546,408 7 5,597 1 606 1 540 9 6,743
1,000-2,999 1,855 3,362,251 51 87,064 64 125,950 22 44,032 137 257,046
3,000-4,999 924 3,824,433 28 118,023 10 38,200 9 34,600 47 190,823
5,000-7,499 616 3,715,879 26 145,400 10 62,200 - - 36 207,600
7,500-9,999 347 2,979,832 33 292,788 61 552,100 27 249,648 121 1,094,536
10,000-12,999 68 758,432 15 157,686 13 134,362 9 90,000 37 382,048
13,000-15,999 138 1,869,856 13 175,408 23 323,850 25 352,500 61 851,758
16,000+ 10 175,950 11 197,220 31 556,910 1 18,800 43 772,930
Total 5,017 17,325,666 186 1,179,437 215 1,794,388 94 790,120 495 3,763,994
World Cellular Fleet April 2014 (excluding newbuild postponements and cancellations under negotiation)
Total world fleet capacity
rose by 99.626 teu to
17.3m teu in April.
WITH the first-quarter
earnings season already
upon us, it is possible to
consider whether the much-
anticipated improvement in
container lines performance
has occured. While industry
bellwethers including Maersk
Line do not report until later in
the month, some evidence is
emerging.
To date, the picture remains
mixed. Orient Overseas
Container Line experienced
weaker rates in the first quarter
compared with a year ago, but
was still able to inch up its
revenue and volumes.
Meanwhile, MOLs box line
unit reported an 18% rise in
revenue, but a operating loss
of 14.5bn ($142m). At China
Shipping Container Lines,
revenues were up on higher
volumes, but profitability
remained elusive.
The first-quarter earnings
reflect the traditional slow
season for box rates. But prices
have recently bounced back as
carriers appear to be pushing
through rate increases, at least
temporarily.
The latest Shanghai
Containerised Freight Index
shows that the component
covering the Shanghai-Europe
route reached $1,305 per teu
at the beginning of May. That
compares to a recent low of
$843 per teu in late March. But
whether lines will be able to
maintain these higher rates is
questionable.
The issue facing operators
remains overcapacity, and this
months fleet data will offer
little comfort, with vessels
comprising 138,725 teu
being delivered during April.
That is nearly a third more
than the 106,000 teu that
Source: Lloyds List Intelligence
DATA HUB
WORLD FLEET UPDATE
joined the fleet the previous
month.
Total world fleet capacity
in April rose by 99,626 teu
compared with a month ago, to
17.3m teu. Despite the gain in slot
capacity, the number of vessels
in the fleet decreased over the
month by 10 units, pointing to
further increases in the size of
ships entering service, and the
scrapping of smaller tonnage.
DATA HUB
WORLD FLEET UPDATE
Vessels laid-up Week ending April 27, 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 14 4,951 86 20,352 100 25,303 27.3%
500-999 11 6,911 51 36,641 62 43,552 8.0%
1,000-2,999 17 27,814 41 70,761 58 98,575 2.9%
3,000-4,999 12 51,837 26 108,058 38 159,895 4.2%
5,000-7,499 5 29,530 6 37,863 11 67,393 1.8%
7,500-9,999 1 8,200 1 9,572 2 17,772 0.6%
10,000-12,999 - - - - - - -
13,000+ - - - - - - -
Total 60 129,243 211 283,247 271 412,490 2.4%
Vessels delivered April 2014
Vessel name Shipyard Teu Reefer
plugs
DWT Knots Beneficial owner Operator Deployment
Maribo Maersk Daewoo Shipbuilding & Marine
Engineering
18,270 600 194,433 23 A.P. Moller-Maersk Maersk Line Asia-Europe
OOCL Korea Samsung Shipbuilding & Heavy
Industries
13,208 1,150 142,340 OOIL NYK Asia-Europe
Ludwigshafen
Express
Hyundai Heavy Industries 13,200 142,036 Hapag-Lloyd Hapag-Lloyd Asia-Europe
Ulsan Express Hyundai Heavy Industries 13,200 140,700 24.7 Hapag-Lloyd Hapag-Lloyd Asia-Europe
Cap San
Artemissio
Hyundai Heavy Industries 9,700 1,600 124,426 22.8 N.S. Lemos Hamburg Sud Asia-Africa
APL Houston Daewoo Shipbuilding & Marine
Engineering
9,200 700 108,635 22.8 NOL APL Transpacific
APL Santiago Daewoo Shipbuilding & Marine
Engineering
9,200 108,617 22.8 NOL APL Middle East
Gulf/Indian
Subcontinent-Asia
MOL Contribution Mitsubishi Heavy Industries 8,560 89,893 MOL MOL Transpacific
Ever Lissome CSBC Corporation Taiwan 8,000 105,000 24.5 Evergreen Evergreen Transpacific
YM Moderation Imabari Shipbuilding 6,350 500 72,370 Shoei Kisen Kaisha Yang Ming Transpacific
Carl Schulte Hanjin Heavy Industries 5,400 650 62,292 21.5 Bernhard Schulte
Group
Maersk Line Asia-Africa
Clemens Schulte Hanjin Heavy Industries 5,400 650 62,292 21.5 Bernhard Schulte
Group
Jogela Jiangsu New Yangzijiang
Shipbuilding
4,957 600 58,032 21.5 Peter Dohle
Schiffahrts-KG
Jin Ling 59 Jiangsu Jinling Ships 4,800 57,500 Reederei Dietrich
Tamke KG
Jadrana Jiangsu New Yangzijiang
Shipbuilding
4,800 600 58,037 21.5 Peter Dohle
Schiffahrts-KG
MOL Hope Guangzhou Wenchong Shipyard 1,740 300 23,579 19.5 Yong Hai Agencies Mitsui O.S.K. Lines
Limited (MOL)
Regional Asia
San Pedro Guangzhou Wenchong Shipyard 1,740 300 23,579 19.5 Eastern
Mediterranean
Maritime
Heung-A Shipping
Company Limited
Sunny Lily Hyundai Mipo Dockyard 1,000 12,244 Dong-A Tanker
The situation will not
improve anytime soon, either.
Braemar Seascope estimates
that 120 newbuildings in
excess of 10,000 teu will be
delivered over the coming
three years, with an average
nominal capacity of 14,000
teu.
Lloyds List Intelligence
figures show that orders are in
place for 106 ships in this size
band this year and next alone,
with a total capacity of over
1.5m teu. Braemar Seascope
warns that this will lead to
persistent overcapacity at least
until 2017.
The containership fleet is
expected to increase by some
5.5% this year after vessel
scrapping is taken into account.
After slowing in March, boxship
demolition picked up again
slightly in April, with 16 vessels
comprising 46,600 teu going
to the breakers. The youngest
of these was just 16 years old
and nearly half fell into the
unloved panamax category.
Braemar Seascope points
to static time charter rates
over the past two years as a
key driver behind scrapping.
Owners holding onto older
vessels in the hope that
rates may increase are now
throwing in the towel. Some
brokers expect that as much
as 400,000 teu could be
demolished this year.
However, as the capacity of
the fleet relentlessly rises
Braemar Seascope suggests
the growth over the next three
years to be sufficient to set
up another dozen Asia-Europe
strings any hopes of a
meaningful recovery for rates
and lines probably remain a
long way off.
DATA HUB
WORLD FLEET UPDATE
Valuations for post-panamax, panamax and handymax container vessels
Note: All values in $m
Age Capacity (teu) April 22,
2014 ($m)
March 22,
2013 ($m)
Monthly change
($m)
April 22,
2013 ($m)
Yearly change
($m)
0 4,250 33.1 33.0 0.1 36.3 -3.2
5 4,250 22.9 22.8 0.1 25.2 -2.3
10 4,000 13.3 13.1 0.2 15.0 -1.7
15 4,000 9.6 9.2 0.4 8.9 0.7
20 3,750 9.0 8.7 0.3 7.6 1.4
25 3,750 9.1 8.7 0.4 7.9 1.2
Panamax Source: Vesselsvalue.com
2014 ($m)
March 22,
2013 ($m)
Monthly change
($m)
April 22,
2013 ($m)
Yearly change
($m)
0 1,400 16.2 17.9 -1.7 18.8 -2.6
5 1,400 11.8 12.9 -1.1 13.0 -1.2
10 1,400 8.0 8.5 -0.5 8.0 0.0
15 1,400 5.0 5.1 -0.1 4.6 0.4
20 1,400 3.7 3.6 0.1 3.1 0.6
25 1,400 3.7 3.6 0.1 3.2 0.5
Handymax Source: Vesselsvalue.com
Current and historical values for tankers, bulkers and containers.
Daily updated sales lists, vessel specications and ownership
information.
Data exports, valuation certicates, interactive charts and
automated alerts
2014 ($m)
March 22,
2013 ($m)
Monthly change
($m)
April 22,
2013 ($m)
Yearly change
($m)
0 7,000 64.1 64.1 0.0 59.5 4.6
5 7,000 47.7 47.7 0.0 41.3 6.4
10 6,500 29.6 29.4 0.2 24.2 5.4
15 5,500 15.0 14.6 0.4 14.4 0.6
20 4,500 10.0 9.6 0.4 8.5 1.5
Post-panamax Source: Vesselsvalue.com
Vessel name Teu DWT Speed (knots) Config Year built Price ($m) Purchaser
ESM Amanda 787 12,600 18.0 Gearless 2000 4.3 Vietnam
Montana 1,294 17,350 20.0 Geared 2007 8.6 UK
Rafflesia 1,675 24,548 18.0 Gearless 1997 4 China
Tatiana Schulte 2,826 39,400 22.0 Gearless 2005 13.5 Germany
Santa Rosanna 4,112 52,800 23.5 Gearless 2002 12.5 Norway
Santa Roberta 4,112 52,800 23.5 Gearless 2002 12.5 Norway
Santa Rufina 4,112 52,800 23.5 Gearless 2002 12.5 Norway
Vessels sale and purchase April 2014
Notes: C=cellular; GL=gearless; G=geared; NC=non-cellular; MPP=multipurpose; U/D=undisclosed Source: Braemar Seascope
Vessels demolished April 2014
Vessel name Built Teu Broken date Broken place Shipbreakers Previous Beneficial owner
Hanjin Oslo 1998 5,308 01-Apr-14 Alang Indian Breakers Hanjin Shipping
Hanjin London 1996 5,302 16-Apr-14 Alang Indian Breakers Hanjin Shipping
Hanjin Berlin 1997 5,302 28-Apr-14 Alang Indian Breakers Hanjin Shipping
MSC Socotra 1995 4,743 30-Apr-14 Alang Indian Breakers Dragnis Group
Commodore 1992 4,651 29-Apr-14 Alang Indian Breakers Danaos
Sun 1993 4,229 16-Apr-14 Alang Indian Breakers Seafarers Shipping
Da He 1994 3,800 08-Apr-14 Xinhui Chinese Breakers Cosco
S. Trader 1995 2,227 19-Apr-14 Alang Indian Breakers Lomar Shipping
Jolly 1993 2,098 02-Apr-14 Alang Indian Breakers Euroseas
Finisterre 1991 1,960 28-Apr-14 Alang Indian Breakers Kotani Shipping
Northern Delight 1994 1,717 16-Apr-14 Alang Indian Breakers Conti Holding
Asia Star 1994 1,512 27-Apr-14 Alang Indian Breakers Israel Corporation
Kota Wijaya 1991 1,160 14-Apr-14 Alang Indian Breakers Pacific International Lines
DATA HUB
THE current average vessel capacity on the
transatlantic trade lane is 4,700 teu and it is
covered by 21 carriers.
According to Lloyds List Intelligence, the
average vessel capacity operated by the
three that are set to form the P3 Network
Maersk, Mediterranean Shipping Co and
CMA CGM on this route is 5,400 teu.
The current average capacity operated by
members of the G6 alliance APL, Hapag-
Lloyd, Hyundai Merchant Marine, Mitsui OSK
Lines, NYK Line and OOCL is 4,500 teu.
The P3 and G6 alliances may cascade
their larger vessels onto this trade to benefit
from economies of scale. The P3 Network
is likely to begin operating in mid-2014
with five services on this route, while
the G6 alliance has announced plans to
extend cooperation to the Atlantic, with five
services in the second quarter of 2014.
However, larger ships on the trade could
put pressure on east coast North American
ports, as they may not be ready to handle
bigger vessels.
Currently around 30% of service capacity
on the Europe to North America route is
provided by alliances. Through slot-charters
and partnerships, the three P3 carriers
currently offer 52% of available capacity on
the Europe to North America route.
As much as 80% of service capacity
New alliances on the transatlantic trade lane
are set to dominate the market in capacity
terms, writes Sarah Bennett
A CHANGING
LANDSCAPE
250 vessels on 35 fully
containerised services
Average weekly capacity:
150,000 teu.
Most capacity on this route is made
up by 3,000 teu-4,999 teu ships
DATA HUB
ports. However, operators fail to gain from
economies of scale. The P3 and G6 alliances
will most likely cascade its larger vessels
into this trade.
MSCs Golden Gate pendulum service
currently offers the largest ships between
the Mediterranean and North America with
six vessels of 9,000 teu, although it mainly
covers Asian and North American ports with
Haifa in Israel as the only call in between.
The next largest ships serve Maersks TP7
service, which uses three 8,000 teu units. This
service also mainly serves ports in Asia and
North America, but also calls at Port Said and
Tangier-Med as it transits the Suez Canal. These
larger ships have been cascaded onto this
trade route during the first quarter of 2014.
It is likely that we will see more services
that cover more than one trade route to
acquire efficiency benefits when using the
larger boxships, such as combining
Asia-Europe and Europe-North America
loops via the Suez Canal.
The largest vessels on the North Europe
to North America trade are three 6,700 teu
vessels on MSCs US Gulf service calling at
15 ports across North Europe, the Americas
and the Caribbean.
The addition of larger ships onto this
trade will put pressure on east coast North
DATA HUB
TRADE ROUTES
7,500-9,999 1,000-2,999
3,000-4,999
5,000-7,499 500-999
% of total Asia-Europe (teu)
0
10
20
30
40
50
60
70
80
90
100
6.1%
33.3%
47.8%
12.7%
Figure 1: Teu range proportion among
Europe-North America
operators
could be operated by alliances when the P3
begins operations, depending on its service
consolidations. The Grand and New Alliance
service revisions, once the G6 Alliance enters
the North Europe-North America trade in the
second quarter of 2014, will also affect the
extent of alliance capacity on this route.
Larger containerships are deployed on
the Mediterranean-North America route
than its northern counterpart. Ships sized
between 7,500 teu and 9,999 teu hold
20% of capacity on the trade lane, while
3,000 teu-4,999 teu ships account for the
majority of capacity on the North Europe-
North America route at 67% and there are
no ships larger than 7,000 teu.
Smaller ships may be deployed between
North Europe and North America to make
it quicker for services to call at more
TRADE ROUTE INTELLIGENCE
The addition of larger ships onto the trade will put pressure on
east coast North American ports such as New York, where the
height of the Bayonne Bridge is a limiting factor.
DATA HUB
TRADE ROUTES
American ports. The largest containerships
calling at the east coast come from Asia via
the Suez Canal, with vessels of up to 9,000
teu. These are former transpacific services
that have been switched to the Suez
Canal route because of Panama Canal size
restrictions, but the height of the Bayonne
Bridge in New York is another limiting factor.
Container Trade Statistics data shows
a year-on-year growth in 2013 container
0 5,000 10,000 15,000 20,000 25,000 30,000
Eimskip
NYK
HMM
Yang Ming
CMM
Turkon
Evergreen
ICL
Hamburg Sd
UASC
Coscon
CSAV
Zim
Hanjin Shipping
APL
OOCL
MOL
CMA CGM
Maersk Line
Hapag-Lloyd
MSC
Figure 2: Weekly operated capacity on the Europe-North America trade route by line (teu)
volumes from Europe to North America of
8.5% since 2011, with volumes nearing
300,000 teu per month. But it has dropped
from North America to Europe by 2.7%
with volumes around 200,000 teu per
month. The difficult trade resulted in Hanjin
Shipping deciding to remove its vessels
from CKYHs transatlantic service in May.
The focus for operators is reduced slot
costs that can be attained from deploying
larger vessels on the route. However, there
are still many smaller operators in the trade
that may struggle to maintain market share
when the new alliances begin service.
These include carriers such as Turkon
Line and Independent Container Lines,
which have an average vessel capacity of
just 2,000 teu in this route. Most of Turkon
Lines services are focused on regional
Europe and the transatlantic trade, while
Independent Container Line focuses on the
northern Europe-US trades.
Alliances could contribute up to between
80% and 90% of capacity on this route, which
is a similar outlook for the other two main
trades of Asia-Europe and the transpacific,
leaving a smaller market share for independent
carriers. However, smaller carriers can maintain
market share by providing shippers with
flexibility by carrying breakbulk and project
cargoes as well as containerised freight and by
offering calls at alternative ports.
THE leading Mediterranean ports last year
saw volumes increase by 5.5% compared
with 2012 to reach 28.5m teu.
The growth comes as the Eurozone
countries, where the majority of the
leading ports are located, continue to
recover after the difficulties they have
faced over the last few years.
Spain and Greece were hit particularly
hard and both required support packages
from the stronger European economies.
Luckily for the countries ports over
the last few years, the region also acts as
a transhipment hub for a range of trade
lanes, meaning those ports affected by the
crisis have been able to benefit from this
type of traffic heading to other areas.
However, as transhipment containers
arent captive to a particular port or
region, shipping lines can easily switch
from one port to another to escape
operational issues, as part of a wider
network re-organisation or simply because
they have been offered a better deal.
The trend for transhipment has been
on the increase as shipping lines look
to fill their ultra-large vessels, create
network efficiencies, use up spare ships
and benefit from avoiding a costly Panama
Canal transit.
When asked how it managed to keep
its big Asia-Europe containerships full in a
low growth environment, one shipping line
executive recently told Containerisation
International that it topped up the ships by
using them for transhipment cargo.
For instance, containers from Asia
destined for west Africa can be carried
on an Asia-Europe vessel and then
transhipped in Algeciras. Traffic destined
for northern Europe from other regions
of the world can then be picked up at the
transhipment port and carried on the final
leg of the journey.
Maersk Line has similarly included calls
from its Triple-E vessels at a Mediterranean
transhipment hub.
While this trend is benefitting
transhipment facilities in the short term,
and possibly the medium term, the use of
direct services could eventually return as
cargo volumes on the mainline services
increase and capacity on larger vessels is
dedicated to catering for these trade lanes.
This trend is reflected by Mediterranean
Shipping Cos decision to launch a direct
service from China to West Africa rather
than tranship in Valencia.
For now though, Mediterranean ports
are able to benefit from the introduction
of larger vessels that the carriers need to
work hard to fill.
Looking at 2013 volumes, the Spanish
port of Algeciras finally completed its
march to become the regions leading
container port.
This is a remarkable turnaround from
2010 when the port saw its box volumes
tumble by 7.6% year-on-year to 2.8m
teu, the third annual decline in a row, as it
faced competition from Moroccos Tanger
Med complex.
It has been rebuilding volumes since
then, thanks in part to the development
of Hanjin Shippings semi-automated TTI
terminal which opened in 2010. Last year,
Box volumes at leading terminals jumped by more
than 4% last year, buoyed by economic recovery
and transhipment, reports Damian Brett
ONWARDS
AND UPWARDS
MEDITERRANEAN PORTS/VOLUMES
PORTS
Selected Mediterranean port volumes
Country Port 2013 teu 2013 %
+/-
2013 teu +/- 2012 teu 2011 teu Last
years
ranking
Spain Algeciras 4,336,459 5.5% 224,610 4,111,849 3,602,631 2
Spain Valencia 4,327,838 -3.2% -152,597 4,469,754 4,327,371 1
Turkey Ambrali
(Istanbul)
3,405,800 9.9% 308,336 3,097,464 2,686,000 3
Greece Piraeus 3,164,000 15.7% 429,986 2,734,014 1,680,133 4
Italy Gioia Tauro 3,087,000 13.4% 365,896 2,721,104 2,305,000 5
Malta Marsaxlokk 2,750,000 8.3% 211,920 2,538,080 2,360,489 6
Italy Genoa 1,988,013 -3.7% -76,793 2,064,806 1,847,102 7
Spain Barcelona 1,720,383 -2.2% -38,264 1,758,647 2,033,549 8
Turkey Mersin 1,378,800 9.1% 115,305 1,263,495 1,126,588 9
Italy La Spezia 1,300,432 4.3% 53,214 1,247,218 1,307,274 11
France Marseille-Fos 1,097,740 3.4% 36,547 1,061,193 944,047 12
Total 28,556,465 5.5% 1,478,160 27,067,624 24,220,184
Source: Port authorities, terminal operators * Estimated ** Fiscal Year
volumes increased by 5.5% compared
with 2012 to reach 4.3m teu.
Algeciras growth comes as Maersk Line
began calling at the APM Terminals facility
at the port with its 18,270 teu Triple-E
vessels.
In contrast, its main Spanish rival
Valencia, which has developed a mixed-
model approach of both transhipment and
gateway traffic, reported a 3.2% year-on-
year decline in volumes to 4.3m teu.
But investments are being made in the
ports terminals.
Earlier this year, JP Morgan Asset
Management received approval from the
Port Authority of Valencia for a 100m
($138m) investment in facilities controlled
by terminal operator Noatum.
Following the announcement of the
investment, JP Morgan Asset Management
global head of infrastructure Paul Ryan said:
We firmly believe the Spanish economy
has turned the corner, which will have a
positive effect on trade activity. Growth
rates were positive in the second half of
2013 ending a nine-quarter double-dip
recession. We expect around 1% growth in
2014 and 2% in 2015 and beyond.
Total trade volumes and the activity
in Spanish ports have just ended a very
over operation of its second container
terminal to Cosco Pacific.
With improving productivity, the
port is enjoying a renaissance and also
benefitting from the recovery of the Greek
economy. That said, growth levels are
slowing; in 2012 volumes increased by
63% to 2.7m teu.
In contrast to Piraeus, Genoa suffered
the largest percentage decline in volumes.
The Italian port reported a 3.7% slip in
container throughput to 2m teu.
So far this year, trade lanes covered by
Mediterranean ports have had a mixed
start to the year.
The latest figures from Container Trades
Statistics has revealed that volumes from
Asia to the eastern Mediterranean and
Black Sea increased by 8.4% year on year
in January but then declined by 10.1% in
February.
On services from Asia to the western
Mediterranean and North Africa, volumes
increased 11.5% in January compared
with the same month a year earlier. In
February, the trend reversed and volumes
slumped 11.5% year on year.
Over the last few years there has been
a surge in volumes in January as shippers
look to move cargo before factories close
for the Chinese new year holiday period.
This year, the holiday was earlier than in
2013, which distorted container volume
comparisons for January and February.
Analyst MDS Transmodal also recently
told Containerisation International that
shippers had this year brought forward
shipments prior to the Chinese New Year
because in 2013 there was not enough
capacity to cater for demand, resulting
in delays.
Adding together the volumes for January
and February perhaps gives a better
reflection of how this important trade lane
has begun the year as it strips out some of
the effect of the holiday.
When doing this, it can been seen that
shipping line volumes on services from
Asia to the entire Mediterranean region
increased by 1.2% year on year in the first
two months of 2014 to hit 789,607 teu.
The transatlantic trade lane has
seen a more successful start to the
year, with volumes increasing from the
Mediterranean to the US in January and
February by 12.2% year-on-year to
135,766 teu.
rough period, and as economic recovery
is starting, the recovery in seaborne trade
volumes will even be stronger.
The expansion will include increased
quay and yard space and improved
intermodal connectivity.
In early April, it was also announced that
business enterprise organisation Mitsubishi
Corporation and port transporation provider
Kamigumi Corporation would take a 25%
stake in Valencia terminal operator TCV
Stevedoring Company, owned by Grup
Maritim TCB.
The deal is part of a wider global
agreement between Grup Maritim TCB
and Mitsubishi that will see the two work
together in terminal projects around the
world.
This particular terminal had a succesful
2013 with volumes increasing by 25%
year on year to 700,000 teu.
The Mediterranean port which
benefitted from the largest percentage
growth in volumes was Piraeus in Greece,
which reported an annual volume increase
of 15.7% to 3.2m teu.
The port has been going from
strength to strength since 2008 when
it was hit by a series of labour strikes
in protest at government plans to hand
Algeciras is now the top-ranked Mediterranean port.
MEDITERRANEAN PORTS/VOLUMES
PORTS
THE VIEW FROM THE BRIDGE
INSIGHT FROM THE CSUITE /TOSHIYA K KONISHI
TOSHIYA K Konishi believes the worst could
be over for container shipping lines.
The senior executive from Mitsui OSK
Lines doesnt sound overly pessimistic about
the current status of the industry.
A 30-year veteran with the Japanese
shipping giant, Mr Konishi was appointed
executive vice president of MOLs container
and logistics business unit right before the
collapse of Lehman Brothers.
Last June, he became MOLs liner
president and chief executive.
While recognising a persistent supply
overhang, Mr Konishi suggests the financial
position of container lines is on the mend.
Most carriers are still suffering from
losses in the container sector, including
us. But compared to last year or after the
Lehman shock freight rates now are low,
but can cover costs of voyages. Thats a fact,
says Mr Konishi, who is widely known in the
industry as TK.
We are not so far from the [rate] level
where we can be profitable. Thats the
reason carriers can hang in there.
Indeed, no major box carriers have
been squeezed out despite a general weak
rate environment since 2008. They just stay
on.
For MOL, its container division made only
one yearly ordinary profit during fiscal years
2008 to 2012 and has forecast another loss
in 2013. The carrier has also refrained from
placing any newbuilding orders and kept the
fleet size at some 110 vessels.
In its latest mid-term business plan, MOL
announced it will route most investments
over the next six years to the liquefied
natural gas shipping and offshore sectors,
COUNTING
THE COSTS
MOLs liner president and chief executive Toshiya K Konishi explains to
Max Tingyao Lin why he believes the worst is over for the box trades and
talks about dealing with the fall-out from the MOL Comfort incident
where the group expects higher returns
compared to merchant vessels.
This approach is not really surprising. The
bottom might be near for container shipping,
yet a true recovery is not yet in sight, says Mr
Konishi.
Since summer last year, exports from Asia
to Europe and to the US have been stronger
than the year-ago level, and intra-Asia trade
has still been growing as well, he explains.
But the underlying overcapacity issue is
there. Its fair to say this year may be better
than last year, but perhaps there wont be a
big turnaround.
Like many of its peers, the carrier has
been engaged in alliance expansion and
increasing the average vessel size of its
fleet to reduce unit costs apparently the
most common way for box lines to improve
bottom lines when rates are pressured.
One area where we can control is cost,
Mr Konishi says.
Size matters
One of the more active measures is to
operate larger containerships. Mr Konishi
says the G6 Alliance of which MOL is
a member is likely to have two loops
of 18,000 teu containerships by 2020 or
shortly after.
G6 member lines Hapag-Lloyd, NYK ,
OOCL, APL and Hyundai Merchant Marine,
as well as MOL currently have no vessels
of that capacity on their orderbooks but are
studying plans to acquire some.
We are always looking for options
and studying but have not yet made any
decision, Mr Konishi says.
Perhaps [well have] a maximum two sets
of 18,000 teu-19,000 teu ships by 2020, or
by 2022 or 2023. Its a long-term issue.
The remark echoed comments from
Hapag-Lloyds executive board member
Ulrich Kranich, who previously told
Containerisation International that all G6
members must be thinking about 18,000
teu ships and that the alliance could have a
string of such vessels within three years.
A loop usually requires 10 to 12
vessels, so each member would need to
contribute up to four ships if all share equal
responsibility.
However, even if those predictions
come true, G6s approach seems rather
conservative compared to one of the rival
alliances.
The P3 Network, formed by Maersk Line,
Mediterranean Shipping Co and CMA CGM,
is due to operate at least 29 ships of 18,000
teu-19,000 teu by 2016.
The careful measure is partly due to the
G6s smaller market share on Asia-Europe
routes, where such giant ships are deployed.
Moreover, Mr Konishi points out the largest
ships within the G6 network at 13,000 teu-
14,000 teu could be just as competitive as
P3s bigger vessels.
Its not really the size of ships that
matters, but slot costs, Mr Konishi says.
Well have 48 ships [of 13,000 teu-14,000
teu] by 2016, mostly by 2015 only five of
them are ordered before the Lehman shock
[at high prices].
Overall, the G6 deploys 65 vessels on four
Asia-North Europe services and one Asia-
Mediterranean service, including 40 vessels
larger than 13,000 teu. In the latest move,
NYK signed time charter agreements with a
Japanese owner for eight 14,000 teu ships
under construction at Japan Marine United,
due for delivery from February 2016 to
January 2018.
Those [48] ships are very cost
competitive even when compared to
Maersks 18,000 teu-19,000 teu vessels.
There is not so much difference in slot costs
[between them].
The Danish giant booked 20 Triple-E
18,270 teu vessels for an average of
around $185m each in 2011, a far
higher price compared to todays quote
at $130m-$150m, depending on
specifications.
Maersks vessels are awfully expensive
of course they have some edge in fuel costs,
but the difference is very small [between the
P3 and G6 fleets] when slow-steaming, Mr
Konishi says.
If we order 18,000 teu-19,000 teu ships
now, those ships can be much cheaper
then there will be some cost benefits.
Investment challenges
Having forecast high capital expenditures
in other sectors, MOL will likely seek
charter opportunities to avoid an increase
in debt ratio if it needs to expand its
boxship fleet.
Our focus is LNG and offshore sectors
and it require lots of our investment it
makes sense to charter for overall balance
sheet management, Mr Konishi says.
Chartered-in tonnage is off balance sheet.
But we probably have one of the highest
charter ratios versus owned tonnage in the
industry already so maybe our ratio will
stay at the current level for a while.
Whether we charter or own tonnage
may not be the most important thing. What
matters more is our fleet component.
G6 has managed to win approval from the
US Federal Maritime Commission to widen
its network to cover transpacific west coast
and transatlantic trades from this quarter,
having submitted further materials over the
expansion proposals in mid-February.
In mid-January, the FMC had halted the
45-day processing schedule and asked the
alliance to address competition concerns,
with commissioner Richard Lidinsky
raising the point that MOL is the only G6
member not a member of the Transpacific
Stabilization Agreement, which has antitrust
immunity under the US Shipping Act of
1984.
We have been operating in accordance
with our FMC filings from that perspective
we have antitrust immunity, Mr Konishi
says.
As long as we discuss all sorts of things
fully lawful as filed in agreements, I dont
really see any particular reason why we have
to be in the TSA to operate in the alliance.
[The TSA and G6] are totally different
agreements, which have different
discussions [among members].
Vicious circle
Mr Konishi also reflects on the worst parts of
the industry trend of liner alliances upsizing
vessels in their own networks. He points out
the phenomenon helped create the vicious
circle of recurring overcapacity, despite the
obvious benefit of lower unit costs.
[Ordering larger ships] is kind of a
vicious circle but one of the simplest, most
straightforward ways to lower our slot costs,
he points out.
Because every carrier is trying to do its
best to manage costs, eventually carriers are
building ships. Then here comes another
round of overcapacity.
So in a sense, thats the kind of circle we
are already in over the past two years.
Rather than voluntary efforts from
carriers, Mr Konishi suggests that the Suez
Canals physical constraint would be the
determining factor in ending the circle.
Basically, the Suez Canal is going to be
the physical constraint for now. The 19,000
PATH TO
THE TOP
TOSHIYA K Konishi, widely known
as TK in the liner shipping industry,
joined Mitsui OSK Lines in April 1983
and held a number of managerial
positions before being appointed
executive vice president and chief
operating officer of MOL (America)
in February 2003.
In June 2008, he took the position
of executive vice president and chief
operating officer of MOL Liner, the
container and logistics business
unit of MOL, and was also named
executive officer of MOL.
He was recently promoted to
president and chief executive of MOL
Liner and managing executive officer
of MOL in June 2013.
Mr Konishi now spends the
majority of his time in Hong Kong
where the global headquarters of
MOL Liner is based. He also has an
office at MOLs Tokyo headquarters.
He has a law degree from the
University of Tokyo. He is a Japanese
citizen and holds a permanent
resident card in the US.
Brookfield Asset
Management took
shares in the holding
firm of MOL-owned
TraPac terminal
at the port of Los
Angeles.
teu ships, currently the largest, are very close
to suezmax, he says.
Because the main trade lanes that
megaships are deployed on are from Asia
to Europe, I dont think ships that cannot
go through the Suez Canal are practically
viable.
Carriers would struggle to sell slots if they
send ships via the Cape of Good Hope due
to longer transit time, Mr Konishi explains.
[And] the African market is too small. In
South Africa, there is no port facility that can
efficiently receive big ships yet.
Based on MOLs estimates, a suezmax
boxship would be able to carry 20,000 teu
of containers in 24 rows, with a 415 m length
overall, a 61.8 m beam, a 31 m depth and a
16.3 m draft.
In comparison, a Triple-E class vessel has
23 rows, with a 400 m length overall, a 59 m
beam, a 30.5 m depth and a 16 m draft.
Ships can probably be larger for another
10% in nominal capacity but weve come
very close to suezmax now, Mr Konishi says.
Another positive factor for operators is the
Panama Canal expansion, which would draw
8,000 teu-9,000 teu vessels from the
Asia-Europe trades to Asia-US east coast
trades, squeezing out panamax vessels or
smaller, Mr Konishi says.
Those 8,000 teu-9,000 teu ships
will have better employment the
surplus of panamax sector is more of
a problem for owners, rather than for
operators.
Owners will have very a difficult time
to find employment for panamax boxships
and smaller. Even now, charter hires for
small ships are very low, and this sector will
continue to be under heavy pressure.
We also have too many panamax ships.
But from now to 2016, we will redeliver
many of them.
Mr Konishi is relatively optimistic about
MOLs logistics business, though.
Logistical thinking
Earlier this year, the group sold 49% of
its US terminal assets in Los Angeles and
Oakland, California and Jacksonville, Florida
to Brookfield Asset Management. The
Canadian asset manager took the shares in
International Transportation Inc, the holding
firm of MOL-owned TraPac, which operates
terminals in those ports.
Mr Konishi suggests the deal was more
about forming a partnership than raising
funds. Both sides are looking for expansion
opportunities in Latin America and other
regions.
Our logistics business is not huge but
offers a stable return. Brookfield is not a
short-term [asset] pursuer; it came to hold
those assets for long term, Mr Konishi says.
I think its a very good match they have
a long history of investing in South America
and we have an extensive shipping network
and cargoes. Brookfield can offer expertise
for new ventures in countries where MOL
may not necessarily have the know-how.
Mr Konishi adds that TraPac is actively
looking at a couple of projects and could make
a firm investment decision later this quarter.
Repairing reputations
Aside from the business operations, MOL
is also carefully repairing its reputation
within the liner industry in the aftermath
of the MOL Comfort incident.
The five-year-old, 8,110 teu vessel split
in two and sank off Yemen in mid-2013
without any collision, along with all 4,372
boxes on board.
MOL then carried out hull-strengthening
works on the ships sister vessels as
preventative measures. To limit its liability
to cargo interests and other relevant
parties as a shipowner, the carrier also
initiated limitation proceedings in Tokyo
and received around 600 claims before the
deadline for filing passed in mid-November.
I dont think we could continue to run
the sisterships [without strengthening
works]. We needed to have enough
justifications for crew members. We
needed to tell them those ships were
safe, Mr Konishi says.
And we needed to tell our
customers their cargoes were safe.
Also our alliance partners needed to
know those ships were safe so even
before they asked any question, we
pulled those ships out of service [for
strengthening].
It was painful to take them out.
Earlier this year, the carrier launched
a lawsuit against Mitsubishi Heavy
Industries, the shipbuilder of MOL Comfort
and its sisterships, seeking at least
13.8bn ($131.6m) in damages related
to the incident and to the costs linked to
strengthening sisterships under Japans
Product Liability Law.
Claiming that the casualty resulted
from vessel defects and the shipbuilders
negligence, MOL urged shippers, insurers
and other interested parties to join its
case.
MHI rejected all the claims and
responsibility in the casualty, pointing out
that MOL Comfort was constructed under
class rules and passed inspections. It
suggested issues related to ship
operation might be the accidents actual
causes.
Mr Konishi was careful in not
offering any direct criticism towards
the shipbuilder, though. Our overall
partnership with MHI is one thing; this
particular lawsuit is another thing, he
says.
I dont think MHI has any interest
in the container business anyway.
Regardless of MOL Comfort, they made the
decision to focus on something else, like
engineering.
MOL Comfort broke
in two and sank off
Yemen in mid-2013.
Photo: India TV
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TO ALL OUR
PARTNERS IN
MUMBAI
DP WORLDs performance in 2013 was

masked by the sale of a series of assets.
When actual figures are compared, the
terminal operator appeared to struggle
on throughput and turnover; volumes
declined 3.8% compared with 2012 to
26.1m teu and revenues slipped 1.5%
to $3bn. That said, profits attributed to
owners increased 7.9% to $674m.
However, when compared on a like-
for-like basis, stripping out the effects of
divestment or monetisation of assets at
Tilbury, Adelaide, Aden, Vostochny
and ACT (Hong Kong) and the addition
of terminals in Embraport in Brazil and
London Gateway in the UK, volumes
decreased by the lower amount of 0.5%,
revenue increased by 3.6% and profits
were up 23.9%.
Perhaps the standout figure in the
results was the increase in profits.
DP World chief executive Mohammed
Sharaf tells Containerisation International
this improvement was mainly generated by
the improved performance of terminals in
the UAE and a 4.6% increase in container
revenue per feu.
The terminal operator also revealed
that its volume and revenue performance
would have been better were it not
for constrained capacity at certain
terminals.
Mr Sharaf explains: Our average
utilisation was about 80% and this is
what we mean when we say we have
constrained capacity. I would say its
mainly in Europe, where we are running
around 80% in many terminals.
However, depending on which part of
the world we are in, if we see growth then
we will invest and expand that capacity.
He says volume growth last year was
challenging but expects an improvement
this year.
So far we have had a good strong start
to the year and if it continues, and [analyst]
Drewrys projection of overall market
growth of 4%-5% growth for this year
is correct, then we will be ahead of the
market.
We are seeing growth everywhere now,
which is good news perhaps the seven-
year cycle is almost over and maybe this is
the beginning of a new cycle, he says.
Looking at the year ahead, DP World has
two major developments that are set to
come to fruition. The first is the opening
of the 2.3m teu Rotterdam World Gateway
terminal on the Maasvlakte II site and the
second is the 4m teu Jebel Ali T3 terminal.
Both of these facilities are designed to
handle the 18,000 teu vessels that are
already on the water.
Another trend that terminal operators
are braced to meet this year is the
formation of ever larger carrier alliances,
but does this present an opportunity or
challenge?
DP World is set for an improved year in terms of volumes but still has to
contend with larger vessels and the growth of alliances, writes Damian Brett
OPPORTUNITY KNOCKS
DP Worlds 4m teu Jebel Ali T3 terminal
is expected to come on line this year.
MIDDLE EAST PORTS/DP WORLD
PORTS
DP World chairman Sultan Ahmed
Bin Sulayem tells Containerisation
International that DP Worlds spread of
terminals across the world will help guard
against any consolidation of terminal
calls because of the formation of global
shipping line alliances.
We are fortunate at DP World in the
sense that we are well spread around
the world in 65 terminals, he says.
We don t have one place where we
are concentrated, contrary to other
terminal operators where they are 80%
represented in one place, and that
is a comfort in the current
marketplace.
We are well spread if you look at
Africa, it is very important, you look at
Latin America, it is very important, we are
not concentrated in one area. That does
not make us immune, but it does give us
comfort that we havent put all our eggs in
one basket.
Mr Sulayem adds that he does not
expect alliance members to try and
negotiate jointly with terminal operators,
something that the P3 Network had
originally included in their agreement
submission to the US Federal Maritime
Commission, although the request was
later withdrawn.
He says: Each member will continue to
use the port they are using. Each line has
their own agreement, their own advantage
based on their value with certain
operators.
Alliances are more a matter of the
shipping lines looking to reduce their costs
and counter rising energy costs as well as
the carbon emission regulations around
the world.
I think they are going to use their
knowledge to deal with these global issues
and how to reduce their costs.
Another effect of the use of larger
vessels is the trend for transhipment
as larger vessels call at fewer ports and
containers will be relayed to their final
destination.
This development is in contradiction to
DP Worlds target of 75% of its volumes
being origin and destination cargo and
25% being transhipment.
This strategy is based on the belief that
transhipment is inefficient as it increases
costs and lengthens the overall supply
chain.
and Europe and you arent seeing
the same kind of investment in Africa.
But that doesnt mean the growth isnt
there.
Mr Sulayem is also of the belief that
Africa will continue to grow as investments
are made in infrastructure.
In our experience we have seen
good growth, he says. The growth in
each port in Africa, without exception, is
far more than any port we have seen in
Europe.
But no matter how much you handle in
the port, there isnt the infrastructure and
its a problem.
Look at the central African countries, all
these countries are landlocked and unless
there is a proper transport method then
the costs of moving a container are too
high.
Mr Sulayem says it may cost $1,500
to transfer a container from Jebel Ali to
Mombasa by ship, but the cost to move the
container onwards to Burundi could be as
much as $5,000.
China is currently investing in rail
infrastructure from Addis Ababa in
central Ethiopia to Djibouti, which Mr
Sulayem says will be a gamechanger. More
of these types of project are needed, he
adds.
He says that DP World will continue to
invest in both east and west Africa, but
they must be sure the right infrastructure
will be in place before it does so.
Currently DP World is represented in
Africa with terminals in Maputo, Djibouti,
Doraleh and Dakar, which Mr Sulayem says
are performing well. It is also developing a
new terminal in Dakar.
Overall, Mr Sharaf says that 2013 was
a success and the cash generated by the
sale of assets will enable it to continue to
invest in growth markets with good returns.
This is down to its strategy of developing
terminals that create an efficient supply
chain.
We are going to be exploring
opportunities in growth markets and that
continues, he says.
The 2013 numbers say it all we have
delivered year on year and we are happy
to see some of our competition take some
of the same strategy because at the end
of the day it is about the customer and
the supply chain and the effectiveness of
transporting the goods.
We will continue to focus on our
strategy so that our dependence on
transhipment is kept to a minimum, Mr
Sharaf says.
We will make sure the addition of
Rotterdam capacity is balanced with the
addition of new origin and destination
cargo.
Im not saying transhipment isnt going
to grow, but when we see that growth
coming we will ensure that our origin
and destination part of the business also
grows.
Looking to the longer-term future and
its investment plans, the terminal operator
continues to identify Africa and South
America as regions of growth and potential
investment.
However, growth in Africa hasnt been as
strong as many had expected.
We have invested hugely in Africa and
it will continue, Mr Sharaf says. Growth
isnt to the level people had expected as
investments are shifting back to the US
MIDDLE EAST PORTS/DP WORLD
PORTS
We are fortunate at
DP World in the sense
that we are well spread
around the world in 65
terminals... and that is a
comfort in the current
marketplace
Sultan Ahmed
Bin Sulayem,
DP World chairman
www.contshipitalia.com
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SUBSTANTIALLY enhanced European
horizons are beckoning, especially for
container ports, shipping lines and terminal
operators active in eastern Canada.
The catalyst is the Canada-EU free
trade agreement reached in principle last
October that is expected to be finalised
in time for implementation by the end of
2015. Shippers and the marine industry
will benefit from virtually total free trade
across the Atlantic between Canada and
the 28-nation European Union, notably as
global economic recovery gains traction in
the wake of the 2008-2009 recession.
In the federal cabinet in Ottawa, one
of the most avid supporters of what is
called the Comprehensive Economic and
Trade Agreement is transport minister Lisa
Raitt, who qualifies the accord as an ideal
opportunity to further reduce Canadas
reliance on the US as a dominant trading
partner.
The US is important, she says, but the
EU, with a population of 500m, represents
an even bigger market.
While foreign trade with Asia has been
steadily increasing, Canadas waterborne
trade with Europe, as a percentage of
volume, has fallen almost by half in the
past two decades.
In fact, notes a senior shipping
executive, of Canadas C$463bn ($420bn)
of worldwide exports in 2012, less than
10% went to EU countries. A reversal of
that fortune will most certainly be heartily
welcomed.
In this regard, the Canadian government
has forecast that trade under CETA will
rapidly expand by 20% in the first few
years, though some analysts estimate this
might be somewhat optimistic.
The Montreal advantage
There is pretty unanimous agreement
that Montreal is the Canadian port best
positioned to capitalise on future free
trade with Europe. With its location on the
St. Lawrence River 1,600 km inland, it is
the closest international container port to
North Americas industrial heartland.
With annual throughput of 1.3m teu,
Montreal handles even more containers
than mighty New York just in box
shipments to and from Europe, thanks
to such factors as excellent intermodal
connections with central Canada and US
midwest and no significant congestion
problems. Add to this the fact that
containerships serving Montreal make no
intermediate calls, completely loading and
unloading their cargo at the port.
Many of the worlds leading container
lines, including Hapag-Lloyd, CMA CGM,
Maersk Line, Mediterranean Shipping Co
and OOCL, provide dedicated weekly or
twice-weekly services through Montreal
year-round.
Though the largest containerships
calling at Montreal are in the 4,400
teu range, the port could actually
accommodate post-panamax ships of
up to 6,000 teu capacity as a result of a
decision last year by the Canadian Coast
Guard authorising the passage of ships
up to 144 ft wide. Observers consider
Free trade agreement
between Canada and Europe
means new opportunities
for shipping lines, ports and
terminals, writes Leo Ryan
OUR
FRIENDS
IN THE
NORTH
CANADIAN PORTS/EUROPEAN TRADE
PORTS
Photo: Sylvain Gigure/Montreal Port Authority
such a development could eventually
occur as more containerships in the
medium-size category follow a cascading
pattern onto other trade lanes following
the introduction of the 18,000 teu mega
vessels on the Asia-Europe routes.
Commenting on CETAs impact for the
Port of Montreal, Sylvie Vachon, president
and chief executive of the Montreal Port
Authority says: We are the leading port
on the North American east coast for
[container] trade between northern Europe
and North Americas industrial heartland.
Within the context of the new free trade
agreement with the European Union, our
vision to expand the port to our land at
Contrecoeur [nearby on the St. Lawrence
River] takes on added significance.
Whereas northern Europe was the point
of origin or final destination for 77.2% of
the containers moving through the port in
2000, this proportion today has declined
to 44.4%. Thus, despite the growing role
of Asia, at 13.8%, and the Middle East, at
8.3%, northern Europe still remains the
prime trade route for Montreal.
Also reflecting the persistent emphasis
on Europe is the 2013 Memorandum
of Understanding between the Port of
Montreal and the Antwerp Port Authority
aimed at fostering mutually-beneficial
co-operation in marketing and business
development.
One out of every five containers
handled by the Montreal comes from or
goes to Antwerp, the leading European
hub for all north Atlantic container
business.
Thus, in short, Ms Vachon is unabashedly
optimistic over what the future brings in
maritime trade with Europe.
Endorsing such a bullish outlook is
Michael Fratianni, president of Montreal
Gateway Terminals Partnership, whose
facilities handle close to two-thirds of all
container cargo at Montreal.
Montreal has traditionally been a
leader and a preferred gateway for moving
cargo between Europe and North America,
he says.
The lines that call on our port have
been servicing shippers that move their
products to and from Europe for almost
four decades. The elimination of tariffs
should spur even more trade, increasing
the transportation of products between
the EU and Canada. This will be positive for
marine transportation and, by extension,
for marine container terminals.
Concurring was Madeleine Paquin,
president and chief executive of Montreal-
based Logistec, which is present in over
30 ports and terminals in eastern North
America. Of course, trade will grow with
a free trade agreement, as we all assume
exceptions will be minimal. I would
venture to say that Montreal will be a big
winner.
Port of Halifax sees opportunities
On the Atlantic Coast, the deepwater Port
of Halifax has been a long-time supporter
of freer trade with Europe. On the Great
Circle route, it is two sailing days closer
to northern Europe than any port on the
North American east coast.
Since 2011, over C$100m has been
invested in infrastructure, allowing the
Nova Scotia port to handle the largest
containerships calling on the eastern
seaboard.
Last July, Halifax welcomed the biggest
container vessel to call on Canadas
Atlantic coast the 7,500 teu Berlin
Express operated by Hapag-Lloyd.
The elimination of
tarifs should spur even
more trade, increasing
the transportation of
products between the
EU and Canada
PORTS
The timing of the free trade
accord could be particularly
fortuitous for ACL, according to
managing director Fritz King.
PoH_185_x_130.Image_(Containerisation-International-Germany) 25.04.14 08:02 Seite 1
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In recent years, container cargo moving
on Asian trade routes, chiefly via the Suez
Canal, has expanded markedly, and today
accounts for 46% of Halifaxs container
volume of 442,173 teu in 2013 versus
41% for European trade.
But Karen Oldfield, president and chief
executive of the Halifax Port Authority,
has stationed a special marketing
representative in Europe as well as in
the US midwest and in India through
a strategic partnership with Canadian
National Railway.
We know there are growth
opportunities in Europe as a result of
the upcoming Comprehensive Economic
Trade agreement, and there is tremendous
growth potential in Asia, she says. We
are actively pursuing growth in both our
key markets. In Europe, we are served by
17 shipping lines, more than any other
Canadian port. We are already connected
to every single European Union country.
Shipping lines serving Halifax on the
North Atlantic trade include Hapag-Lloyd,
OOCL, NYK, MOL, HMM, Zim, Atlantic
Container Line, Hamburg Sd, Maersk,
CMA CGM, Wallenius Wilhelmsen and
Eimskip. This spring, French line CMA CGM
announced a doubling of capacity out of
Halifax for shipments of frozen seafood
and other perishable cargoes.
Fritz King, Halifax-based managing
director of ACL, says he is looking
forward to taking advantage of the new
opportunities on the horizon.
ACL has been serving the transatlantic
trade since 1967. We offer five con-ro
sailings each week between North America
and Europe. It is not a stretch to say Europe
is what we are all about consequently
any likelihood of expanding that trade
holds important opportunities for us.
Mr King says that the timing of the free
trade accord could be particularly fortuitous
for ACL as we introduce our uniquely
designed and newly constructed G4 vessels
to the market in 2015 a prospect that
could be called a double win for ACL.
He says that the dismantling of
tariff barriers should allow for many
commodities currently restricted or cost
prohibitive for import/export to begin
moving more freely in both directions.
Certainly the seafood producing
industries here on Canadas east coast
are probably positive recipients of freer
trade as are beef, pork, forest, and agri
suppliers.
Mr King also suggests that the first
mover advantage clause under CETA, as
economies improve on both sides of the
Atlantic, should spur the importation of
machinery and materials related to long-
neglected infrastructure. Our vessels
ro-ro decks are perfect transporters for
oversized materials and equipment.
Elsewhere in eastern Canada, various
ports with a primary vocation in bulk
shipping see potential benefits from
free trade with Europe in the near future.
Among these one can include Quebec and
Sept-Iles on the St Lawrence River and the
heavily-industrialised Port of Hamilton on
Lake Ontario.
According to Terence Bowles, president
of St Lawrence Seaway Management
Corporation, CETA holds promise for
increased Seaway cargo.
With traffic on the bi-national waterway
slipping below 40m tonnes in recent years,
the Seaway system of locks and channels
connecting the Atlantic to the heartland
of North America is today operating below
50% capacity.
Tim Heney, president of the Port of
Thunder Bay on the tip of Lake Superior,
affirms that with the prospect of
elimination of EU tariffs averaging about
14% on agricultural products, Thunder
Bay is well placed to ship increased grain
exports to Europe. Quality wheat from
the Prairies remains in high demand, and
we have the largest storage area in North
America for grain products.
Among Canadian carriers, Fednavs
FALLine, the largest ocean-going user
of the Great Lakes-Seaway corridor, has
been operating a regular service between
northern Europe and the waterway for
55 years. Mark Pathy, co-chief executive
of Fednav, anticipates the free trade
agreement should improve the economics
of both traditional FALLine cargoes
inbound, namely steel and general cargo,
as well as agri-exports outbound, which
could be quite positive for the Seaway.
PORTS
The Port of Halifax is served by 17 shipping
lines, more than any other Canadian port.
LIVERPOOL has received an important
vote of confidence as the port strives
to re-establish its position as a major
container terminal and the city develops
its maritime services activities.
Atlantic Container Line finally confirmed
in April that its new ships would call at
Liverpool after considering the alternatives
of Southampton and Bristol, both of which
are served by parent company Grimaldi.
The transatlantic specialist currently
uses the north-west port for UK calls
and its newbuildings are designed to
go through Liverpools lock, but ACL
nevertheless did not formally commit to
Merseyside until a few weeks ago.
By that stage, though, Peel Ports
had already invested around 14m on
reconfiguring the lock system in order to
speed up the berthing process by providing
an easier turning circle for the new vessels.
The decision coupled with an
expansion of ACLs back-office workforce
in Liverpool came shortly before this
summers International Festival of Business,
designed to promote the Merseyside
economy. One week will focus on events to
showcase the regions maritime industries,
with Containerisation International and
Lloyds List hosting a debate in Liverpool
on June 16 to discuss both the ports future
and the broad range of maritime skills and
expertise that are being combined to create
an important regional cluster.
Peel Ports chief executive Mark
Whitworth, ACL president and chief
executive Andrew Abbott, MacAndrews
inter-European trades general manager
Mark Copsey and MDS Transmodal
managing director Mike Garratt are
panellists. The debate will be chaired by
former APL executive David Appleton,
principle of the consultancy firm Focus
Maritime, who comes from Liverpool.
Many of the worlds top container lines,
including Maersk Line, CMA CGM, Hamburg
Sd and Zim, have Liverpool offices, while
one of the most familiar names in British
shipping, Bibby, is headquartered in the city.
ACLs roots are also in Liverpool.
Now owned by one of Italys leading
shipping groups, headquartered in New
Jersey and registered in Sweden, ACL was
originally set up in 1967 as a consortium
by five European shipowners, including
Liverpool-headquartered Cunard. Now best
known as a cruise line, Cunard back then was
a prominent a cargoship operator as well.
After keeping everyone guessing for
many months, Mr Abbott disclosed in April
that he had opted for Liverpool as the UK
port of call for ACLs five newbuildings that
will be delivered from next year.
These will be the largest ships of their
type on the high seas. With container
capacity of 3,800 teu, compared with
1,850 teu for the current ships in service,
and 28,900 sq m of ro-ro space against
18,500 sq m at the moment, they will be
much larger than ACLs G3 quintet.
Liverpool was better suited for its ship
calls because of the type of cargo its
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Containerisation International and Lloyds List to host a Liverpool debate to consider
the future of the port and Merseyside as a leading maritime hub, writes Janet Porter
NEW DAWN FOR
LIVERPOOL?
LIVERPOOL/THE DEBATE
EVENTS
Andrew Abbot
ACL president and chief executive
multipurpose vessels carry, says Mr Abbott.
Customers tended to be clustered in the
north of the country.
He tells Containerisation International
of his decision that ACL will remain in
Liverpool when disclosing that the line
would also be also expanding its local
presence and concentrating all back-office
activities in one place.
ACL is building its own office in Liverpool
which should be completed by the end of
next year, and has just taken on another
47 staff, all hired locally, bringing its total
Merseyside workforce to 178. That reflects
a reorganisation, with all documentation,
account payables, logistics, and similar work
handled in Liverpool
One reason is that Liverpool has always
scored highest on our productivity charts,
whether in terms of bills of lading per hour
or teus booked per person, says Mr Abbott.
Ship planning and hazardous cargo
bookings are managed in Liverpool as well.
Documentation work covering Grimaldis
North America-West Africa services are
also being switched to Liverpool.
Customer-facing activities will still be
handled at local level in the countries that
ACL serves, rather than be centralised.
Although the new ships will continue to
call at Liverpools Royal Seaforth terminal
inside the locks rather than the new
Liverpool2 facility on the river, the decision
to stay is nevertheless a significant boost
for Peel Ports as it presses ahead with its
ambitious Merseyside plans.
Peel Ports, which bought Liverpool and
other UK facilities from Mersey Docks and
Harbour Co in 2005, is building a new
are due to open in late 2015 enabling
much bigger ships to sail eastbound
directly from Asia to the US east coast for
the first time, Peel Ports is hoping ocean
carriers will develop new trade routes
that could extend across the Atlantic and
incorporate Liverpool.
We are the closest port to where over
half the UK population resides, and with
9m sq ft of warehousing, in what we see as
our natural hinterland, says Mr Whitworth.
And in recent months much of that has
been pretty much at capacity, occupied by
existing customers, but if you look across
the M62 today, it is just a construction
site between Liverpool and Manchester,
with major warehousing and infrastructure
developments going up, and all of those
present us with additional opportunities
for various customers.
As well as Liverpool and other port
facilities, Peel Ports also owns the
Manchester Ship Canal that connects the
two cities, and which last year saw a 20%
growth in ship movements
Although it is too soon for any container
line to make a firm commitment to Liverpool2,
Mr Whitworth says the port is working closely
with a number of ocean carriers on market
opportunities, and that the level of interest
has been very encouraging.
We have existing customers that, if the
facility were open today, would be using it
now and we have engagement from new
and prospective customers, he says.
With the crane order now signed, that
sends out a clear message that Liverpool2
should be open for business in less than
18 months from now.
300m ($505m) facility outside the locks
to enable the port to handle much larger
containerships. Liverpool2 will be able to
berth two 13,500 teu ships end-to-end.
Work has begun on the site with the first
phase due to be open in late 2015. Peel
Ports has just signed a 100m contract
for ship-to-shore and gantry cranes for
the new deepwater facility with Shanghai-
based Zhenhua Heavy Industries Co.
Five quay cranes and 12 cantilever rail-
mounted gantry cranes will be supplied for
phase one of the contract, with a further
three ship-to-shore and 10 gantry cranes
to be ordered for phase two.
The port does not necessarily expect
the new generation of boxships to call at
Liverpool straight away, but knows that,
in this day and age, it must be ready to
receive them if required.
With the new Panama Canal locks that
Mark Whitworth
Peel Ports chief executive
LIVERPOOL/THE DEBATE
EVENTS
If you look across the
M62 today, its just
a construction site
between Liverpool
and Manchester, with
major warehousing
and infrastructure
developments going up
Liverpool has always
scored highest on our
productivity charts,
whether in terms of bills
of lading per hour or
teus booked per person
EVERGREEN was undoubtedly one of the
pioneers of containerisation as regional
lines broadened their horizons, with
founder and group chairman Chang
Yung-fa taking on the European shipping
establishment while refusing to be drawn
into their world.
At the same time, he cultivated top level
political contacts, most notably with the
late UK prime minister Margaret Thatcher
and with Italys former prime minister
Romano Prodi. Both friendships helped to
shape Evergreen, which now has a UK-flag
fleet and expanded partly through the
acquisition of Italian carrier Lloyd Triestino.
At one stage, the Taiwan line was ranked
number one in the world, as its network
developed to cover all the major trades,
while its round-the-world services were
also groundbreakers.
More recently, though, there has been
plenty of talk about whether Dr Chang,
now 86, has lost his touch. And with only
one of Dr Changs four sons working in the
group and not on the shipping side
there is also uncertainty about whether
there is a succession plan.
Some of those questions are now being
answered, though, with a clearer idea of
Evergreens future direction starting to
emerge as senior executives, having kept a
low profile for several years, publicly defend
and explain recent strategic decisions.
One of those on the front line is vice
group chairman Marcel Chang, who is in
charge of Evergreens European shipping
and aviation interests as well as the
groups Paris hotel. He is also a member of
Dr Changs inner circle, although the two
are not related.
He is adamant that Evergreens
30-strong order for 8,500 teu ships
when competitors were going for much
larger tonnage was not a mistake, but
acknowledges that the time is now right to
bring 14,000 teu vessels into the fleet.
We think it was a correct decision, he
tells Containerisation International. There
is greater flexibility with the deployment
of 8,500 teu ships.
They can be utilised in many trades,
including the Far East to North America,
South America, and Middle East routes.
Mr Chang says the more recent decision
to acquire both 13,800 teu and 14,000
teu ships through lease deals reflects
technological advances of the more
modern tonnage, and the formation of
new-style alliances.
Dr Chang had famously resisted larger
vessels for many years, arguing that they
would be harder to fill and therefore not
necessarily any cheaper in terms of costs
per loaded teu.
But that was some seven years ago, and
the industry has changed considerably
since then, with the formation of several
global power blocks including the P3 and
G6 alliances, and the partnership between
Cosco Container Lines, K Line, Yang Ming
and Hanjin Shipping.
After years of preferring to operate
solo where possible, Evergreen has finally
signed up as a full member of this group
on the Asia-Europe trades, which has been
renamed the CKYHE alliance.
Evergreen is thought to have opted for
this alliance because it is more looseknit
than the other two big consortia, and so
better suited to its basic philosophy of
retaining as much flexibility as possible,
and continuing to work with different lines
in other trades.
We have various forms of service
co-operation with different partners, and
will seek more co-operation opportunities
to further enhance our service, says
London-based Mr Chang.
Following the decision to charter
10 ships of 13,800 teu from Greeces
Enesel, the first of which was delivered in
September, Evergreen then disclosed in
January that it would be acquiring another
10 ships of slightly larger capacity.
A series of 14,000 teu ships will be
chartered from Greeces Costamare and
Japans Shoei Kisen Kaisha, which will be
ordering five each. Costamares quintet
will be built by Samsung Heavy Industries
in South Korea, with Imabari building the
other five, for delivery in 2016 and 2017.
By joining the alliance and sharing
space with alliance partners, the necessary
load factors become more feasible and the
big ships potential economies of scale can
be achieved, says Mr Chang.
But the 8,500 teu ships are of the size that
gives Evergreen flexibility of deployment on
any trade lanes that it sees fit.
We do not rule out any possibility
and are pleased that the flexibility of
the 8,500 teu units allows us to react
quickly to customer demands, while
taking advantage of the cost benefits and
utilisation efficiency that they exert.
However, Evergreen is not thought to be
considering a revival of its round-the-world
services, regardless of how the enlarged
Panama Canal may affect trade patterns.
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Former number one box
line Evergreen embarks
on a new growth path,
writes Janet Porter
THE GREEN LIGHT
LOOKING FORWARD/EVERGREEN
CARRIERS
THE NEWS THIS MONTH
MORE ONLINE AT CONTAINERSHIPPING.COM BOX WORLD BRIEFING
MAERSK Line was a relative
latecomer to container
shipping, not getting involved
until nearly 20 years after the
early US pioneers had started
to appreciate the benefits of
loading cargo into a standard-
size metal box.
But the impact the carrier
from a small north European
country has had on both
shipping and the wider
global economy has been
immense, as a new book
marking Maersk Lines 40
years in containerisation
demonstrates.
The 442-page account of
Maersk Lines astonishing
ascent from the time the
first containership carrying
the Maersk Line brand name
was delivered in 1974 the
1,800 teu Svendborg Maersk
to the arrival of ships 10
times that size in 2013, is
documented in detail by
authors Chris Jephson and
Henning Morgen.
The book draws heavily on
Containerisation International
for both industry data and
commentary, with former
editors Jane Boyes and John
Fossey quoted on numerous
occasions throughout the
book.
The authors had hoped
the book would be ready
last June in time for a
triple celebration, Maersk
Mc-Kinney Mollers 100th
birthday, delivery of the
worlds first 18,000 teu
ship that was named after
the legendary shipowner,
and publication of Creating
Global Opportunities; Maersk
Line in Containerisation
1973-2013.
That was not to be,
however. Mr Moller died a
How Maersk Line rose to the top
year earlier, just before his
99th birthday, leaving his
youngest daughter Ane
Uggla to name the first
Triple-E ship after her father
at a ceremony in Okpo, South
Korea, while completion of
the book was delayed a few
months.
Published by Cambridge
University Press, it was
formally launched at a
reception in Londons
Trinity House in May, and
followed by another event in
Copenhagen.
The book has taken
years of painstaking
research by Mr Jephson,
the former director of
learning at Maersk Line,
and Mr Morgen, AP Moller-
Maersk general manager in
group communications and
branding, with responsibility
for archives management and
history documentation.
Set against the backdrop
of the AP Moller-Maersk
group from the time it
was established by Arnold
Peter Moller in 1904, the
book details every aspect
of Maersk Lines evolution,
starting with the internal
meetings to consider whether
to stay with conventional
break bulk services or set
up a container line, to the
decision four decades later
to order the largest boxships
ever seen.
In the intervening period,
this traditionally-low profile
conglomerate had swallowed
up some of the biggest
names in shipping en-route
to becoming the world
number one, including the
once apparently invincible
Sea-Land Service and P&O
Nedlloyd, the latter a merger
of two of the most famous
brands in shipping.
The groups oil and gas
business undoubtedly
provided the financial muscle
to ride out the extreme rate
volatility that continues to
this day, but Maersk has also
distinguished itself by taking
on a leadership role over the
past few years, with projects
such as Daily Maersk. Most
recently, it apparently made
the first move in proposing a
tie up with its two arch rivals,
Mediterranean Shipping Co
and CMA CGM, to form the P3
Network.
Frequently the target of
criticism from rivals and
shippers alike, Maersk is
often seen as aloof, arrogant,
and impersonal, all traits
that the carrier has tried to
shrug off in recent years
through initiatives such as its
customer charter.
The book not only
documents the acquisitions
and innovations, but puts
Maersks growth into the
context of political, economic,
social, technological,
legal and environmental
developments.
The authors also spoke
to senior industry figures
whose companies competed
against Maersk, such as
former P&O Nedlloyd chief
executive Tim Harris, top
industry experts like Martin
Stopford, and those who
found themselves working
for Maersk Line as a result of
takeovers, including Jeremy
Nixon, who now heads
up NYKs liner shipping
activities.
There are many interviews
with both current and former
Maersk executives from
Flemming Jacobs and Knud
Stubkjaer, to the lines two
most recent chief executives,
Eivind Kolding and Sren
Skou.
Janet Porter
The new book
is a 442-page
account of
Maersk Lines
ascent in the
containership
sector.
CARRIERS
CARRIERS
PORTS
A NEW breed of containership
charter-owners is making
a significant impact on the
industry as its investment in
newbuildings expands.
These players now account
for almost 60% of the
containership orderbook,
Clarkson Research Services
estimates, having seen their
share slump to around a
third in 2012 after traditional
tonnage providers ran into
serious financial difficulties.
For many years, fleet
ownership has been divided
roughly 50-50 between liner
operators and tramp owners,
and this is still more or less
the case at the moment.
However, the balance could
soon change in favour of
charter-owners, given recent
ordering activity.
At the beginning of April,
the charter-owner fleet
stood at 2,703 boxships
of a combined 8.3m teu,
representing 47.7% of global
containership slot capacity,
Clarksons estimates.
However, charter-
owners now account for
59.1% of total boxship
capacity currently on order,
their largest share since
September 2004.
The charter-owner
orderbook reached a low
of 1.2m teu in mid-2012,
with the share of contracted
capacity down to 33.7%
in June 2012. That was a
steep fall from the 56.2%
orderbook share that tonnage
providers accounted for in
April 2008 when it reached
3.7m teu.
In comparison, the
operator-owner orderbook,
boosted by a surge in
contracting in 2011, declined
less precipitously in the
aftermath of the crisis.
Indeed, operator orderbook
capacity was the same size
in July 2011 as in June 2008,
whereas the charter owner
orderbook was 53% smaller.
This decline was largely
driven by the banking crisis,
which had a devastating
impact on the liquidity of
traditional charter-owners.
Investment from the
KG system of finance in
Germany collapsed. This
had constituted a significant
portion of total charter-owner
ordering, especially in the
smaller sizes.
And yet, the charter-
owner orderbook has since
increased by 79% from its
2012 low to reach 2.2m teu,
according to Clarksons.
New sources of finance have
emerged to compensate for
the drop in investments by
traditional charter-owners that
are still under pressure and
largely unable to engage in
significant newbuilding activity.
In their absence, major
carriers have turned to
alternative sources of
finance to fund newbuilding
programmes.
In the last few years, new
charter-owners have financed
orders with long-term
charters attached to major
operators.
Janet Porter
BOX WORLD BRIEFING
DP WORLD London Gateway
has won its first global
alliance service and DP World
Southampton has grabbed
a new transatlantic service
as a result of the G6 Alliance
service shake-up.
London Gateway, which
opened for business in the
final quarter of last year, was
revealed in late April as a port
of call on the G6 Alliances
PA2 pendulum service.
The service begins in Asia
before heading across the
Pacific, through the Panama
Canal, calls in the US and
then makes its way to Europe
before heading back across
the Atlantic.
Meanwhile, Southampton
has won the AX1 transatlantic
service.
There had been much
speculation as to where the
services would call in the UK,
after the G6 carriers revealed
their plans to expand the
alliance to the transatlantic and
Asia-US west coast trade lanes.
On the original service
schedules, announced in
February, the carriers revealed
that the services would call in
the UK, but did not say which
terminals they would use.
It had also been suggested
that London Gateway had
been competing with DP
World Southampton, which
is a DP World and Associated
British Ports joint venture, for
the services.
However, it appears that
both terminals have come out
as winners from the shake-up.
On the other hand,
Felixstowe is no longer
London Gateway and Southampton
win as G6 reveals UK transatlantic calls
included in the schedule of the
G6 members, which previously
operated on the transatlantic
trade lane as the Grand Alliance
and New World Alliance. The
merger of the two alliances saw
them combine their ATX service,
which called in Southampton,
and the AEE service, which
called in Felixstowe, into the
single AX1 service.
The PA2 service was
previously the New World
Alliances APX service and did
not have a UK port call.
Damian Brett
Tonnage providers account
for 60% of orderbook
THE NEWS THIS MONTH
MORE ONLINE AT CONTAINERSHIPPING.COM BOX WORLD BRIEFING
LANGUAGE problems
contributed to an accident
last year when a CMA
CGM containership was in
collision with a bulk carrier
after officers on each ship
had talked to each other in
Mandarin.
That left the Filipino
officer-of-the-watch on the
5,100 teu CMA CGM Florida
unaware of exactly what had
been agreed by his Chinese
colleague who had been
conversing with the crew of
the 175,569 dwt Chou Shan
as the two ships approached
each other some 140 miles
east of Shanghai in March
2013.
The resulting
misunderstanding led to a
collision between the two,
with each ship sustaining
damage.
There were no injuries to
any of the 24 crew on each
vessel, but some 610 tonnes
of heavy fuel oil spilled
from the UK-registered
containership.
An investigation into the
accident by the UKs Marine
Accident Investigation
Branch found that CMA CGM
Floridas Filipino second
officer, who was the officer-
of-the-watch, altered course
to starboard to pass between
a group of fishing vessels on
the port bow and a vessel
on a reciprocal course to
starboard. This resulted in
a risk of collision with Chou
Shan, which was crossing
CMA CGM Florida from port to
starboard.
Chou Shans officer-of-
the-watch then used the
Very High Frequency radio
to request that CMA CGM
Florida pass around Chou
Shans stern. The VHF radio
conversation was conducted
in Mandarin by CMA CGM
Floridas Chinese second
officer, who had joined
the vessel in Yang Shan
and was on the bridge for
familiarisation.
CMA CGM Floridas Filipino
officer-of-the-watch did
not understand Mandarin
and was unaware that the
Chinese second officer
had, tacitly, agreed to Chou
Shans request. Both vessels
altered course to port, which
resulted in a continued risk
of collision with each other.
The containerships Chinese
second officer then called
Chou Shan on the VHF radio
to request that both vessels
pass port-to-port. This was
agreed to by Chou Shans
officer-of-the-watch. Both
vessels then altered course
to starboard, resulting in a
collision.
CMA CGM Floridas
second officer and Chou
Shans officer-of-the-watch
considered that it was
appropriate to use VHF
radio for collision avoidance,
contrary to industry advice.
Likewise, Chou Shans
officer-of-the-watch
considered that it was
appropriate to use VHF radio
for negotiating a passing
protocol that was contrary to
Rule 15 of the International
Regulations for Preventing
Collisions at Sea, the MAIB
said.
The French line has
since taken action aimed
at preventing a recurrence,
while the MAIB has advised
the International Chamber of
Shipping and the Maritime
and Coastguard Agency
to update their respective
guidance on the use of AIS
data for collision avoidance.
The MAIB recommends that
watchkeepers should call
the master if in any doubt,
and to sound five or more
short blasts on the whistle or
flashes by signal lamp when
there is a risk of collision.
Janet Porter
CMA CGM Florida (top) and Chou
Shan (left) collided in March
2013.
Photos: MAIB
CARRIERS
Language problems contributed to
CMA CGM ship collision
CONTAINER lessors have experienced
a choppy 2013 with returns generally
falling along with rates, despite continuing
investment and fleet expansion, but they
are in little danger of extinction in the
foreseeable future.
Container leasing has always been
an essential feature of the container
revolution, with lessors supporting the lines
in the early days as they grappled with the
investment demands of conversion from
their traditional breakbulk operations.
Vessel and port investments stretched the
lines resources and the lessors filled a gap
by providing the equipment necessary to
complete the transition.
The Seven Sisters of the early days,
all US or offshore corporations, initially
dominated the sector and of the current
leading lessors only some names remain.
The enduring feature is their focus on
the basic box with more or less exposure
to specials, reefers and tanks in their
portfolio.
The lessor-owned proportion of the
global container fleet has fluctuated over
the years and is currently considered to be
above 50% and stands at 14m teu, against
under 7m teu in 1999, and this share is
expected to continue to increase.
The basic business model of sourcing
funding, converting the cash into
containers and then placing them on
hire remains unchanged. Although over
time equipment costs have risen and
fallen quite markedly. Todays prices
would be recognised as not untypical of
those seen over many years and currently
stand at around $2,100 per standard 20ft
box.
The dramatic change has been in
the rates that lessors can charge, which are
hovering in the $0.50-$0.55 range
per day for the standard 20ft box and
for a reasonable to good-quality
lessee.
This is barely enough to cover
depreciation and interest, let alone
overheads, so the commercial logic is
elusive; there was a time not too long ago
when a lessor looked for something in the
region of $0.80 per day.
Interestingly, one private equity owner
of a lessor categorises its investment as
financial services, and not in transport
and logistics or even industrial,
emphasising the change in perception of
the sector.
The present concentration on finance
and long-term leases has supplanted the
more lucrative master and short-term
leases leading to intense competition.
Other changes include reduced credit risk
with the consolidation of many smaller
operators, and the demise of the
plethora of unsustainable national lines
without the expertise or financial
backing to survive. In the past, repair costs
would be passed on to lessees,
with lessors even demanding the
restoration of equipment to as-new
condition.
Lessors set to expand but prots may be harder to earn, writes Alastair Hill
BUY OR
LEASE?
ANALYSIS/CONTAINER LESSORS
EQUIPMENT
Container lessor revenues have grown with the
fleet, but recent rate pressure has meant that
revenue has not grown in line with investment.
Photo: Jordi C/Shutterstock.com
As seen in the graph above, Textainer and
Triton jockey for top position with fleets of
around 3m teu with TAL and Florens some
way behind with fleets around the 2m teu
mark. However, position in the rankings can
change substantially if ceu (cost equivalent
units with a 20ft rated as 1) are used.
8.6% to $529m over 2012 but suffered
an adjusted net income fall of 14% to
$175m. TAL reported a near 11% rise in
leasing revenue to $567m, but a slight fall
in profitability to $126m after stripping
out the value of a change in depreciation.
CAIs attributable profit rose by 1% to
$63.9m after a near 13% rise in revenue.
While TAL may have fewer teu, its fleet
has more high-value items like tanks so
its ceu count is higher, leading to higher
revenues than Textainer. In mid-2013
Textainer announced a combination
with tank specialist Trifleet to raise
its profile in that sector. However, for
smaller lessors without the backing of
rich parents or membership within larger
groups, the demise of the German KG
model has damaged their ability to raise
cheap finance and the weak rates in the
leasing market has shut off many other
opportunities to fund expansion.
The supply of cheap finance to the
majors has allowed lessor fleets to grow in
2013 with Textainer, TAL and CAI estimated
to have invested $750m, $660m and
$310m respectively. There has also been
Only Textainer, TAL and CAI offer current
statements in any detail. However, from
what information is available 2013 can be
characterised by growing fleets, growing
revenues, steady utilisation and stagnant
or falling profits.
Textainer grew top line revenue by
EQUIPMENT
Table 1: Estimated lessor fleets 2013 (teu)
0
500
1,000
1,500
2,000
2,500
3,000
Textainer Triton TAL Florens SeaCube CAI SeaCo Cronos Dong Fang Toaux
Source: Company filings
some transfer of equipment between
managed and owned fleets and from liner
companies to further increase the owned
proportion in many fleets.
Fleet growth, generally in the range
5%-10%, has also been spurred by
the inability or unwillingness of lines to
maintain their own container investment.
The lines position is due to the overriding
financial demands of acquiring new vessels,
the deteriorating shipping market and
consequent sharp decline in profitability
and the continuing uncertainties expected in
many trades. Nonetheless, investment shows
little sign of drying up despite the severely
depressed rates achievable by lessors and the
factories persistent drive to increase prices.
Over the years demand for containers,
beyond that dictated by actual levels
of trade, has been influenced by the
requirements for each vessel; traditionally
the ratio for equipment was 3 times vessel
capacity but nowadays that is nearer 2.3
times, reducing overall stocks. Conversely
slow steaming has increased demand as
vessels spend longer in transit. However,
the general forecasts of world trade growth
in 2014 and beyond of some 5% should
mean that a reasonable level of fleet growth
will be absorbed in 2014 and beyond.
Inevitably, lessor revenues have grown
with the fleet growth but the effect of
the rate pressure described earlier has
meant that revenue has not grown in line
with investment. With pressure on rates
continuing, there is unlikely to be a significant
improvement in the bottom line and lessors
will experience challenging times feeding
through from the difficulties of their liner
customers. However, of more significance in
the coming two to three years may be the
expiry of higher-rated leases struck in earlier
and better times with lower rated new leases.
Additional revenue generated from
the disposal of life-expired equipment
has not been as buoyant as before with
volumes and prices down, although there
are hot spots where good returns are still
available. Even the military withdrawal from
Afghanistan could well release a significant
quantity of used units into the central Asian
market with an effect on prices.
Fleet utilisation in 2013 was in the
range 92%-97% and represented a great
improvement since the sub-80% levels
of 2009. However, not all lessors report
on the same basis and most exclude sale
units and factory stocks. Utilisation is
likely to continue at these levels for the
foreseeable future, with idle management
a key part of running a lessor fleet.
Profitability has been under pressure
with any increase due to volume growth
rather than value growth and little
improvement can be foreseen without a
material change in the lessees own trading.
Any consolidation between carriers would
only be harmful, as fleet rationalisation
would inevitably reduce demand for
containers by the lines involved. The used
container market may offer some hope but
it can be no substitute for improvement in
the underlying leasing activity.
So what can the lessors do to
reinvigorate their performance?
Merger or acquisition is certainly
one solution, with any increase in fleet
generally incurring little marginal cost
but enhancing the top line. There are few
smaller players left to snap up and the big
lessors, for whom financial performance
is important, must therefore look at major
competitors. However, it is unclear where
this may happen as several are controlled
by entities which offer little indication
of what their real situation is. In any
event the acquisition of a major lessor by
another would allow some consolidation
and consequent value to be extracted so
it would seem the most likely course of
events in the next two to three years.
Possible expansion by the acquisition of
manufacturing capacity could be tempting
but no lessor has been a significant factory
operator since Sea Containers, with mixed
results, boasted several small facilities in
the past.
It is interesting to note that no lessor has
entered the chartering market despite its
obvious synergy.
The outlook therefore for the container
leasing business is that rate pressure will
continue possibly for several years, the
proportion of the world fleet under lessor
control will rise from some 55% to towards
60% and the risk of lessee default will
increase with the difficult conditions in liner
shipping made worse by well-documented
overcapacity. There are one or two large
lines whose position would appear to be
precarious and default would be bigger and
therefore more damaging than ever before.
The entry of a major container builder
into the leasing market cannot be
excluded in the same way as some liner
companies are closely associated with
lessors, but competition authorities and
the likely reluctance of existing lessors
to patronise such a competitor for future
equipment needs would seemingly limit
the scope for this to progress.
It seems that like their liner company
customers, the lessors will sit tight and
wait for better times to return.
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.
Textainer grew top line revenue by 8.6% to $529m over 2012 but suffered an adjusted net income fall.
EQUIPMENT
THE HEADLINES
FROM HAMBURG
The big names in shipping gathered at Hamburgs Atlantic Kempinski Hotel
for Containerisation Internationals annual Global Liner Shipping conference,
just as Hapag-Lloyd nalised details of its merger with CSAVs container
division in a deal that should revitalise the citys status as a top maritime hub
GLOBAL LINER SHIPPING CONFERENCE/HAMBURG
CONFERENCE
Hapag-Lloyd and CSAV sign deal to form
worlds fourth largest box line
HAPAG-Lloyd signed a binding agreement
with Compaa Sud Americana de Vapores
to take over the container division of the
Chilean group in late April in a deal that
will considerably change the shareholding
structure of Germanys largest shipping
line.
The transaction may not be formally
concluded for several more weeks, since
approval is needed from regulators
including the Federal Maritime
Commission in the US.
The combined business will form the
fourth-largest containership operator
in the world, behind Maersk Line,
Mediterranean Shipping Co and CMA CGM.
All four are European.
The new group will have a fleet of some
200 ships and carry an estimated 7.5m teu
a year.
The head office will be in Hamburg, with
a large regional office in Chile.
Due diligence talks between Hapag-
Lloyd and CSAV began in January after
the pair announced they were holding
exploratory talks late last year.
Hapag-Lloyd executive board
chairman Michael Behrendt, who
steps down in June, made no secret of his
wish to find an acquisition target and to
prepare an enlarged group for an eventual
IPO.
Every shipping company wants to
grow and every [chief executive] has
prepared presentations of the top five
strategic fits, he said in an interview with
Containerisation Internationals sister
publication Lloyds List two years ago.
Although billed as a merger, the deal is
in truth a takeover, with the much smaller
CSAV containership arm being absorbed
into the Hamburg line.
Hapag-Lloyd is ranked number six in
the world with a total fleet of 760,000 teu,
according to Lloyds List Intelligence.
CSAV is the worlds 19th-largest line,
with capacity in service and on order of
327,300 teu
In an interview with Containerisation
International earlier this year, Hapag-Lloyd
executive board member Ulrich Kranich
said the secret of a successful integration
was to move fast, with one party in clear
charge, and a single IT system.
Hapag-Lloyd has plenty of experience
amalgamating two businesses, having
bought CP Ships in 2005.
The combined group is to be run
from Hapag-Lloyds headquarters on
Ballindamm. That will protect local jobs,
generate related business, and strengthen
Hamburgs maritime cluster.
The one possible loser could be
Hamburg Sd, one of the few global
CONFERENCE
carriers that is not part of one of the
big global alliances being formed. Two
attempts in the past to merge with Hapag-
Lloyd have failed.
The CSAV deal was known to have the
support of Hapag-Lloyds biggest single
shareholder, Klaus-Michael Kuehne, who
had earlier objected to Hamburg Sd
wanting a majority stake in a tie-up with its
compatriot line.
The merger will also provide an
exit route for local investors who
stepped in when talks between
Hapag-Lloyd and Singapores NOL fell
through in 2008.
Together, these have a 37% interest
in Hapag-Lloyd, but this will go down
to 23% once CSAV becomes a new
shareholder.
CSAV will initially hold a 30% stake
in the combined entity, but this will
subsequently go up to 34%.
Khne Maritime, which has a 28%
holding at the moment, will see its interest
decline to around 20%. Tuis will go down
to about 14% from 22%.
The partners have agreed a capital
increase of 370m ($512m), once the
transaction has been concluded, to which
CSAV will contribute 259m.
That is when CSAVs Hapag-Lloyd
shareholding will rise to 34%. A second
capital increase of 370m will be linked
to Hapag-Lloyds planned stock exchange
listing, the two said in a statement.
The combination of CSAVs container
shipping business with Hapag-Lloyd will
create annual synergies of at least $300m,
the lines said.
Service networks and fleets of both
companies complement one another
ideally.
The combination with CSAV, Latin
Americas leading container shipping line,
considerably strengthens Hapag-Lloyd
in this growth market and adds a strong
position in the north-south traffic to the
companys global network and to its
established strength in east-west traffics,
said CSAV chief executive Oscar Hasbn.
The orderbooks are also complementary.
At the end of April, Hapag-Lloyd will put
into service the last of 10 vessels of 13,200
teu ordered for the Asia-Europe trades.
CSAV still has seven vessels, each of
9,300 teu, scheduled for delivery in 2014
and 2015.
Hapag-Lloyds planned tie-up with CSAV
seen as boost for Hamburg
THE integration of CSAVs container
shipping activities into Hapag-Lloyd will
boost Hamburgs position as a leading
shipping city, but other local maritime
activities remain under severe pressure,
while the port also faces significant
challenges.
Those were the central conclusions
of several leading industry figures at a
discussion on the outlook for Gemany
as a shipping centre and its role in the
container sector, where it has been so
dominant for years.
Christian Niewswandt, HSH Nordbank
managing director and head of global liner
and container finance, told the Global
Liner Shipping conference that the deal
between Hapag-Lloyd and CSAV would be
good for Hamburg.
The enlarged group will be
headquartered in the German city,
protecting jobs, generating related
business and strengthening the local
maritime cluster.
But while Hamburg looks set to remain
the home for two global container lines,
with Hamburg Sd headquartered close
to Hapag-Lloyd, the situation for local
tramp owners is much worse, said Mr
Nieswandt.
Large-scale consolidation looks likely,
with the number of non-operating owners
expected to shrink from about 300 at the
moment to nearer 100 as the survivors
strive for critical mass. That requires a
fleet of at least 35 ships, according to Mr
Nieswandt.
He also anticipates tremendous
consolidation of the German-flag fleet
and a similar reduction in the German-
managed fleet.
On the positive side, Mr Nieswandt
said he still believes there is a future
for tonnage providers, as evidenced
by the fact that leading lines including
Mediterranean Shipping Co and CMA CGM
are ordering ships through new leasing
structures available in China, rather than
buying directly.
They definitely need tramp owners,
said Mr Nieswandt. But for German charter-
owners to survive, they should look at the
models developed by shipowners such as
Costamare, Danaos and Seaspan.
That requires a corporate structure that
will make it easier to access the capital
markets.
Consolidation, as is now being seen in
the German market, will also help to cut
overheads.
There is a future for German tramp
owners in Hamburg, but they have to take
the proper steps, Mr Nieswandt urged.
Germanys ship finance industry has
also seen massive consolidation, with
HSH Nordbank, for example, shrinking
its shipping balance sheet from 31bn
($43bn) to 23bn.
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CONFERENCE
However, Nr Nieswandt said money was
still available for good projects.
For those and for good owners, you will
get the financing, he said. It was wrong to
say the orderbook could not be financed.
The current German orderbook stands at
180 ships, and they would find financing,
he said, although the vessels might not all
remain with German owners.
But it is not just the shipping side of
Hamburgs diversified maritime cluster
that is under pressure. The port also faces
problems, a leading carrier executive
warned.
Patrick Won, managing director of Hanjin
Shipping Europe, cast doubts on the ports
long-term ambitions to eventually be
handling 25m teu a year. He pointed out
that only around 4% of cargo arriving in
Hamburg was for the immediate vicinity,
with 30% bound for northern Europe and
the rest further afield.
But unless the Elbe is dredged soon
and inland connections are improved,
that cargo could be lost to ports such
as Bremerhaven or Wilhelmshaven, he
cautioned.
Hanjin, a member of the CKYHE alliance,
is likely to switch some of its German calls
to other ports because of local constraints,
said Mr Won.
Shortsea operator OPDR has also
experienced local bottlenecks.
Hamburg has missed an opportunity
to promote the inter-European shortsea
segment, said OPDR chief executive Till
Ole Barrelet. Dedicated shortsea terminals
would be a plus, he added, while also
calling for action on deepening the Elbe.
P3 gears up for July start as carriers wait
for Chinas approval
In a keynote speech at the Hamburg
conference, CMA CGM executive officer
Rodolphe Saad revealed that temporary
offices have been rented in London by the
P3 alliance as member lines prepare to
start joint fleet operations in three months
time.
The trio is still waiting for approval from
the Chinese authorities, which apparently
continue to regard the network centre
that will be responsible for ship planning
as a merger rather than a vessel-sharing
agreement.
Nevertheless, the worlds top three
carriers are starting to make firm plans for
the co-operative agreement in the hope
that clearance will be granted in time for
operations to start before the beginning of
the 2014 peak season.
Offices have been leased in London
until the end of the year, said Mr Saad.
The P3 group also plans to have an office
in Singapore.
The Federal Maritime Commission has
already approved P3, while members are
hopeful that the European Commission
will signal that it is satisfied with
assurances given by mid-May.
Consortia members have to self-assess
in Europe, but may still receive some
guidance from Brussels on whether what is
planned is acceptable.
CMA CGM, along with Maersk and
Mediterranean Shipping Co, announced
plans to operate a joint fleet in the mature
east-west trades last year.
Since then, other alliances have
strengthened their partnerships, with Mr
Saad seeing consortia as the way forward
for the foreseeable future. He said that a
new business model was needed for the
container shipping industry to remain
profitable.
Observing that the top three lines in
the world are not only European but
also in family hands, Mr Saad said that
ownership structure was absolutely
critical, with in-house expertise built up
over the decades that cannot be replicated
in more conventional corporate structures
or state-controlled entities.
The son of CMA CGM founder Jacques
Saad told the conference that the line
had also identified a strategy based on
several core principles, including the use
of investment as a cost-reduction lever in
growing trades, alliances in mature trades
and the development of commercial
differentiation within those alliances.
CMA CGM, which was one of the few
lines to produce reasonable results for
2013, will be able to offer more service
loops and increased frequencies as a
result of P3, he said.
But Mr Saad stressed that P3 was only
an operational alliance between the three,
with each competing on price, service and
intermodal networks, operating separate
feeder networks and negotiating terminal
contracts separately.
P3 will allow us to provide the best
economic model by deploying the largest
vessel size, he said.
CMA CGM recently upgraded six ships
on order from 16,000 teu to 17,700 teu
to be compatible with Maersk and MSC
tonnage.
CMA CGMs Rodolphe
Saad makes his
keynote speech.
CONFERENCE
Three of the CMA CGM ships are being
built in Shanghai and Mr Saad, speaking
to an audience for whom the KG model
has lost credibility, said China was able
to offer financing packages that are not
available anywhere else.
He also said Chinese yards had shown
more flexibility than the South Koreans
during the recent crisis when lines
struggled to cancel or delay newbuilding
orders as losses mounted, and had proved
easier to work with.
Looking ahead, the P3 Network would
create a new operational landscape for the
industry, said Mr Saad.
The expected outcome of P3 is to
advance the level of service, provide
seasonal scaleability, reduce network
costs, and minimise transhipment costs,
he said.
But the P3 services will only represent
41% of CMA CGMs volumes, with the
line continuing to develop and expand in
north-south and regional trades.
Mr Saad also said that, despite the
imminent merger between Hapag-Lloyd
and CSAVs container arm, he does not see
much scope for further consolidation of
that type in the industry.
We believe, on the other hand, that
more and more alliances will take place
in the form of P3, the G6, and CKYHE
where shipping lines join forces on the
operational side and offer their customers
a much better product than they do today,
he said.
Eastbound Asia-Europe rates must rise to
avoid capacity crunch
EUROPEAN shippers will have to pay more
of the round-trip costs of the Asia-Europe
trade if they are to avoid continuing
capacity crunches in the eastbound
direction.
Maersk Line chief executive north
Europe region Karsten Kildahl told the
conference that eastbound volumes had
been increasing at a much faster rate than
westbound volumes over the last five
years.
These increases had not been led by
low-value cargo such as waste paper or
scrap materials traditionally carried on
this route. Machinery volumes had risen
by 27% over the last five years while
automotive volumes were up by .10%.
However, said Mr Kildahl, capacity
deployment decisions were based on
westbound demand, meaning sailings
could be blanked in that direction at the
very time demand was at its highest for
the eastbound leg.
The situation has been building up over
the years, Mr Kildahl said. But the issue
only hits you when you get to a capacity
crunch situation.
There is still a significant difference
on eastbound and westbound flows,
especially if you count on a teu basis and
not on a weight basis.
But there are certain periods of the
year, the Chinese new year for example,
when sailings are blanked and this hits
Europe five weeks later during the peak
season from Europe to Asia.
So at the time of year when you need
space you dont get it, you actually get
less.
He said carriers also needed to transport
empty containers back to Asia in order to
cater for demand on the higher-paying
westbound leg, which also contributed to
the problem.
Mr Kildahl said that if eastbound
shippers were to ensure they had access
to space in the future, they might need to
pay more.
Today, carriers are forced to take
deployment decisions based on
westbound demand because the
eastbound is just basically there to cover
variable costs.
Will that change dramatically
tomorrow? No, but over time we will see
that the carriers will rely more on having
the overall roundtrip cost covered by the
backhaul leg.
Shippers have an anticipation that they
can always get their boxes on board and
that is their expectation for the future as
we hear a lot about overcapacity.
So for a shipper in Europe it must be
hard to understand when you hear about
all this overcapacity that you actually run
into space concerns. But in the future this
will become an issue on more and more of
a regular basis.
Shippers face information gaps when
using alliances
INFORMATION gaps are among the key
issues faced by shippers that use services
provided by shipping line alliances,
according to a leading European shipper.
Speaking at the Hamburg conference,
Nestl head of global transport
procurement Jochen Gutschmidt
outlined the challenges it faces when
using alliances, including vessel-sharing
Maersk Lines Karsten
Kildahl told the
conference that
eastbound volumes were
increasing much faster
than westbound volumes
on the Asia-Europe lane.
CONFERENCE
agreements and other forms of carrier
co-operation.
He said one of the major issues Nestl
faced was the slow progress of information
through the various carriers.
As these alliances become more
and more complex and there are more
and more players we see an increase in
information gaps, Mr Gutschmidt said.
We believe that people on the ground
are not always certain as to what will
happen next week or the week after and
we experience that information can take
too long to move through the respective
organisations that we are dealing with.
In response, Maersk Line chief executive
north Europe region Karsten Kildahl said
he hoped the network centres that the
P3 Network planned to set up in London
and Singapore would mitigate this type of
issue.
Other alliance-related challenges
outlined by Mr Gutschmidt included the
differences in service offerings presented
by the different alliance members during
tendering as each provided various
versions of the truth, a lack of flexibility
when it came to space allocation and, on
occasions, a reduction in the number of
port-to-port calls as carriers consolidated
services to reduce costs.
He also said that alliances were not a
customer-driven process but a carrier-
driven choice.
Decisions are made without talking to
customers. It is a continuation of shipping
lines saying; this is what we have, we hope
you like it.
However, he agreed that alliances
also brought some benefits, as they
bundled volumes at fewer terminals and
allowed for more intermodal transport
options.
Capacity hits a plateau as owners stop at
19,000 teu boxships
CONTAINERSHIP capacity growth appears
to have reached a plateau for now, with no
owners or operators looking to go beyond
19,000 teu.
Nevertheless, technical experts expect
larger containerships to eventually enter
service, once infrastructure constraints
have been overcome.
At the moment, though, the biggest
ships in the pipeline are for China
Shipping, with CSCL Globe, due for delivery
in November, reported to have a nominal
capacity of 19,000 teu.
United Arab Shipping Co has 18,800 teu
vessels on order, Mediterranean Shipping
Co will soon be receiving 18,400 teu ships,
while Maersks Triple-Es have a nominal
intake of 18,270 teu.
CMA CGM has recently upgraded ships on
order, which will now be around 17,700 teu.
What they all have in common is
their length, just under 400 m, which is
regarded as the practical maximum for now,
according to Marcus Ihms, containership
expert at classification society DNV GL.
Beam is another potential limiting factor,
with cranes needed to handle broader
ships, and the greater rolling forces of a
very wide vessel making it inadvisable to
load cargo on deck.
Where designers can obtain additional
capacity within those limitations is
through the siting of the engineroom or
accommodation block.
Moving the engineroom, for example,
can create as much as 250 teu of extra
cargo space.
What is clear, he told the conference, are
the economies of scale of the larger ships
that are now being delivered.
The slot costs of, say, a 21,000 teu ship,
are as much as 10% lower than for a
14,000 teu vessel.
An 18,000 teu ship would still have
cheaper slot costs than a 14,000 teu
Clockwise from top: Jochen
Gutschmidt of Nestl outlined
the challenges faced when
using alliances; conference
chairman Jesper Kjaedegaard
speculates on how big
containerships will become;
shippers tell carriers to
improve customer service; and
conference delegates were
encouraged to vote on the big
issues using their electronic
keypads.
CONFERENCE
vessel even at 90% rather than 100%
utilisation.
Although ship designers have been
talking about vessels of up to 24,000 teu,
Mr Ihms told delegates that no carriers
were thought to be looking beyond 19,000
teu right now.
However, ships of more than 400 m
have been built in the past, most notably
the 564,650 dwt ultra-large crude carrier
Jahre Viking, which was 458 m long.
ER Schiffahrt chief executive Hermann
Klein said he expected ship sizes to
continue growing, albeit not as rapidly as
in recent years.
Dr Klein, the former head of
Germanischer Lloyd and one of the first in
the world to predict the arrival of 18,000
teu ships, anticipates that containerships
will eventually exceed 400 m in length and
so go beyond 19,000 teu.
There is no technical limitation, he said.
But first, the ports need to be ready to handle
the next generation of containerships.
That will require larger cranes, dredging,
higher bridges in some cases, and other
infrastructure investments.
Shipping faces $120 per teu hike in
Asia-Europe bunker charges in 2015
ASIA-Europe bunker adjustment factors
could increase by as much as $120 per
teu next year as a result of stricter sulphur
regulations.
Drewry Supply Chain Advisors
director Philip Damas warned that the
requirement to use fuel with a 0.1%
sulphur content in emission control areas
such as the North Sea and Baltic Sea would
push up the bunker charges implemented
by carriers.
Mr Damas said the cost differential
between current fuel and low-sulphur fuel
is around $300 per tonne.
Carriers will therefore need to increase
baf charges on the trade lane by around
20% to cover the increased cost.
He said: The problem is that today very
few carriers are equipped with liquefied
natural gas engines, instead they have to
use low sulphur marine diesel oil or they
have to use scrubbers.
The impact of this is that the cost per
tonne is 50% higher than the current fuel.
So its a huge increase next year.
Our best estimates show that bunker
adjustment factors will increase by 20%
which is an increase of $100-$120 per
teu.
Mr Damas said that certain shipping
lines were expecting an even higher
increase in baf levels, some expecting
increases as high as $500 per teu.
Drewrys calculations were based on the
assumption that one teu would account for
around a tonne of fuel on the Asia-Europe
trade and that only a certain percentage of
the voyage would take place in the North
Sea and Baltic Sea ECAs.
Mercator International partner Jesper
Kjaedegaard said baf levels could be even
higher as an increase in demand for this
type of fuel could drive up prices.
However, MDS Transmodal managing
director Mike Garratt said research had
shown that the increase in demand was
not expected to result in an increase in the
price of lower-sulphur fuel.
He expects baf levels to increase
next year by a lower amount than Mr
Damas had suggested, although if the
Mediterranean also becomes an ECA the
amount would be even higher.
Mr Kjaedegaard said other trade lanes
were likely to be even more affected by
increases in the level of baf.
He pointed out that the US east coast
would also be an ECA, meaning that 60%
of a transatlantic voyage to North Europe
would take place in an ECA.
CONFERENCE
Klein calls for new relationship between
boxship owners and operators
ER Schiffahrt chief executive Hermann
Klein is calling for a new type of
relationship between container lines and
the shipowners that charter vessels to
ocean carriers.
Traditionally referred to as tonnage
providers or tramp operators, these owners
account for about half the worlds cellular
fleet.
This balance is expected to remain,
but the charter-owners are far more
fragmented than the liner side of the
business where there are about 50 global
operators compared with some 500 ship
suppliers.
In future, the companies will need to
adapt and become much more involved
with their customers, according to Dr Klein,
who is now in charge of the fleet owned
by prominent Hamburg shipowner Erck
Rickmers through ER Schiffahrt.
He thinks the non-operating owners
must go beyond simply supplying ships to
the lines.
Dr Klein sees the owner of the future as
a service provider rather than a tonnage
supplier.
We transport cargo as a partner to the
liner companies, he told Containerisation
International.
That means, for example, making
sure that any ship on charter to a line is
operated efficiently, keeps to schedule
and has a well-trained crew, with the
shipowner as much a part of the business
model as the liner operator.
Lines today are looking for dedicated
top service providers they are not just
looking for the vessel but for service
that makes a huge difference, he said.
In the past, the tonnage providers have
focused on their operating expenses such
as manning costs, maintenance, lube oil
and insurance, when considering charter
rates and whether they are making or
losing money. Ocean carriers, though,
look at the total cost per container mile,
including fuel, and the sums are very
different.
The charter owners will have to pay far
more attention to their customers need
in future, as new style partnerships are
forged, said Dr Klein.
The alliances being put together between
container lines such as P3 will add to the
impetus for the charter owners to adapt,
with Dr Klein coming up with his own
version of P3 Preference, Performance
and Partnership when setting out what
container lines will be looking for in future
from the charter owners.
That may mean investing their own
money to upgrade ships to meet the
more exacting requirements of the global
carriers as, for example, they try to cut fuel
bills through slow steaming.
Carriers expect the ships they
charter to have the best efficiency
at 11 knots, 18 knots or 20 knots but the
vessels are designed for speeds of 25
knots, so the lines expect the
charter-owners to modify their
vessels, said Dr Klein.
Even though that is expensive, the
charter owners have no choice but to
Speed-dating with a difference: conference delegates network.
Dr Hermann Klein called for a new type of
relationship between container lines and
shipowners that charter vessels.
CONFERENCE
make the changes demanded by the
customer.
The alliances will change the market, Dr
Klein predicts, with the big groupings more
selective in their choice of charter owner.
A two-tier market is already emerging,
with better charter rates for modified
vessels, although the differential is not
that great.
Whether or not charter-owners recognise
the need to change, not everyone agrees
that the tonnage suppliers especially
those built round Germanys KG model
have much of a future.
They face a long slow death, said one
insider of the majority of independent
owners, with the global alliances such as
P3 and G6 not in need of partnerships
with traditional owners. Lines such as CMA
CGM and Mediterranean Shipping Co have
both made use of new Chinese financing
opportunities.
That competition from industry
newcomers was partly behind the forecast
from Christian Nieswandt, HSH Nordbank
managing director and head of global liner
and container finance, that the number of
German containership tramp owners would
shrink from about 300 to nearer 100.
Mr Nieswandt also said German
owners should adopt the Seaspan or
Danaos model and put in place corporate
structures that would enable them to
access the capital markets.
But Dr Klein, the former head of
Germanischer Lloyd, does not see that
happening, partly because of the different
histories of the two types of businesses,
and the way each has evolved.
What he does accept is the need for
charter owners to understand the strategy
of the ocean carriers and what they are
trying to achieve, and adapt accordingly.
That means low charter rates, low
fuel consumption, the highest reliability,
flexibility, dedicated shipmanagers and
dedicated crew, said Dr Klein.
They are looking for the perfect
match the charter owner has to fit
exactly into the puzzle of the specific line.
P3 could force break-up of existing
alliances
THE P3 Network will not solve
industry-wide overcapacity and could spark
the break-up of existing alliances and the
formation of new shipping line groupings.
SeaIntel Maritime chief executive Lars
Jensen said he expected the P3 carriers to
enjoy cost advantages compared with rival
carriers because of the size of vessel they
are able to utilise.
However, its formation will simply
shift the problems faced by the
industry onto competitors, he told the
conference.
The P3 alliance doesnt solve any
problems, Mr Jensen said. I am quite
fond of the saying that they are just
rearranging the deck chairs on the Titanic.
The fundamental problem is still there.
What the P3 will do is shift part of this
problem onto the other carriers.
He said rival carriers could respond to
the P3 Network in several ways, perhaps
by forming a new, rival alliance.
I think this is a realistic option. Im not
convinced that the G6 and CKYH Alliance
will exist in their current form in the
future.
Mr Jensen suggested a P3 rival
consisting of four to six shipping lines with
similar strategic outlooks could be formed.
If you look at the individual members,
they do not have aligned strategic
interests.
Some of them have huge orderbooks
and growth plans, some of them do
not want to grow, they just want to be
profitable there are going to be some
difficult conversations ahead.
But that requires a break-up of the
existing two alliances. The carriers that
make it onto the new alliance will survive
in the long term.
The carriers that dont make it onto
the new alliance will not survive on the
main east west trades. They will either
exit completely or they will have to be
relegated to a position as a niche carrier.
Mr Jensen added that before his
suggestion was dismissed completely, it
should be considered that the P3 filing
with the US Federal Maritime Commission
was for a period of 10 years.
The G6 alliances agreement filed with
the FMC was for a two-year deal and the
CKYH alliance as he understood the
situation could be exited within six to
12 months.
Other options open to P3s rival carriers
include mergers, which Mr Jensen fully
expects as carriers come under pressure
from powerful owners.
Otherwise, alliances may take on new
members, as with United Arab Shipping Co,
or form ad hoc vessel-sharing agreements.
Some carriers may opt to order ever-
larger vessels, or will simply pin their
hopes on regulatory bodies rejecting the
P3 Network.
Lars Jensen warns of
alliance break-ups.
THE VIEW FROM THE
INVESTORS remain hungry for container
terminal assets, and their appetite is
growing.
So far in 2014, two box lines have
re-joined the investment queue.
Mediterranean Shipping Co announced
plans to develop a container terminal at
Belgian hub Antwerp, while CMA CGM
took a 25% stake in a still-to-be-built
greenfield box hub in Nigeria.
Non-industry players are also snapping
up port share tranches. Canadian pension
fund CPPIB Credit Investments acquired a
10% equity position in Ports America.
Canadas Brookfield Asset Management
formed a joint venture with APM Terminals
in New York. Its affiliate, Brookfield
Infrastructure, intends to prospect for Latin
American terminal concessions
in partnership with Japans Mitsui OSK
Line.
This follows Brookfield Infrastructures
purchase of an approximate 50% equity
stake in TraPac, the MOL subsidiary with
terminals in the US west coast hubs of Los
Angeles and Oakland.
Shipping lines with terminal businesses
have the industry knowledge and
experience to select their targets. Non-
industry investors such as pension
funds will hire industry expertise, but
they can now also employ analytical tools
to help them reach a decision that will
often stretch to hundreds of millions of
dollars.
There is another important difference
between industry and non-industry
investors. Pension funds and their ilk are
less likely to invest in greenfield sites,
preferring stakes in established assets with
a steady cash flow from day one.
But as mature port and terminal assets
battle less on the quayside and more on
logistics connectivity, the competitive
landscape in overlapping hinterlands
requires a new set of skills and analytics to
decide which port has the best investment
profile.
BMT oers non-industry investors the answers they need
when buying terminal assets, reports Roger Hailey
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BMT Asia Pacific, the Hong Kong
based arm of the UK maritime design,
engineering and risk management
consultancy, has launched its Port Choice
Model and Port 360 tools.
BMT says the tools apply quantitative
and qualitative methodology and measure
a spectrum of criteria, defined by leading
economists and technical port experts.
Port Choice Model forecasts market
share, analysing trucking time and cost
from factory to port, average waiting time
in ports due to customs inspection and
cargo handling, frequency of sailings,
specifics on the terminal handling charges
and ocean-freight costs differentials.
The Port 360 tool reviews the
competitive strengths of ports, or terminals
within the same port, and identifies areas
for improvement for the target investment.
It can be used in isolation when time
or availability of data is limited or in
conjunction with the Port Choice Model.
It analyses 12 criteria relating to four
aspects of a port: demand based on cargo
throughput, physical attributes, hinterland
connectivity and management and
operating systems.
BMT Asia-Pacific director and chief
economist Simon Su says: Some
investors have asked for more concrete
criteria to use as a benchmark, or for
assessment tools that produce a more
scientific result.
Dr Su makes the point that Port Choice
Model and Port 360are not new but a
reorganisation of proven tools used by
BMT Asia-Pacific.
His colleague, senior consultant Steve
Roberts, says that port investor clients are
asking common questions: We wanted
a comprehensive way of answering
them, so that is why we developed these
frameworks.
Mr Roberts continues: Competition
is intense now, with many ports having
overlapping hinterlands. So market share
is of particular interest, with investors
wanting to know how a port can improve
its market share or respond to threats to its
market share.
That was the evolution of our
port choice model. We can give well
researched, quantified answers to those
questions.
Hutchison Port Holdings vice chairman
John Meredith has recently focused
on the advantage of continuous linear
quays to improve turnaround times for an
increasingly complex range of container
vessel sizes.
BMT AsiaPacific believes that linear
berthing space is important, but not the
be all or end all, and that productivity has
to be seen as a combination of quayside
and landside operations, viewed in terms
of volume handled per hour or vessel
turnaround times.
Dr Su says: Long linear quays are
sometimes less preferable if the port is
handling transhipment cargo and has
different vessels under operation at the
same time. Linear or non-linear will not be
the key issue.
But the market trend is for bigger and
bigger vessels, and if you dont have a
linear quay to handle super large vessels,
then that is going to be a problem.
So how does a port investor plug in
to the BMT AsiaPacific system? Firstly,
an investor makes contact, outlining its
interest in an individual port or selection
of competing ports in a particular
geography. The consultancy then decides
which ports to include in a comparative
study for the client, based on the potential
investors criteria.
SERVICES
On ship Handling & storage On truck or train
Navigation capacity Berth capacity
Handling &
storage capacity
Movement & clearance Inland transport
Shipping lines concerns
Terminal operators concerns
Shippers concerns
Investors concerns
Figure 1: Stakeholder concerns
Source: BMT Asia Pacific
For a gateway port, the study will look at
neighbouring competitors where hinterland
access is a key factor. In the case of a
transhipment hub, the study will look at
where shipping routes converge and vessel
diversion sailing times, for example.
The tools can also be used to assess how
investment in equipment and other aspects
could change the competitive arena.
The data is bespoke and confidential
for each commission. We have not added
a common data pool available for any
potential client to look at, says Dr Su.
While global terminal operators have
in-house data, market knowledge and
operational experience, financial investors
normally do not own such a rich data
pool and thus prefer to use specialist
consultants.
We have a top down and bottom
up approach. For top down, we look at
the industrial journals, magazines and
publications, adds Dr Su. And then we
undertake consultations with our chief
stakeholders, including logistics service
providers, government officials, shipping
companies and cargo owners. All the
key industry decision makers need to be
interviewed.
A ports catchment area and a terminals
connectivity to it are important items on
an investors agenda when assessing the
potential of an asset.
Mr Roberts says: We are now in an era
of competition between ports because of
the overlapping hinterlands. In terms of
competition, you are generally looking at
mature markets, so places like Europe and
Asia.
However, the cost advantages of rail and
road links the latter more common in
Asia are not simple things to evaluate.
Connectivity can be subject to varying
external factors, which need to be
researched in depth.
Take trucking costs, one thing we
found is that you have to be very careful
when you research them. You might ask a
trucking association or a trucking company
about rates, and you might get a standard
price, Mr Roberts says.
But, in reality, the price that shippers
pay can be very different due to their
relationship or their volume, so part of
our diligence is asking the right questions,
and asking them in the right way. We
obtain real market rates rather than the
advertised or standard rate.
Dr Su adds that some cost elements
will be localised. He cites Hong Kong
container haulage and its competition
with ports in China: The ports share the
same hinterland and cargoes, but once a
truck gets into Hong Kong, the shipper has
to pay a much higher trucking cost just
because of this artificial border crossing
created by government policy.
Many Chinese truckers cannot get into
Hong Kong because the customer has
to use Hong Kong drivers who are more
expensive, and thus the costs are much
higher.
So, to a certain extent, the cost items
need to be looked at from a very local
SERVICES
perspective. You have to look at these
government policies or regulations so that
you can adjust cost items.
So, do these tools work for non
container terminals in the port sector?
Mr Roberts says: The tools are
applicable to any cargo but obviously
containers are more contestable, while
bulk ports tend to have dedicated
hinterland links, so there is not so much
competition.
But theoretically, the tools can be
applied to anything, multipurpose and
break-bulk ports, it just happens that most
of their application is in the container port
sector.
A ports catchment area and
a terminals connectivity to
it are important items on an
investors agenda.
Social selling
It has never been easier to
get to know your customer.
Let conversations flow more
organically, much like the
concepts behind Value Selling.
Are your sales reps trained to
sell value and do they know
how to engage with their
customers socially?
Customer service
Social media allows you
to quickly and easily track
sentiment. Use this to
good effect to reap cost
benefits. How are you
approaching customer
concerns and is your time-
to-market responsiveness to
emergencies or breakdowns
satisfactory?
Market intelligence
Monitor the competition
and be monitored by
the competition. Do you
understand where and
how you are exposing your
intentions and do you
organise all the competitor
information right at your
fingertips to understand what
your existing and potential
peers are doing?
Guarding the brand
Use sites like Twitter or
Facebook to monitor and
engage with key influencers
around key issues which may
affect your brand. Do you
know who is talking about
you, what they are saying and
to whom? Once is never enough:
Be ready to tell people the news
several times over in different
ways.
Product development
If youre clever you can
engage with your customers
and shipping experts to
co-create new services. Could
you host compelling online
forums where beta versions
can openly be debated?
Internal collaboration
This part is most likely the
least exploited. Management
consultants McKinsey estimate
that knowledge-based companies
can save up to 25% in internal
efficiencies through breaking
down silos with social media and
working together smartly.
GUEST COLUMNIST
I GUESS stating that social
media is changing the world
we live in is a bit of a clich by
now. Even saying that we are
in the midst of a revolution is a
worn-out phrase.
Many business leaders,
including the top bosses in
container shipping, have heard
enough so-called experts
(guilty as charged!) cry wolf.
Yet the new social era
of the sharing economy
keeps disrupting decades
of well-established industry
structure in a couple of years,
sometimes months.
Just think for a minute. In
the leisure industry, websites
like AirBnB enable people to
rent out their home as holiday
accommodation. The websites
success has meant that in less
than six years it has connected
600,000 people in 160 countries
and is worth an estimated $10
bn similar to Hyatt Hotels and
Wyndham Worldwide.
Even something as simple
as ordering a cab has been
revolutionised by companies
that understand how to
interact with their customers
via social media. Apps like
Uber and Addison Lee,
combined with supreme
service, instantly outcompete
traditional cab companies
because they are completely
in sync with todays busy city
slickers needs. And they are
even cheaper!
Is the shipping industry
immune to this sea change? What
happens to container shipping
when 3D printing matures and
someone invents the right app
and service around it?
A few shipping companies
have made an effort to adapt
and to engage in the digital
conversation, but many have
just reverted back to the
old-school push marketing
approach; filling Facebook,
LinkedIn and Twitter with
sales collateral and stuffing
products down peoples
throats rather than engaging
audiences via an honest and
authentic dialogue the true
DNA of the new social era, and
why people love it.
It reminds me of the dotcom
bubble back in the 1990s.
Companies were under pressure
to have an immediate web
presence and many did this
just to tick the box. But those
that didnt adapt to the new
business reality either went
bust or became marginalised
by the companies that saw
and embraced the way ahead.
Just think about what online
commerce did to travel
agencies. Is it that unrealistic
to imagine that the process of
booking a box could be done in
new ways?
There are parallels with
social media to the 90s rush to
the internet. Many companies
have joined, but after having
applied techniques gleaned
from direct marketing and
advertising most have thrown
in the towel.
It is all about understanding
what these extremely
powerful media offers in
terms of opportunity and then
getting organised to exploit
them. Quickly.
So should containers be
social? Yes. And to get going you
need a presence and a course.
But in this fast moving digital
world where the horizon is
constantly shifting, approaches
must evolve together with the
audience to reflect what is
actually happening and that
simply cant be masterminded
from the outset.
It is all about getting your
feet wet to learn how your
company could benefit from
an ocean of possibility.
SOCIAL CLIMBING
Joining the digital conversation takes more than
old-school direct marketing tactics, says Agenda
Strategies managing partner Klavs Valskov
OPPORTUNITIES ABOUND
CONTAINERSHIP values started
to massively depreciate
in 2009 before steadily
recovering in 2010.
Since January 1, 2014, other
sectors have seen a high level
of growth, with certain vessels
in the LPG sector increasing by
25% in the past three months.
Within the ultra-large
container vessel sector, there
are currently 76 live vessels
compared to 94 newbuilds
including those launched,
on order and at the letter of
intent stage which is a large
overhang by any standard.
The ultra-large container
vessel sectors maximum
capacity seems to continue to
increase in size. For example
in April 2013, China Shipping
ordered a series of vessels
with nominal capacity of
19,000 teu the largest ever
to be ordered in an enbloc
deal with each vessel
bought for $140m.
As of April 2014, each ship
has a current market value
of $159.4 m. Looking at the
effect of these larger vessels
on sale and purchase market
values, all five China Shipping
ships have increased in value
by $20m each over the course
of one year.
Once these big ships are
delivered, their values remain
steady during their first few
years.
However, vessels at the
lower end of the upper size
bracket (around 14,000 teu)
are depreciating in value a lot
faster, as they are no longer
the most efficient
and therefore are less
desirable.
This appetite for bigger
vessels can be seen in recent
newbuilding deliveries: in
2011, 10 ultra-large vessels
hit the water with an average
size of 13,906 teu, compared
with an average size of 15,342
teu for 2014 deliveries.
The panamax sectors
values have this year dropped
drastically. Since January
1, panamax values have
decreased by 14%, and
since the start of the year, 23
vessels of this type have been
scrapped.
Interestingly, we have
seen a large price premium
developing for geared
panamaxes, of which there
are 42 currently in operation
versus 870 gearless
panamaxes.
The recent Metrostar enbloc
deal to Goldenport comprising
Carlotta Star, Carolina Star and
Celina Star heavily supports
this, as these geared vessels
sold for $14.8m and $14.2m
for the 2001 and 2000 ships
respectively.
This is a premium of around
75% when compared with
other similar sales such
as HLL Atlantic and NYK Galaxy,
both of which are gearless.
Most striking is the recent
Hanjin Shipping demolition
sale of 10 panamax or older
post-panamax containerships
this year.
This further highlights
how gearless panamaxes
have fallen out of fashion.
The youngest of these ships
was built in 1998, only two
years older than two of the
Metrostar vessels.
In the smaller sector, values
are steady, if not slightly
firming, and continue to
offer attractive returns. In the
feedermax, handy and sub-
panamax categories there are
2,702 live ships compared
with 119 newbuildings. This is
one of the lowest orderbook
overhangs in the entire
shipping industry, and it is
starting to attract attention in
terms of sales and purchase
activity.
In conclusion,
containerships have proven
to be a mixed bag in value
trends. Larger vessels are
growing in popularity, size and
value, but with a potentially
alarming orderbook
overhang.
There has also been the
development of a two-tier
panamax value with huge
premiums being paid for
geared ships, while the
picture for the conventional
panamaxes doesnt seem
promising.
Finally, we are already
seeing increased interest in
the smaller container sectors.
Our opinion is that this is the
sector to watch.
GUEST COLUMNIST
ULTRALARGE SHIPS
SEE VALUE INCREASE
VesselsValue head of valuation analysis Toby Mumford
takes a look at the divergence in the value of containerships
Toby Mumford is head of the VesselsValue valuation analysis
team, responsible for monitoring the values on a daily basis.
He also works on increasing the ship types valued within
VesselsValue.com. He recently graduated with a degree in Naval
Architecture from the University of Southampton.
0
3,000
6,000
9,000
12,000
15,000
Feedermax Handysize Sub
Panamax
Panamax Post
Panamax
New
Panamax
ULCV
Live eet value ($m)
Newbuilding value ($m)
Figure 1: Live vs newbuilding vessel value
Source: VesselsValue
Port Metro Vancouver is already
close to Asian markets. And with
unprecedented infrastructure
investment in our gateway, were
getting even closer.
Were building land-side projects
that boost rail and road efciency.
Were increasing our container
terminal capacity and reducing on-
dock dwell through collaboration
with supply chain partners. And
were operating with longshore
labour certainty to 2018.
As a result, weve taken up to
3 days out of your supply chain.
That brings your goods closer
to market and you closer to
your customers.
Fold to
Fold to
VANCOUVER
SHANGHAI
DALIAN
KAOHSI UNG
SHENZHEN
HONG KONG
TOKYO
YOKOHAMA
BUSAN
is better. Closer

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com MAY 2014

DP WORLDs performance in 2013 was

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