T P Chí Containerisation Informa - Ci - 20140102 PDF

www.containershipping.
com JANUARY/FEBRUARY 2014

Data Hub: Load Factors ..............................08
Data Hub: World Fleet Update ...............10
P3 Network .....................................................34
Saudi Arabia ports focus ...........................40
FINANCIAL FOCUS:
PIL, WHAT THE
DOCTOR ORDERED
P23
CARRIERS
MEDITERRANEAN:
ARKAS RISES
TO THE TOP
P38
ANALYSIS
PRICING:
BOX LINES IN
LEGAL LIMBO
P19
MORE INSIGHT
THE
JOHN MEREDITH
INTERVIEW
QUAY TO
SUCCESS
REGULATION
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Containerisation International-h-cornede.indd 1 03/12/13 15:54
January/February 2013
CONSOLIDATION is back on the agenda in the container
shipping industry.
For years, there has been talk about the need for fewer
global players in order to restore stability and profitability to
the business, and yet very little has happened for almost a
decade.
The last major round of rationalisation was back in 2005
when Maersk Line acquired P&O Nedlloyd and Hapag-Lloyd
swallowed up CP Ships, which was a conglomerate of regional
lines such as Canada Maritime, Lykes, Contship and Cast.
Before then, Maersk had taken over Sea-Land and Safmarine,
Neptune Orient Lines had bought APL, and P&O Containers
merged with Royal Nedlloyd.
Many assumed there would be casualties and acquisitions
during the slump of 2009, but all the big names managed to
survive, leaving the question of how consolidation was ever
going to be achieved.
That was partly answered when the top trio agreed to form
the P3 Network, and the G6 consortium strengthened its
alliance. Both are awaiting regulatory clearance.
Then came news late last year that Hapag-Lloyd and CSAV
were in talks about a possible merger, with the two now at
the due diligence stage. So consolidation of a sort is taking
place, although any outsider would wonder why there are still
three Japanese lines, two South Korean and a pair of global
Taiwanese operators.
Perhaps even more curious is the fact that the number
one carrier hails from tiny Denmark, the second largest from
Editor-in-chief Containers Janet Porter
(+44 (0) 20 7017 4617) janet.porter@informa.com
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Incorporating
www.containershipping.com JANUARY/FEBRUARY2014
Data Hub: LoadFactors..............................08
Data Hub: WorldFleet Update...............10
P3Network.....................................................34
Saudi Arabia ports focus...........................40
FINANCIALFOCUS:
PIL, WHATTHE
DOCTORORDERED
P23
CARRIERS
MEDITERRANEAN:
ARKASRISES
TOTHETOP
P38
ANALYSIS
PRICING:
BOXLINESIN
LEGALLIMBO
P19
MOREINSIGHT
THE
JOHN MEREDITH
INTERVIEW
QUAY TO
SUCCESS
REGULATION
an informa business
Audited by ABC.
Total circulation 10,017
Jan Dec 2011
Containerisation International is published monthly by
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Informa plc ISSN: 0010-7379
The New Year signals a fresh round
of carrier rationalisation
CONSOLIDATION
CONUNDRUM
land-locked Switzerland, and the third from the south of
France, rather than from one of the big shipping nations or
former maritime powers such as Norway, Greece, the UK or the
Netherlands, let alone the US.
Containerisation International will be tracking the progress
of this new shake-up as events unfold, and analysing the likely
impact of these super-alliances or new combinations on the
global economy. For if one thing is certain in this unpredictable
world, 2014 looks set to be another lively year for the box
trades.
Janet Porter, editor-in-chief containers
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JANUARY/FEBRUARY 2014
www.containershipping.com CONTAINERISATION INTERNATIONAL 01
LEGAL GREY AREA
FOR CONTAINER LINES
European Union to investigate whether
freight rate announcements constitute
unlawful price signalling
P19
SPOTLIGHT ON PIL
Pacic International Lines has had its ups
and downs but if it aint broke, dont x it
P23
THE LONG GAME
Dr John Meredith talks of his vision for
the future as he takes on a new role at
Hutchison
P26
NEWS ROUNDUP
Hapag-Lloyd and CSAV courtship signals
new round of consolidation
Zim eyes brighter future after nancial
rescue
P30
DATA HUB
TRADE STATISTICS
MDS Transmodal considers whether the
positive growth on the European trade lanes
will be undermined by the arrival of larger
containerships
P04
DATA HUB
LOAD FACTORS
Looking at the likely vessel utilisation rates
for the key European trade lanes
P08
DATA HUB
WORLD FLEET UPDATE
Record number of deliveries expected this
year, but will scrapping keep pace to level
out eet capacity?
P10
FREIGHT RATE
INDICATORS
The fourth quarter was a freight rate
rollercoaster as prices went from low to high
P14
16
Those ports with
linear, mile after
mile berth length
are going to be
the winners
CARRIERS
BOX WORLD BRIEFING DATA HUB DATA HUB
CARRIERS
VIEW FROM THE BRIDGE
TRADE ROUTES
Carriers look for tie-ups on the
Asia-Mediterranean route to counteract
the impending P3 Network
P16
02 CONTAINERISATION INTERNATIONAL www.containershipping.com
CONTENTS / JANUARY/FEBRUARY 2014
P26
DR JOHN MEREDITH
VIEW FROM THE BRIDGE
38
P3 COMPROMISE?
Lawyer expects network to be approved in
Europe, but with some adjustments
P34
BREAD FOR
EVERYBODY
Arkas is one Mediterranean operator facing
up to the challenge of weaker volume
growth and vessel cascading
P38
SAUDI PORTS
ON THE UP
Volume growth feeds investment in
infrastructure at ports such as Jeddah
P40
BALLAST BILL
Treatment type-approval remains a
problem, says Christopher Koch
P44
PERISH THE THOUGHT
More needs to be done to minimise risk on
the reefer supply chain, says Mike Yarwood
P46
UASC SECURES LOAN
New facility will help nance 75% of the
cost of 17 newbuildings on order
P48
PORTSIDE
SHOW ME THE MONEY!
CARRIERS
CARRIERS
GUEST COLUMNIST
FLEXI BLE LEASES
DI RECT SALES LONG-TERM WARRANTY
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CUSTOM DESI GN
ROBUST, DEPENDABLE AND EFFI CI ENT
CRONOS REEFER
TYPICAL SPECIFICATIONS
REEFERS // DIMENSIONS ARE NOMINAL AND TYPICAL THERE MAY BE VARIATIONS
STANDARD 20 CONTAINER TYPE 40 HIGH CUBE
5,456 mm
2,294 mm
2,273 mm
2,290 mm
2,264 mm
2,221 mm
28.4 cu m
2,940 kg
27,540 kg
INTERNAL LENGTH
INTERNAL WIDTH
INTERNAL HEIGHT
DOOR OPENING WIDTH
DOOR OPENING HEIGHT
CARGO ACCESS HEIGHT
CUBIC CAPACITY
TARE WEIGHT + MACHINERY
MAX PAYLOAD
11,590 mm
2,294 mm
2,554 mm
2,290 mm
2,569 mm
2,505 mm
67.9 cu m
4,740 kg
29,480 kg
TOP QUALI TY
ANTWERP DUBAI DURBAN GOTHENBURG GRAND CAYMAN HAMBURG HONG KONG HOUSTON LISBON
LONDON NEW YORK RIO DE JANEIRO SAN FRANCISCO SEOUL SHANGHAI SINGAPORE SYDNEY TAIPEI TOKYO
DRYS REEFERS TANKS EQUI PMENT SERVI CES
DRY FREI GHT SPECI ALS: Bul kers / Opentops / Fl atracks / Hal f Hei ghts / Rol l trai l ers / Sl i mwal l CPC
s / Car Racks
GUEST COLUMNIST
ISSUE 1/VOL 47
04 CONTAINERISATION INTERNATIONAL www.containershipping.com January/February 2014
DATA HUB
TRADE STATISTICS
SUPPLY/DEMAND INDICATORS
FOR CONTAINER SHIPPING
DATA PROVIDED BY:
FOLLOWING the encouraging signs of
recovery observed during the first six
months of 2013, trade from Asia (Far East)
excluding intra-regional trade has seen
an increase of almost 4% during the third
quarter of 2013 as compared with the same
period last year.
With an increase of some 6%, exports to
North America registered the highest growth
between the third quarter of 2012 and
the third quarter of 2013. Positive results
are also estimated for the other dominant
corridor, Asia-North Europe, where MDST
estimates an increase of 2.5% during the
same period.
As a consequence, at a global level MDST
estimates that excluding intra-regional
trade total loaded maritime volume will
have grown by almost 4% between the third
quarter of 2013 as compared with the same
quarter the previous year (up 3.7% between
the first nine months of 2013 and the same
period last year).
These growth rates are consistent with
those reported by the shipping lines as well
as with those indicated by the shipping line
surveys. Container Trades Statistics, in fact,
also reports positive year-on-year growth
rates during the last few months.
For the near future, MDST forecasts an
increase of 1.3% in the fourth quarter
2013 as compared with the third quarter
2013.
For this edition, MDST has observed the
European trade lanes, reporting an increase
of 4.2% in deepsea import volumes to North
EUROPEAN SUPPLY AND
DEMAND GAP REMAINS
North America to north Europe North America to Mediterranean
Leading indicators: headhaul from N Europe 000 teu. Italics = projected
Commodity 2011 2012 2013 2014
11 Beverages 192 188 183 181
89 Miscellaneous Manufactures 159 169 192 211
78 Road Vehicles 154 174 174 180
74 General Industrial Machinery 149 163 153 140
72 Specialised Machinery 115 121 123 128
Overall headhaul index 100 106 111 119
Overall backhaul index 100 91 95 102
Leading indicators: headhaul from Med 000 teu. Italics = projected
Commodity 2011 2012 2013 2014
66 Mineral Manufactures 102 118 145 177
82 Furniture 53 57 65 71
11 Beverages 51 51 52 51
05 Vegetables & Fruit, Nuts 50 50 49 47
North America to north Europe (000 teu) North America to Mediterranean (000 teu)
1,922 921
2,340 1,020
1,758
-8.5%
905
-1.7%
2,478
5.9%
1,085
6.4%
1,826
-3.9%
955
5.5%
2,599
4.9%
1,177
8.5%
1,953
7%
959
0.4%
2,788
7.3%
1,250
6.2%
2011 2011
2012
2012
2013
2013
2014
2014
North Europe to North America (000 teu)
North Europe includes northern Europe, Scandanavia and the Baltic
Mediterranean to North America (000 teu)
Mediterranean includes North Africa and Black Sea
Underlying westbound trade grew by 6% in 2012 and is expected
to grow by 5% in 2013.
Underlying eastbound trade fell by 9% in 2012 but is expected to
grow by 4% in 2013.
Of the leading headhaul commodities, road vehicles and specialised
machinery showed most growth.
Annual headhaul growth from 2012 to 2016 is forecast at 6%.
Service capacity westbound in the third quarter of 2013 is
estimated to be 5% below the third quarter of 2012.
Y-o-Y in the third quarter of 2013, freight rates, profits and
utilisation level are estimated to fall westbound.
Underlying westbound trade grew by 6% in 2012 and is expected
to grow by 9% in 2013.
Underlying eastbound trade fell by 2% in 2012 but is expected to
grow by 6% in 2013.
Of the leading headhaul commodities, mineral manufactures shows
most growth.
Service capacity westbound in the third quarter of 2013 is
estimated to be 18% above the third quarter of 2012.
Y-o-Y in the third quarter of 2013, freight rates, estimated
utilisation and profit are estimated to fall westbound.
2011
2011
2012
2012
2013
2013
2014
2014
Positive growth expected, but introduction of larger ships will further weaken rates
Europe and the Mediterranean during the third quarter of 2013 compared with the
same quarter of 2012 (with a 2% increase for the third quarter of 2013 compared
with the previous quarter).
Positive growth rates are also estimated for the opposite direction: an increase
of some 4% is estimated for the third quarter of 2013 as compared with 12
months ago (with a 1.3% increase for the third quarter of 2013 compared with the
previous quarter).
Despite the improvement observed in the recent months in the containerised
traffic and despite the actions taken by the lines in capping capacity, the gap
between supply and demand remains and this is likely to further weaken rates,
as shown in graph A, which shows that the gap between supply and demand in
the fourth of 2013 is forecast to reach a level of 20 points down from 21 in the
previous quarter (2006 Q1 = 100).
As more of the larger ships come on stream it is inevitable that rates will remain
depressed. However, the economies of scale these new ships offer in terms of
fuel economics are so powerful that they will be able to ride out the inevitable
depression in rates over the short term.
This has been clearly demonstrated in Maersks results for the third quarter
2013, which showed increasing profitability despite falling mean rates.
Trade from North Europe to America is projected to grow by 5% by the end of
2013 and it is forecast to continue to grow at 6% per annum from 2013 to 2016.
North Europe to Mid-East Gulf & Indian Subcontinent Mediterranean to Mid-East Gulf & Indian Subcontinent
North Europe to Mid-East Gulf & Indian Subcontinent (000 teu)
North Europe includes northern Europe, Scandinavia and the Baltic
Mediterranean to Mid-East Gulf & Indian Subcontinent (000 teu)
Mediterranean includes North Africa and Black Sea
1,416
1,539
1,032 930
1,469
3.7%
1,670
8.5%
1,041
0.9%
990
6.5%
1,441
-1.9%
1,849
10.7%
1,083
4%
1,161
17.3%
1,510
4.8%
2,057
11.2%
1,147
5.9%
1,337
15.2%
2011
2011
2012
2012
2013
2013
2014
2014
Mid-East Gulf & Indian Subcontinent to north Europe (000 teu)
ME Gulf & Indian Subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh
MId-East Gulf & Subcontinent to Mediterranean (000 teu)
ME Gulf & Indian Subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh
Underlying eastbound trade grew by 4% in 2012 but is expected to
fall by 2% in 2013.
Underlying westbound trade grew by 1% in 2012 and is expected to
grow by 4% in 2013.
Of the leading headhaul commodities, food and paper show the most
growth.
Annual headhaul growth from 2012 to 2016 is forecast to be 5%.
Service capacity eastbound in the third quarter of 2013 is estimated
to be 1% below the same quarter last year
Y-o-Y in the third quarter of 2013, estimated utilisation is estimated
to have increased but freight rates and profits are estimated to have
decreased eastbound.
Underlying eastbound trade grew by 9% in 2012 and is expected to
grow by 11% in 2013.
Underlying westbound trade has been growing by 6% in 2012 and is
expected to grow by 17% in 2013.
Of the leading headhaul commodities, mineral manufactures, animal
feeds and fruit & veg show the most growth.
Service capacity eastbound in the third quarter of 2013 is estimated to
be marginally lower than the level observed the same quarter last year.
to have remained substantially stable, freight rates and profits are
estimated to have decreased eastbound.
2011 2011 2012 2012 2013 2013 2014 2014
* Excludes intra regional trade. ** Forecast. On the basis of trade data available in mid-
August, 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-
2014**
North America to Europe -11% +6% +4%
North America to Asia (Far East) +5% +2% +16%
Asia (Far East) to Europe -2% +1% +11%
Asia (Far East) to North America +4% +6% +7%
Europe to Asia (Far East) +4% 0% +11%
Europe to North America +4% +6% +7%
North America exports * +1% +3% +10%
North America imports * +5% +3% +8%
Asia (Far East) Exports * +4% +3% +10%
Asia (Far East) Imports * +9% +2% +9%
Europe & Med Exports * +6% +3% +9%
Europe & Med Imports * -2% +2% +10%
Intra Asia (Far East) +5% +5% +5%
Intra Europe +2% +6% 0%
Global overview +6% +4% +8%
Commodity 2011 2012 2013 2014
64 Paper & Paperboard 98 105 114 125
77 Electrical Machinery 59 60 59 64
09 Miscellaneous Food Products 58 66 76 84
78 Road Vehicles 56 50 51 55
28 Ores & Scrap 53 55 51 51
Leading indicators: headhaul from Med 000 teu. Italics = projected
Commodity 2011 2012 2013 2014
08 Animal Feedingstuffs 234 286 401 592
05 Vegetables & Fruit, Nuts 152 167 176 173
66 Mineral Manufactures 150 174 181 178
27 Crude Fertilisers & Minerals 83 99 94 98
Underlying unitised trade growth rates (year on year)
www.containershipping.com CONTAINERISATION INTERNATIONAL 05 January/February 2014
DATA HUB
TRADE STATISTICS
DATA HUB
TRADE STATISTICS
Specialised machinery grew but general industrial machinery and
beverages fell, with traffic in the eastbound direction increasing by
4%.
Trade from the Mediterranean to North America is projected to
grow by 9% by the end of 2013, with all leading commodities rising.
Growth from 2013 to 2016 is forecast at 5% per annum. Eastbound
traffic increased by 5.5% in 2013.
Trade from northern Europe to the Gulf and Indian subcontinent
is projected to fall by 2% by the end of 2013, with paper and
paperboard and food products bucking the trend, and is forecast to
grow at the rate of 7% per annum from 2013 to 2016.
Trade from the Mediterranean to the Gulf and Indian sub-continent
is projected to grow by 11% by the end of 2013, being led by animal
feeding-stuffs and mineral manufactures. It is forecast to grow at the
rate of 8% per annum from 2013 to 2016.
Trade growth from northern Europe to East and southern Africa is
projected to grow by 2% by the end of 2013. This growth was led
by road vehicles. It is forecast to continue to grow by 6% per annum
from 2012 to 2016.
Trade from northern Europe to Australasia is projected to grow
by 1% by the end of 2013, being led by electrical machinery. It is
forecast to grow by 6% per annum from 2013 to 2016.
North Europe to E&S Africa North Europe to Australasia & Oceania
North Europe to E&S Africa (000 teu)
North Europe to Australasia & Oceania (000 teu)
310 337
271 142
331
6.8%
358
6.2%
310
14.4%
150
5.6%
336
1.5%
363
1.4%
296
-4.5%
140
-6.7%
360
7.1%
394
8.5%
324
9.5%
142
1.4%
2011
2011
2012
2012
2013
2013
2014
2014
E&S Africa to north Europe (000 teu) Australasia & Oceania to north Europe (000 teu)
Australasia & Oceania includes Australia, New Zealand and Pacific Islands
Overall southbound trade grew by 7% in 2012 and is expected to
grow by 2 % in 2013.
Underlying northbound trade grew by 14% in 2012 but is expected
to fall 5% in 2013.
Of the leading headhaul commodities only paper shows consistent
growth.
Service capacity southbound in the third quarter of 2013 is
estimated to be 1% below the third quarter of 2012.
to have improved but profits and freight rates are estimated to have
decreased southbound.
Overall southbound trade grew by 6% in 2012 and is expected to
grow by 2% in 2013.
Underlying northbound trade has been growing by 6% in 2012 but
is expected to fall by 7% in 2013.
Of the leading headhaul commodities, misc manufactures and
paper shows most growth.
Service capacity southbound in the third quarter of 2013 is
estimated to be 3% above the third quarter of 2012.
to have remained stable, freight rates are estimated to have decreased
but profits are estimated to have increased marginally southbound.
2011
2011
2012
2012
2013
2013
2014
2014
This data is provided by Box Trade Intelligence in collaboration with MDS Transmodal.
Much more detail is available directly from BTI (www.boxtradeintelligence.co.uk),
including tonnages and estimated teu at the country x country x 3,000 commodities level,
individual ship deployment and estimated revenue, profit, rates and utilisation at the
tradelane and individual ship level.
Commodity 2011 2012 2013 2014
26 Textile Fibres 17 19 20 21
08 Animal Feedingstuffs 16 17 14 14
09 Miscellaneous Food Products 15 13 13 13
Commodity 2011 2012 2013 2014
72 Specialised Machinery 22 28 19 20
77 Electrical Machinery 15 17 16 16
Supply - based on actual data Demand - based on actual data
Demand seasonally adj
60
80
100
120
140
160
180
2
0
0
6
Q
1
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
9
Q
3
2
0
0
9
Q
4
2
0
1
0
Q
1
2
0
1
0
Q
2
2
0
1
0
Q
3
2
0
1
0
Q
4
2
0
1
1
Q
1
2
0
1
1
Q
2
2
0
1
1
Q
3
2
0
1
1
Q
4
2
0
1
2
Q
1
2
0
1
2
Q
2
2
0
1
2
Q
3
2
0
1
2
Q
4
2
0
1
3
Q
1
2
0
1
3
Q
2
2013 Q4
Supply Index=167
2012 Q4 - 2013 Q4
% change quarter on quarter
Supply=3.0%
Demand=7.8%
2013 Q4
Demand Index=147
2
0
1
3
Q
3
For explanatory notes that define how data has been organised please
see www.boxtradeintelligence.co.uk/media.
Graph A: Global supply v demand and seasonally adjusted
demand
FLEA CONTROL
United States
PEDESTAL
Brazil
LEGGINGS
India
SHOES
Italy
DRESS
France
CHAISE LOUNGE
China
TABLE
Argentina

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January/February 2014 8 CONTAINERISATION INTERNATIONAL www.containershipping.com
DATA HUB
LOAD FACTORS
NEW YEAR, NEW START
This month, Damian Brett takes a look at the likely vessel utilisation rates on some of the key
European trades
Europe to Middle East Gulf/South Asia
Volumes in the head-haul direction of this trade lane were weak
in 2013. In fact, the latest figures from Container Trades Statistics
show that volumes declined by 3.6% during the first ten months of
the year.
However, it isnt all bad news. Growth is expected to return this
year, with analysts predicting that volumes could increase by as
much as 9%. Meanwhile, capacity additions have been controlled,
with gaps in services offsetting the introduction of larger
tonnage.
If carriers can maintain this level of discipline for the
rest of the year, then utilisation rates are expected to improve,
reaching as high
91% during the
second
quarter of the
year.
This should
put carriers in a
strong position
with regards to
pricing during the
first nine months
of the year.
6
Northern Europe to east coast of South America
Utilisation rates
on services from
northern Europe
to the east coast
of South America
are expected
to improve in
2014 compared
with last year,
but perhaps
not enough
for carriers to
dramatically raise rates. Load factors will be at their strongest during
the third quarter of the year when they hit 82%.
The higher utilisation levels are down to continuing strong
demand, with analysts projecting that volumes will grow by as much
as 9.2% in 2014, following on from an 8% improvement last year.
Although growth in the Brazilian economy is lower than previously
projected, inflation is making foreign imports cheaper and the
country is preparing for the football World Cup this year and the
Olympics in 2016.
On the supply front, Mediterranean Shipping Co has left gaps in
two loops, SAMEX and Bossa Nova, which has brought capacity down
by about 4.5% compared with the start of the fourth quarter.
These gaps are likely to be filled by the middle of the year and
there is expected to be annualised growth levels of 1% for northern
Europe capacity as long as there are no unexpected drastic capacity
additions.
3
East coast of South America to northern Europe
Last year, this trade lane struggled with weak volumes. Inflation
raised the price of many Brazilian exports while demand growth in
Europe wasnt exactly dynamic. As a result, early indications suggest
that volumes declined by around 3% in 2013.
However, the situation appears to be improving this year as the
north European recovery continues to pick up pace. Carriers also
appear to be maintaining a good level of discipline when it comes
to capacity additions and as a result utilisation levels are expected
to improve.
However, they
will not recover
enough to put
carriers in a strong
position for rate
increases and the
best they can hope
for is utilisation
rates of 80% in the
third quarter.
4
3
4
5
East Coast South America to northern Europe
0
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Northern Europe to East Coast South America
0
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Europe to Middle East Gulf/South Asia
0
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
January/February 2014 www.containershipping.com CONTAINERISATION INTERNATIONAL 9
1
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 newbuilds are likely to be deployed, as well as where replaced vessels are likely to be cascaded into.
Average vessel utilisation is simply one divided by the other. It should be noted, therefore, that the resulting freight rate trends only reflect what should theoretically happen if ocean
carriers continue acting according to form. They do not take into account dramatic changes in strategy, such as mass lay-ups, service consolidation and more hub and spoke operations.
Middle East Gulf/South Asia to Europe
Being the
back-haul
leg of a trade
lane means
utilisation
rates will be
weaker than in
the head-haul
direction, but
comparatively,
load factors are
fairly strong on
services from the Middle East Gulf and South Asia to Europe.
In 2013, volume growth reached 5.3% and it is expected to
increase by 7.8% during the coming year.
This will lead to utilisation rates exceeding the 80% mark
during the first half of the year before dipping back in the second
half a reflection of the fact that volumes were stronger during
the first six months of 2013 than during the second.
Capacity on the trade lane increased at the start of the last
quarter compared with the same point three months before as
gaps in dedicated loops were offset by the introduction of larger
vessels by Maersk Line and Evergreen.
While load factors for 2014 are improving compared with last
year, they are weaker than during the last forecast. This is caused
by a weakening of volume growth in the second half of 2013.
5
DATA HUB
FREIGHT FORECASTER
NEXT EDITION: AMERICAS
DATA HUB
LOAD FACTORS
Asia to northern Europe
This year is shaping
up to be a strong one
for carriers on the
Asia-north Europe
trade lane in terms
of utilisation rates
as volume growth
is predicted to
strengthen.
For the winter
period, carriers do
not appear to be
making drastic capacity reductions; at the start of next year capacity
will only be 2.4% lower than at the start of the fourth quarter, a fairly
modest reduction.
Sailings have been blanked but no services have been cancelled.
The blanked sailings are offset by Maersk Line and Evergreen adding
larger vessels.
Yet analysts have forecast year-on-year volume increases of as
much as 5.4% on the trade lane in 2014 as north European economies
continue to strengthen.
Volume figures for the trade lane for 2013 also strengthened as
the year progressed, which resulted in improved utilisation levels
compared with past projections. Contacts suggest that at the end of last
year, container roll pools were already being formed a reflection of
the volume improvements.
However, a big question mark hangs over this trade lane what
impact will the P3 Network have? Perhaps carriers are waiting to see
what happens here before announcing deployment decisions.
Also, while utilisation rates on the trade lane are strong, they were
also strong in 2013 and that wasnt enough to prevent rate volatility.
1
Asia to Mediterranean
Utilisation rates
on services
from Asia to the
Mediterranean
are expected to
fluctuate between
80% and 90% this
year, which should
be strong enough
for carriers to
enjoy some freight
rate successes.
The year looks set to begin with strong utilisation rates of as much
as 90%. This comes despite carriers only reducing capacity by 0.7%
between the start of the fourth quarter and the start of the third
quarter.
However, carriers had been very active in cutting capacity in
the third quarter, meaning the winter period reduction had largely
already taken place.
Volumes increased strongly in 2013, albeit from strong decreases
in the prior year, in both the eastern and western Mediterranean. Data
from Container Trades Statistics showed a year-on-year increase of as
much as 7% last year. Next year, analysts expect volumes to increase
by as much as 8.5%.
However, like northern Europe, there are many question marks
over what impact the P3 Network will have on the trade lane and how
other carriers will react. Also, carriers have had difficulty capitalising
on strong utilisation rates in the past.
2
2
6
Asia to Europe
0
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Asia to Mediterranean
0%
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Middle East Gulf/South Asia to Europe
0
20%
40%
60%
80%
100%
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
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.
DATA HUB
WORLD FLEET UPDATE MORE ONLINE AT CONTAINERSHIPPING.COM
A NEW BEGINNING
Record 1.7m teu of boxship deliveries scheduled for 2014, reports James Baker.
Teu Size range In service Dec 2013 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
0-499 351 97,643 1 250 1 160 - - 2 410
500-999 735 554,237 7 5,597 1 606 - - 8 6,203
1,000-2,999 1,867 3,383,117 66 110,532 52 100,648 5 11,570 123 222,750
3,000-4,999 949 3,920,394 39 166,327 10 38,200 9 34,600 58 239,127
5,000-7,499 613 3,697,464 33 186,350 9 56,800 - - 42 243,150
7,500-9,999 329 2,817,254 52 459,458 46 414,700 13 119,200 111 993,358
10,000-12,999 66 739,132 22 227,686 10 102,562 5 50,000 37 380,248
13,000-15,999 126 1,708,398 25 337,066 22 309,850 3 42,000 50 688,916
16,000+ 7 121,140 14 252,030 30 527,910 - - 44 779,940
Total 5,043 17,038,779 259 1,745,296 181 1,551,436 35 257,370 475 3,554,102
World Cellular Fleet December 2013 (excluding newbuild postponements and cancellations under negotiation)
FOR the container shipping
industry, 2013 was not the
end of the downturn, nor even
the beginning of the end, but
it was, perhaps, the end of the
beginning.
As the US Federal Reserve
begins tapering the financial
lifeline that has kept the
economy on life support for the
past several years, indications
are that both the US and the
Eurozone are showing signs of
recovery.
Forecasts show improved
trade outlooks, with US imports
of retail goods expected to
increase by almost 5% year-
on-year in January and a strong
outlook posited for the rest of
2014.
Container volumes on the
Asia-Europe trade lane are also
improving. Last year saw volumes
beat 2012 figures, even though
they still lag behind 2011, and
improvements are forecast
throughout 2014.
Nevertheless, conditions
remain tough for most operators,
with overcapacity forcing
down freight rates. The world
container fleet stood at 5,043
vessels at the end of 2013, up
from 5,010 at the end of 2012.
The introduction of ever larger
vessels meant that the increase
in the capacity of the fleet was
even greater, up by nearly 1m teu
to 17m teu.
The situation is not expected
to improve much this year.
According to Lloyds List
Intelligence, a record 1.7m teu
will be delivered in 2014, the
bulk of which will be in the post-
panamax and larger classes.
This capacity growth at a
time of global economic turmoil
has put increased pressure on
lines. In an effort to rationalise
services, carriers have been
queuing up to join alliances. If
the P3 Network of Europes three
leading lines wins approval from
US regulators, the spoils
of container shipping will be
split between three powerful
Source: Lloyds List Intelligence
The number of vessels being
demolished is struggling to keep
up with the pace of new deliveries.
* Total includes ships with unspecified delivery dates
DATA HUB
WORLD FLEET UPDATE
Vessels laid-up December 2013
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 4,776 90 21,041 104 25,817 26.4%
500-999 9 5,702 60 43,278 69 48,980 8.8%
1,000-2,999 22 35,386 41 72,270 63 107,656 3.2%
3,000-4,999 6 22,553 30 124,682 36 147,235 3.8%
5,000-7,499 6 37,087 13 74,430 19 111,517 3.0%
7,500-9,999 2 16,781 3 26,482 5 43,263 1.5%
10,000-12,999 - - - - - - -
13,000+ - - - - - - -
Total 59 122,285 237 362,183 296 484,468 2.8%
Vessels delivered December 2013
Vessel name Shipyard Teu Reefer
plugs
DWT Knots Beneficial owner Operator Deployment
MOL Quintet Hyundai Samho Heavy Industries 14,000 150,936 Neptune Orient Lines APL
CSCL Spring Dalian Shipbuilding Industry 10,000 112,000 China Shipping China Shipping
Container Lines
MSC Azov Jiangnan Shipyard 9,403 1,000 103,500 Costamare Mediterranean
Shipping Co
Asia-South
America
MSC Adelaide Sungdong Shipbuilding & Marine
Engineering
8,800 110,875 20.0 Sammy Ofer Group
Monaco
Mediterranean
Shipping Co
Asia-South
America
CSAV Trancura Daewoo-Mangalia Heavy
Industries
8,600 100,000 Sammy Ofer Group
Monaco
Compania Sud
Americana de
Vapores (CSAV)
Ever Lotus Samsung Shipbuilding & Heavy
Industries
8,000 105,000 24.5 Evergreen Marine Evergreen Marine Asia-Europe
YM Modesty Koyo Dockyard Company Limited 6,350 500 72,370 Yang Ming Transpacific
HS Marco Polo Jiangsu New Yangzijiang
Shipbuilding
4,957 600 58,000 21.5 Hansa Treuhand
Schiffsbeteiligungs
Seaviolet Zhejiang Ouhua Shipbuilding 4,834 600 56,300 21.0 Thenamaris Ships
Management
Kota Lestari Dalian Shipbuilding Industry 4,300 50,000 Pacific International
Lines
Pacific International
Lines
Hanjin Louisiana Sungdong Shipbuilding & Marine
Engineering
3,610 350 50,100 20.0 Sammy Ofer Group
Monaco
Hanjin Shipping
Company Limited
Middle East
Gulf/Indian
Subcontinent
- Asia
Banak Jiangsu Yangzijiang Shipyard 2,546 400 34,500 22.0 Torvald Klaveness
Sunny Iris Dae Sun Shipbuilding &
Engineering
1,006 12,454 Korea Marine
Transport Company
Korea Marine
Transport Company
Regional Asia
camps: the P3, G6 and CKYH
alliances.
By joining forces, combining
schedules and reducing sailings,
operators should be able to
rationalise services to the extent
that pricing can be held up.
However, doing so will leave
large numbers of vessels either
idling or sent to scrap.
At the end of 2013, 296
vessels, comprising 484,468 teu
were recorded as inactive. This
was 15,000 teu lower than a year
before and represents 2.8% of
the total box fleet.
Moreover, the number of
vessels being demolished is
struggling to keep up with
the pace of new deliveries.
In December 2013, 86,400
teu was delivered but only
25,930 teu scrapped. A year
earlier, at the bottom of the
downturn, 48,700 teu was sent
to breakers.
The glut of vessels on
the market and the lack of
employment has put pressure
on the values of secondhand
ships. Data from Vesselsvalue.
com show little increase in any
class of vessel. Ten-year-old
post-panamaxes were the most
improved in terms of resale value,
increasing $4.5m to $32.2m.
Panamaxes, a ship class
struggling to find a raison detre
as larger ships cascade down the
market chain and the Panama
Canals expansion looms, despite
ongoing issues, have remained
virtually the same price over the
past year, for vessels of all ages.
The troubles faced by German
KG funds, owners of many of the
worlds smaller vessels, have seen
the price of handysizes the worst
hit of the vessels valued. The price
of a new 1,400 teu vessel has
fallen by $3.8m in the past year
and older vessels are also down.
While we may be at the end of
the beginning, 2014 will still be
a long year in the recovery of the
container shipping sector.
DATA HUB
WORLD FLEET UPDATE MORE ONLINE AT CONTAINERSHIPPING.COM
Vessel name Shipyard Teu Reefer
plugs
DWT Knots Beneficial owner Operator Deployment
MOL Quintet Hyundai Samho Heavy Industries 14,000 150,936 Neptune Orient Lines APL
CSCL Spring Dalian Shipbuilding Industry 10,000 112,000 China Shipping China Shipping
Container Lines
MSC Azov Jiangnan Shipyard 9,403 1,000 103,500 Costamare Mediterranean
Shipping Co
Asia-South
America
MSC Adelaide Sungdong Shipbuilding & Marine
Engineering
8,800 110,875 20.0 Sammy Ofer Group
Monaco
Mediterranean
Shipping Co
Asia-South
America
CSAV Trancura Daewoo-Mangalia Heavy
Industries
8,600 100,000 Sammy Ofer Group
Monaco
Compania Sud
Americana de
Vapores (CSAV)
Ever Lotus Samsung Shipbuilding & Heavy
Industries
8,000 105,000 24.5 Evergreen Marine Evergreen Marine Asia-Europe
YM Modesty Koyo Dockyard Company Limited 6,350 500 72,370 Yang Ming Transpacific
HS Marco Polo Jiangsu New Yangzijiang
Shipbuilding
4,957 600 58,000 21.5 Hansa Treuhand
Schiffsbeteiligungs
Seaviolet Zhejiang Ouhua Shipbuilding 4,834 600 56,300 21.0 Thenamaris Ships
Management
Kota Lestari Dalian Shipbuilding Industry 4,300 50,000 Pacific International
Lines
Pacific International
Lines
Hanjin Louisiana Sungdong Shipbuilding & Marine
Engineering
3,610 350 50,100 20.0 Sammy Ofer Group
Monaco
Hanjin Shipping
Company Limited
Middle East
Gulf/Indian
Subcontinent
- Asia
Banak Jiangsu Yangzijiang Shipyard 2,546 400 34,500 22.0 Torvald Klaveness
Sunny Iris Dae Sun Shipbuilding &
Engineering
1,006 12,454 Korea Marine
Transport Company
Korea Marine
Transport Company
Regional Asia
Valuations for post-panamax, panamax and handymax container vessels
Note: All values in $m
Age Capacity (teu) November 17,
2013 ($)
October 17, 2013
($)
Monthly change
($)
November 17,
2012 ($)
Yearly change
($)
0 4,250 38.4 38.2 0.2 38.4 0.0
5 4,250 28.7 27.0 1.7 28.4 0.3
10 4,000 20.5 18.1 2.4 18.0 2.5
15 4,000 13.0 12.4 0.6 11.4 1.6
20 3,750 8.1 8.0 0.1 7.5 0.6
25 3,750 8.1 8.0 0.1 7.8 0.3
Panamax Source: Vesselsvalue.com
2013 ($)
October 17, 2013
($)
Monthly change
($)
November 17,
2012 ($)
Yearly change
($)
0 1,400 18.2 18.5 -0.3 22.0 -3.8
5 1,400 13.1 13.0 0.1 15.8 -2.7
10 1,400 8.5 7.9 0.6 9.7 -1.2
15 1,400 4.9 4.3 0.6 5.4 -0.5
20 1,400 3.3 3.3 0.0 3.1 0.2
25 1,400 3.3 3.3 0.0 3.2 0.1
Handymax Source: Vesselsvalue.com
Current and historical values for tankers, bulkers and containers.
Daily updated sales lists, vessel specications and ownership
information.
Data exports, valuation certicates, interactive charts and
automated alerts
2013 ($)
October 17, 2013
($)
Monthly change
($)
November 17,
2012 ($)
Yearly change
($)
0 7,000 60.3 59.3 1.0 58.4 1.9
5 7,000 45.0 41.9 3.1 43.2 1.8
10 6,500 32.2 27.9 4.3 27.7 4.5
15 5,500 20.3 19.2 1.1 17.6 2.7
20 4,500 9.4 9.3 0.1 8.3 1.1
Post-panamax Source: Vesselsvalue.com
Vessel name Teu DWT Speed (knots) Config Year built Price ($m) Purchaser
Mentor 2,672 35,600 21.5 Geared 2002 12.5 Undisclosed
Maya Rickmers 2,006 30,460 20.8 Geared 1997 6.15 British Virgin
Islands
STX Qingdao 1,740 23,579 21.5 Gearless 2009 13 Germany
Buxhill 1,687 23,465 19.0 Gearless 1995 3.5 China
Florentia 1,015 12,534 17.0 Geared 1996 3 Singapore
Vessels sale and purchase December 2013
Notes: C=cellular; GL=gearless; G=geared; NC=non-cellular; MPP=multipurpose; U/D=undisclosed Source: Braemar Seascope
Vessels demolished December 2013
Vessel name Built Teu Broken date Broken place Shipbreakers Previous Beneficial owner
MSC Catania 1994 4,743 04-Dec-13 Chittagong Bangladesh Breakers Sammy Ofer Group
Monaco
Darwin 1996 4,507 04-Dec-13 Chittagong Bangladesh Breakers Sammy Ofer Group
Monaco
MSC Carla 1986 3,044 20-Dec-13 Alang Indian Breakers Mediterranean Shipping
Co
Elona 1987 2,794 06-Dec-13 Alang Indian Breakers Hapag-Lloyd
Dong He 1990 2,761 11-Dec-13 Xinhui Chinese Breakers China Ocean Shipping
Hong Kong 1989 1,743 24-Dec-13 Alang Indian Breakers Conti Holding
Branden 2003 1,740 10-Dec-13 Gadani Beach Pakistan Breakers Leonhardt & Blumberg
Song He 1986 1,668 29-Dec-13 Ningde Chinese Breakers China Ocean Shipping
Marc 1994 1,576 03-Dec-13 Alang Indian Breakers Unknown Owners
Hammonia
Adriaticum
1993 1,054 06-Dec-13 Alang Indian Breakers Hansa Mare Reederei
Trader 2 1979 300 21-Dec-13 Alang Indian Breakers Unimarine Management
DATA HUB
FREIGHT RATE INDICATORS MORE ONLINE AT CONTAINERSHIPPING.COM
FREIGHT rates reported during
the fourth quarter of 2013
remained weak and lower than
the levels reported during the
same period in 2012.
The Shanghai Containerised
Freight Indexs composite index
a weighted average of 15
key trade lanes from Shanghai
registered an average of
1,024 points during the fourth
quarter of the year.
This compares with an index
average of 1,148 points during
the fourth quarter of 2012 and
RATES
RALLIED AS
2013 DREW
TO A CLOSE
The fourth quarter was a freight rate roller
coaster as prices went from low to high,
reports Damian Brett.
of the January rush ahead of
Chinese new year before
deteriorating.
Another positive
development for carriers is the
fact that the average bunker
price based on Rotterdam HS
380 has remained below the
$600 per metric tonne mark.
Asia-Europe
Freight rates on the Asia to
Europe trade largely mirrored
the performance of global prices:
declining heavily at the start
of the quarter before staging
a comeback in December that
continued into January.
According to the SCFI,
October freight rates from
Shanghai to northern Europe
averaged $670 per teu and
$708 per teu from Shanghai
to the Mediterranean in
October.
2010 2011
Jan Nov Jan
120
110
100
90
80
70
60
J
u
n
e

2
0
0
8

=

1
0
0
USWC/IPI USEC/Gulf
60
80
100
2013
Nov
2013 2012
Jan
Source: Transpacific Stabilization Agreement
300
600
900
1,200
1,500
D
e
c
N
o
v
O
c
t
S
e
p
t
A
u
g
J
u
l
J
u
n
M
a
y
A
p
r
M
a
r
F
e
b
J
a
n
D
e
c
N
o
v
O
c
t
S
e
p
A
u
g
J
u
l
J
u
n
$

t
e
u
/
M
T
2012 2013
Composite (index level)
Average Bunker price
(Rotterdam HS 380 $/metric tonne)
Composite is a weighted average of 15 major tradelanes out of China; Dec 13
data is up to Dec 20, 2013
Source: Shanghai Shipping Exchange & Containerisation International
Figure 1: Shanghai Containerised Freight Index
June 2012 December 2013
Figure 2: TSA revenue per feu index (excluding bunker)
November 2010 November 2013
Note: Asia to US services = average price per feu.
Asia to Europe and Med = average price per teu. Correct as of January 30
Latest Shanghai Containerised Freight Index trade lane figures
Asia - Med
$1,609
Asia - Europe
$1,580
Asia - USEC
$3,426
Asia - USWC
$2,108
Source: Shanghai Shipping Exchange
1,079 during the third quarter
of 2013. It is the weakest
quarterly figure the SCFI has
recorded for more than a year.
The average index level
of 893 recorded in October
was also the lowest monthly
average recorded for more than
a year.
Container Trades Statistics
global price index which
uses the average for 2008 as
an index level of 100 also
weakened towards the end of
the year, dropping to 83 points
in October and 85 points in
November.
One year earlier, the index
was at a level of 96 in October
and 95 in November.
However, it was not all bad
news for carriers as there was
a resurgence towards the end
of the quarter as shipping lines
successfully implemented a
series of rate increases on
the back of sailing cancellations
for the quieter Christmas
period.
As a result, the SCFI climbed
back up to an average of1,114
points in December, which
beat the index level of 1,094
reported for December 2012.
Rates have continued to
climb this year and the SCFI
composite index reached
1,168.25 at the end of January.
However, last year rates also
started strongly as a result
DATA HUB
FREIGHT RATE INDICATORS
Notes: figures are mid points between bids and offers Source: Freight Investor Services
Table 1: Container Trades Statistics all-in monthly freight rate index.
Average rate in each trade lane for 2008 = 100
Notes: * Western Asia = South Asia and Middle-East region, +Tenerife to Lobito.
Source: Container Trades Statistics
Tradelane Aug-13 Sep-13 Oct-13 Nov-13
Asia to Europe 82 76 66 76
Europe to Asia 92 85 85 86
Europe to North America 89 88 87 87
North America to Europe 96 94 94 93
Europe to Western Asia* 90 88 87 87
Western Asia* to Europe 78 79 78 77
Europe to South & Central America 104 104 105 103
South & Central America to Europe 96 94 94 93
Europe to Australasia 85 84 85 84
Australasia to Europe 99 101 101 101
Europe to Sub-Saharan Africa 72 70 70 70
Tradelane Feb-14 Mar-14 Apr-14 Q2 Q3
Asia to North West Europe $ per teu 1,400 1,325 1,237 1,187 1,255
Asia to US west coast $ per feu 1,862 1,825 1,775 1,962 2,075
Table 2: Container freight rate swaps forward curves
But carriers held firm on an
early November general rate
increase and as a result prices
leapt to more than $1,400 per
teu before they began being
chipped away and sliding back
to the $1,000 per teu mark by
the start of December.
Another GRI in mid-
December helped give rates
another boost and tip the
average for the month to more
than $1,500 per teu. These
increases appear to have been
a success because carriers had
announced a series of sailing
cancellations in November and
December in order to match
supply and demand.
While the rate increases at
the end of last year appear
to be the result of capacity
management, increases
experienced during January
are down to the mini surge
in volumes experienced as
shippers rush to get cargo out
of China before the new year
factory closures.
In fact, January 2013 is set
to be the busiest month of the
year on the trade lane in terms
of containers moved, unless
there is an unexpected surge in
December.
Prices to both northern Europe
and the Mediterranean were
above $1,700 per teu in mid-
January, but then drifted lower.
Transpacific
Like the Asia-Europe trade lane,
the transpacific also started
the fourth quarter poorly but
the situation improved as the
quarter progressed.
SCFI figures for services
from Asia to the US west
coast reached a fourth quarter
average of $1,765 per feu
compared with $2,277 per feu
during the same period in 2012.
Fourth quarter prices on the
trade lane were also behind the
average for the third quarter
of 2013 when they reached
$1,955 per feu.
Freight rates on services from
Asia to the US east coast were
also behind last years level
during the quarter, hitting an
average of $3,092 per feu in
2013, compared with $3,317 per
feu in 2012.
The average price on services
to the east coast for the third
quarter was $3,366 per feu.
But shipping lines did enjoy
a decent last couple of weeks
of the year. A Transpacific
Stabilization Agreement
recommended rate increase
of $200 per feu for December
20 resulted in rate increases to
both coasts.
This trend continued in
January, with spot market
prices climbing to $2,108 per
feu on services to the west
coast and $3,426 per feu to
the east coast as another TSA
recommended rate increase
of $300 per feu kicked in on
January 15.
Transatlantic
Container Trades Statistics data
shows that freight rates on
services from Europe to North
America began to dip in the
final quarter of year, reaching
an index level of 87 in both
October and November. This
compares with an index level
of 92 for the same months in
2012.
For much of 2013, the index
had been tracking very closely
to both the 2012 and 2011
level.
In the opposite direction, the
index was also below the 2012
level. In October, an index level
of 94 was recorded, compared
with 99 a year ago.
In November the index fell
to 93, compared with 98 in the
same month of 2012.
The eastbound index has been
below both the 2012 and 2011
level in every month of the year,
pointing to a difficult year for
eastbound transatlantic services.
The decline in the indices
between September and the
end of November also indicates
that an October 1 rate increase
failed. Hapag-Lloyd, one of
the main players on the trade
lane, had pitched the increase
at $50/$75 per teu/feu in
the eastbound direction and
$150/$200 per teu/feu on
westbound services.
Freight rates on
the Asia to Europe
trade largely mirrored
the performance of
global prices.
Correct as of January 30
DATA HUB
THE CKYH and G6 alliances currently make
up 30% of weekly capacity on the Asia-
Mediterranean trade route, while the P3
members represent 52%, according to
Lloyds List Intelligence.
Although the current share of the P3
members CMA CGM, Mediterranean
Shipping Co and Maersk Line may
decrease as a result of the planned P3
Network consolidations, alliances could
account for 80% of capacity on this route.
Standalone carriers, such as Evergreen,
United Arab Shipping Co and China
Shipping could form alliances in order to
compete.
Hanjin Shipping has considered inviting
Evergreen into the CKYH alliance, which is
comprised of Coscon, K Line, Yang Ming and
Hanjin Shipping. Evergreen and the CKYH
alliance already share four services on the
Asia-Mediterranean route. In total, the CKYH
alliance currently has five services offering
42,900 teu per week.
If CKYH were to join two of Evergreens
other services on this route, then the
alliance would be able to offer an additional
13,000 teu per week, reaching 56,000
teu. Hanjin already has an agreement with
Evergreen on both of these
services, while Coscon, K Line and Yang
Ming have agreements with Evergreen on
one of them.
The benefits for Evergreen of joining
CKYH may not be large, because Evergreen
already offers eight services on the route.
The Asia-Mediterranean route sees carriers vying for tie-ups to counteract
the impending dominance of the P3 Network. Sarah Bennett reports
BATTLE OF ALLIANCES
26 services and 281 vessels
Total average nominal weekly
capacity between Asia and the
Mediterranean is 214,400 teu
13,00015,999 teu vessels
represent the largest group on
this trade route with 30% of
capacity
DATA HUB
However, with the impending P3 Network,
CKYH may be looking to expand its
membership to maintain its market share.
According to prospective P3 Network
plans, each of its members will offer nine
services on the Asia-Mediterranean trade
route.
Currently, MSC offers six services, Maersk
five services and CMA CGM seven services.
Seven of these existing services are already
shared between two of the P3 members,
and altogether the P3 members currently
contribute 11 services with 126 vessels and
a weekly capacity of 112,403 teu.
In the P3 plans for this trade route, the
carriers have added new services, tweaked
existing ones to serve only the Asia-North
Europe route and adjusted existing Asia-
North Europe services to call additionally in
the Mediterranean.
If CKYH joined
Evergreens services on the
Asia-Mediterranean route,
the alliance would be
able to offer an additional
13,000 teu per week.
DATA HUB
TRADE ROUTES
10,000-12,999 3,000-4,999
5,000-7,499
7,500-9,999 1,000-2,999
% of total Asia-Mediterranean (teu)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
13,000-15,999
16,000+
7%
23.9%
24.1%
12.8%
29.8%
Figure 1: Teu range proportion among
Asia-Med operators
TRADE ROUTE INTELLIGENCE
DATA HUB
TRADE ROUTES
CMA CGM will offer seven new services,
with two of its existing Asia-Mediterranean
services no longer calling in the
Mediterranean. Maersk is offering one
new service and tweaking three of its
Asia-North Europe services to call in the
Mediterranean. MSC is offering three new
services.
Container supply and demand has
dropped since the summer peak in 2013,
but the overall trend is still showing an
improvement, year-on-year.
According to Container Trades Statistics,
monthly container volumes from Asia-
West Mediterranean were 10% higher in
the second half of 2013 compared with
the same period in 2012, but volumes still
dropped after August.
Cargo from Asia-East Mediterranean
and the Black Sea had a less dramatic
drop from the July high, however, on
average this was a 15% increase in the
second half of 2013 from the second half
of 2012.
Since August, service capacities have
also dropped slightly on this route, in
response to the downturn in cargo demand.
Weekly capacity fell 2.7% from 220,000
teu in August to 214,000 teu in September,
according to Lloyds List Intelligence data.
This was mainly due to the withdrawal of
the G6 Alliances ABX service at the end of
August, which offered a weekly capacity of
5,800 teu at that time.
This has left the G6 alliance with three
services on the route offering a total weekly
capacity of 20,500 teu. They have an
average vessel size of 6,800 teu, whereas
CKYH offers larger vessels with an average
size of 8,500 teu.
In contrast, the P3 members currently
offer an average vessel size of 10,200 teu,
with the largest vessel having a nominal
capacity of 16,000 teu, currently deployed
on the MSC and CMA CGM service Condor/
FAL1.
The CKYH service NE6 extended its
voyage time to 84 days in December, to
accommodate another vessel.
The 8,600 teu ship Hanjin Hamburg was
cascaded into the service joining 11 other
ships, of which nine are 13,000 teu.
As larger vessels are introduced into
service, overcapacity is being tackled by
network consolidation proposals such as
the P3 Network and the other carriers
response.
The final shape of the consolidated
market remains to be seen but there is no
doubt that major change is coming so that
carriers can remain competitive in this tight
margin industry.
0
20,000
40,000
60,000
80,000
100,000
120,000
G6 Alliance CKYH Alliance Maersk, CMA CGM,
MSC
Figure 3: Alliance capacity on Asia-Mediterranean route
0 10,000 20,000 30,000 40,000
Weekly capacity (teu)
ANL Singapore
Wan Hai Lines
PIL
NYK
HMM
APL
Hapag-Lloyd
China Shipping
Coscon
MOL
Zim
K Line
UASC
OOCL
Yang Ming
Evergreen Line
Hanjin Shipping
Maersk Line
CMA CGM
MSC
Figure 2: Weekly operated teu on Asia-Mediterranean route Source: Lloyds List Intelligence
IF A petrol station raises its fuel prices,
nearby garages are likely to follow suit.
When a big supermarket cuts prices on
certain products, competitors will almost
certainly take similar action.
So is this price signalling, which is illegal
in certain circumstances, or perfectly
healthy competition?
Leading container lines, now
under investigation by the European
Commission, will be arguing that when
they publish details of proposed rate
increases, they are simply advising their
customers. Brussels suspects there may
be an element of collusion, with some
underlying agreement or understanding
between carriers to track each other.
One problem of course, is that lines
never announce a rate reduction. They
would counter that there is no need,
since market forces invariably depress
rates within days of an effort to lift prices
to what carriers would regard as an
economically viable level. In other words,
each proposed rate increase is simply
a restoration move in an industry that
struggles to make decent financial returns.
But these general rate increases also
add to the volatility which both carriers
and their customers claim to abhor. That is
illustrated by the Shanghai Containerised
Freight Index where the China-north
Europe element swung from around
$700 per teu at the start to 2012 to a
high of almost $1,900 by the middle
of the year, then back to below $1,000
before bouncing up to $1,200 at the end
December.
The start of 2013 saw further recovery
to over $1,400 before what some have
described as the fastest price collapse ever
as Asia-Europe spot rates plunged to little
more than $500 by June.
Restoration efforts pushed rates back to
almost $1,500 in August. Then came the
inevitable slide to below $700 per teu,
followed by another round of rate rises.
The general rate increase notices
published by lines are similar in many
ways to those that conferences would
have issued in the past on behalf of
members. These days, each line acts on
its own, now that antitrust immunity has
been abolished in Europe. But the process
by which price adjustments are notified
is broadly unchanged from the days of
conferences.
That may be what has alerted Brussels,
which announced in November that it
had opened proceedings against lines
to investigate whether they engaged in
concerted practices, giving as an example
in a press release of carriers that operate
scheduled services between a range of
Asian ports such as Shanghai, Hong Kong
or Singapore and Rotterdam, Hamburg and
Southampton, publishing announcements
of their price increase intentions.
The move followed a series of raids on
the European offices of major container
lines in May 2011. While container line
bosses had hoped that no news was good
Container lines will be arguing that when they publish details of rate increases, they are simply
advising their customers. Photo: Claudio Divizia/Shutterstock.com
REGULATION/ANTITRUST
CARRIERS
Commission to
investigate whether
freight rate
announcements
represent unlawful
price signalling,
reports Janet Porter
EU ACTION HIGHLIGHTS
LEGAL GREY AREAS
news, senior commission officials had
made it clear that it would take at least
a couple of years to sift through all the
material seized.
Some 18 months after the unannounced
visits, Brussels confirmed that
investigations were still continuing, and
that the lack of communication in the
intervening period should not be taken as
a sign that the carriers were in the clear.
Just because DG Comp has been silent
does not mean nothing is happening,
Hubert de Broca, head of the competition
directorates antitrust, transport and post
unit, told Containerisation International in
late 2012.
The commission has been keen to
ensure that container lines, which enjoyed
an exemption from European Union
competition rules until 2008, had not
reverted to their old habits of sharing
commercially sensitive information or
co-ordinating price adjustments. During
the conference era, that was legal, of
course.
Although some lawyers felt Brussels was
taking far too long to complete the first
stage of the probe, given the uncertainty
that any such investigation leaves for
those under suspicion, there was not
much surprise in legal circles when the
commission finally said it was pressing
ahead with antitrust proceedings.
Those said to be part of the inquiry are
These sort of consortia arrangements
are broadly favoured by competition
regulators, because of the economies
of scale that can be achieved, as long as
these benefits are shared with customers.
Shippers also support them in theory,
with Global Shippers Forum secretary
general Chris Welsh saying recently that he
was not opposed to P3 per-se. However,
because it is a game changer in terms of
scale and scope, it still needed careful
analysis by regulators.
Conferences are different, with
members able to set freight rates together.
These arrangements were outlawed in the
European trades in October 2008 after
years of battling between shippers, carriers
and regulators. The commission issued
guidelines for container lines to help them
adjust to the new legal environment, and
continued to keep a close watch on their
behaviour.
The Federal Maritime Commission
attempted to analyse the impact of the
European ban on conferences, but an
accurate picture was almost impossible,
given that the legal change coincided
with the start of the banking crisis and the
impact that had on world trade. Freight
rates collapsed, but that was probably
more to do with the decline in cargo
volumes than a deregulated market.
For almost two decades prior to that, the
European Commission and cargo interests
on one side, and container lines on the
other, fought their respective causes.
By the time Brussels gained the upper
hand, with the closure of the Far Eastern
Freight Conference, the Trans-Atlantic
Conference Agreement and dozens of
smaller legal cartels that covered the
European trades, relations between the
two sides were at rock bottom.
With so many other issues to contend
with over the past five years, including
difficult market conditions, the arrival of
much bigger ships and the cascading of
smaller vessels onto other routes, and
then new-style consolidation through
giant vessel-sharing agreements such as
P3, lines have not given much thought to
the 2011 raids until the announcement of
formal proceedings in November.
That has been followed by state of
play meetings between commission
officials and individual lines to discuss
the allegations in more detail. Should the
European Commission still think there is a
China Shipping Container Lines, CMA CGM,
Cosco Container Lines, Evergreen Line,
Hapag-Lloyd, Hanjin Shipping, Hyundai
Merchant Marine, Maersk Line, Mitsui OSK
Line, Mediterranean Shipping Co, Orient
Overseas Container Line, NYK Line, United
Arab Shipping Co and Zim Line.
Most, although not all, have officially
confirmed their involvement. Neptune
Orient Lines appears to have escaped
Brussels scrutiny but its liner division APL
is named in a separate investigation by the
Russian antitrust authorities.
The countrys competition authority
said in late November that it had initiated
formal proceedings against a number of
global container lines that are accused of
price fixing.
The Federal Antimonopoly Service
decided to press charges after a series of
raids on the local offices of major carriers
earlier this year. Russia named the local
agents of Maersk Line, Mediterranean
Shipping Co, CMA CGM, APL, K Line, NYK
Line, OOCL, China Shipping, Hyundai
Merchant Marine, Zim, Cosco, Evergreen
and Hapag-Lloyd.
Neither investigation is related to the
proposed P3 vessel-sharing agreement
between the worlds three largest
container lines, or the expanded G6
alliance between half a dozen global
carriers that will cover all three east-west
trade lanes, if clearance is given.
The European Commission is keen
to ensure container lines have not
reverted to sharing information.
Photo: Harald Pettersen
CARRIERS
CARRIERS
case to be answered after these face-to-
face meetings, more detailed statements
of objections are likely to be sent out, after
which lines will have a fixed time in which
to respond to the charges, usually at least
two months.
Oral hearings may also take place, giving
carrier representatives the opportunity to
present their side of the case in person.
After that, Brussels will make its
decision, although the process can be
interrupted. Companies may, for example,
decide to admit guilt in return for a
reduced fine, or put up a robust defence
and do a deal with the commission.
Another option is for carriers to offer to
change market behaviour, in exchange for
avoiding a financial penalty.
Depending on the charges, the lines
caught up in this probe may respond
individually or together, if they feel there is
no conflict of interest between them.
If found guilty of anti-competitive
behaviour, companies can in theory be
fined up to 10% of their worldwide
turnover, although that has never
happened and this does not appear to be
a hardcore price-fixing cartel.
Some lawyers also think Brussels may
find it hard to prove a case against the
lines, and suspect that no hard evidence
of behaviour that has distorted the market
has been found.
Holman Fenwick Willan partner Anthony
Woolich says the commission has entered
a legal grey area, as there is very little case
law on price signalling.
The commission will need to show not
just that lines published their proposed
price rises, but that there was an
underlying agreement or understanding
that other carriers would do the same and
make similar announcements.
Investigators must also show that there
was a mutual understanding that other
carriers, when they saw a price signal,
expected to follow.
Although Brussels may not have found
evidence of malpractice during the raids
of May 2011, investigators must have
reasonable suspicion that there has been a
breach of the law, Mr Woolich says.
However, that did not mean they had
proof.
The fact that carriers rarely succeed
in sustaining higher prices for long will
not have a direct bearing on the case.
Brussels needs to show that an agreement
existed that had the object of restricting
competition, even if it was ineffective.
Others agree that Brussels may not
have any clear-cut evidence of a breach
of Article 101 of the Treaty on the
Functioning of the European Union and
of Article 53 of the European Economic
Area Agreement, which prohibits anti-
competitive agreements and concerted
practices.
The relatively novel focus of the
commissions investigation suggested that
their dawn raids did not uncover evidence
of more direct collusion, says Ian Giles, a
competition lawyer and partner at Norton
Rose Fulbright in London.
Brussels now faces an evidential
challenge to make out its case,
notwithstanding the apparent harm to
customers that price-matching by lines
could cause.
Mr Giles also says that although its
guidelines made clear that price-signalling
could breach competition rules, the
commission was bound by precedent at
the European Court of Justice.
In the landmark 1993 Wood-Pulp
case, the court dismissed allegations of
price-parallelism, saying this could only
breach the rules if collusion was the only
plausible explanation for parallel pricing
behaviour.
If the commission does not have direct
evidence of collusion, for example from
internal documents seized during the
raids, the lines can justifiably argue that
advance public notice of rate changes
helps customers plan, and is invaluable to
spot market traders, Mr Giles says.
Clyde & Co partner John Milligan
has also questioned the strength of the
commissions case.
Whereas private exchange of future pricing
plans would be unlawful, the allegation of
public exchange of such information on a
website is a new development and much
less clear, there being, amongst other things,
potential benefits to customers in comparing
prices, with many companies in different
sectors doing this, he wrote recently on the
firms website.
Despite plenty of doubts about the
strength of the European Commissions
case, container lines still face a long wait
before hearing whether or not they are in
the clear, given the process set in train by
the commissions November decision to
open proceedings against them.
If the commission
does not have
direct evidence
of collusion ...
the lines can
justifably argue
that advance
public notice of
rate changes helps
customers plan
Ian Giles.
PACIFIC International Lines, more familiarly
known as PIL, has carved out a strong
position in liner shipping.
It is currently ranked 16th in the world,
but without having become involved
significantly in the three major global
trade lanes. Originally a niche operator
starting off in southeast Asia, PIL has
now expanded to cover India, the Middle
East, Africa, Oceania, South America and
many points in between, and in a very
small way, the US west coast/Canada and
Mediterranean/northern Europe.
Its traditional container services are
supplemented by multipurpose services
from Asia to South and West Africa.
PILs first owned container vessel was,
like one of its then newly-established
contemporaries CMA, an ex-Manchester
Liners vessel, in PILs case the Manchester
Zeal. In the same year, 1981, the line
opened its office in Cecil Street, Singapore,
from where it continues to manage its
operations today.
Turnover reached $1bn in 2002, tripled
to $3bn by 2007 and by 2012 reached
$4.6bn, growth that many larger liner
companies must regard with envy. The
universally tough times of 2008-2009 did
not leave PIL unscathed but recovery has
been dramatic, albeit with some ups and
downs.
With a current fleet of around 175
vessels some 65% owned in line with
company policy offering 374,000 teu
capacity, its growth in the past two years
has been a heady 25%. There are a further
13 vessels totalling 51,000 teu, along
with two multipurpose units, on order for
delivery by the end of 2014.
PIL maintains that its opportunistic
approach to chartering and buying has
allowed it to take full advantage of
favourable charter rates and newbuilding
prices, an especially valuable feature
during the last two to three years of
extremely challenging conditions in many
of its areas of operation.
Initially, services were confined to
Indonesia and Thailand but expansion
since then has been dramatic. PIL now
boasts 26 weekly sailings from China
alone to a wide range of destinations, and
operates there through an extensive range
of offices.
Other services across its trading range
are provided to a regular timetable.
ANALYSIS/PACIFIC INTERNATIONAL LINES
CARRIERS
Line has had its ups and downs, but if it aint broke, dont fix it, writes Alastair Hill.
PIL UNDER
THE SPOTLIGHT
PILs fleet currently stands at 175
vessels, with another 13 on order for
delivery by the end of the year.
Reliability and frequency are major selling
points, but in some areas it does have
to take particular account of port delays,
draught limitations and infrastructure
availability.
Similarly, PIL has its own offices to serve
its major trading areas, ensuring strict
adherence to service levels demanded by
its customers, all supported by operational
and documentation systems, almost as
important to shippers as the shipping
service itself.
PILs strategy of operating many services
on a joint basis, or through slot charters,
mitigates the risks of being a standalone
provider but can limit rewards.
Notably, there is a 10 year strategic
alliance dating from 2009 with Wan Hai,
another focused liner company half as
big as PIL, which has maintained a strong
financial position through the recent
troubles in the industry and with which
the Singapore carrier operates many joint
services.
Uniquely among liner companies,
PIL owns a substantial stake in a major
container builder, Singamas, listed in Hong
Kong and owner also of numerous depots
in China, Hong Kong and Thailand.
Its first factory was set up in 1989 and
its Hong Kong listing dates from 1993.
With annual capacity in excess of 1m teu
from 11 factories, it is second only to CIMC
in global container manufacturers but has
seen a dismal half year in 2013 as demand
from lines and lessors has fallen in line
with the fortunes of liner companies.
As Singamas controlling shareholder,
PILs and Singamas fortunes are closely
linked. Analysts forecasts at the beginning
of the year at Singamas for growth in
prices and volumes have been dashed as
the market has remained subdued, with
first half results revealing a 35% fall in
turnover to $580m and a similar fall in
earnings per share.
Latest forecasts now indicate that
a weak second half of 2013 is more
than likely as customers have deferred
decisions on fleet renewal or expansion.
Many lines that at one time demanded
new or nearly-new containers for their
services have long since recognised the
need to accept perfectly serviceable but
older and therefore cheaper units for their
services.
Any optimism at Singamas is based on
seeing a revival in demand in the US and
Clearly, PIL has resisted the siren calls
from other shipping companies with an
eye on PILs strong and diverse business
seeking a merger or takeover. Equally,
PIL has so far rejected any approaches
from the financial community seeking a
lucrative public offering.
The low key, conservative yet
enterprising approach of PIL to its chosen
sector of global shipping has had no need
for the uncertain benefits of financial
engineering; as a private company it
enjoys the absence of scrutiny from
outside shareholders, few of whom may
have a real interest in or feel for shipping.
It has built a business without the
distractions of seeking publicity for its
achievements or its leadership and has a
structure that indicates permanence and
steadiness rather than the highs and lows
experienced by many of its peers.
Similarly, PIL has refrained from entering
the choppy waters often encountered with
takeovers and has elected to make its own
Europe, where the majority of customers
are located, with particular focus on
domestic units replacing life expired types
in the US.
For the family that owns the majority of
the company and is headed by 95-year-old
Teo Woon Tiong, also known as Chang Yun
Chung, the development of the enterprise
has delivered real wealth even in a
country like Singapore that has seen the
rise of many multi-millionaires and he
has made an award-winning contribution
to Singapore-China relations.
In the aftermath of World War 2, Teo
Woon Tiong developed extensive contacts
within his native China at a time when
travel to and from China was severely
restricted and time-consuming.
However, success came late in life and
Teo Woon Tiong was 49 before founding
PIL with a largely tramp and tweendecker
fleet. Containers had yet to become the
familiar sight they are today.
These contacts led to long-standing
and loyal followings among Chinese
companies which have grown in
importance on the back of Chinas stellar
industrial successes of the past 20 years
and contributed so much to the success of
PIL. Teo Woon Tiongs son, Teo Siong
Seng, is the current managing director of
PIL. He declined to be interviewed for this
article.
The admiration of its peers, competitors,
suppliers and customers is a compelling
demonstration that PIL is successful, but
how is that defined and where does it lead
the company?
Financially, the companys record
since 2009 has, albeit with some swings,
followed an upward path as shown in the
table below.
With proper respect for the value of
cash and tight control of operating costs,
PIL has built itself a formidable financial
position enabling it to grow its fleet and
expand its geographical spread without
threatening the whole structure.
Table 1: Pacific International Lines
financial results 2009-2012 (US $m)
2012 2011 2010 2009
Turnover $4,649 $4,414 $3,928 $1,915
Profits $178 -$99 $358 -$97
Net worth $5,771 $5,165 $4,857 $3,746
Cashflow $138 $44 $171 -$251
CARRIERS
way in the shipping world without the
distractions of acquiring and integrating
others.
Family ownership and respect for the
companys history and achievements and
an established and shared vision for the
companys future suggest there will not be
any significant divergence from its past.
So, where can PIL go geographically,
given that the major trade lanes, from
Asia to North America and Europe and the
transatlantic, are saturated with capacity
and beset by financial difficulties and offer
little scope for invention or initiative to
reward the obvious risks?
PIL has identified and entered trades
offering opportunities, particularly with
the backing of its customer base in China,
notably to South America, Africa and the
Middle East.
A quick look at a map reveals few
areas which offer the kind of growth
potential that has underpinned PILs past
expansion.
Its risk averse approach to entering new
markets via joint services or slot charters
has brought benefits and its diversification
into logistics and consolidation has been
to support its core liner business. Landside
developments may offer further openings
but are unlikely to have a major impact on
its results.
In the same way, its investment in
Singamas, with a 20% global share of
the market, has been complementary to
its liner operations although its customer
base goes far beyond serving its main
shareholder.
In fact Singamas may be seen as a
weak link in the group, having suffered
along with CIMC in the downturn and
almost certain to have a poor year in 2013
and 2014 being, perhaps, little better.
Furthermore, Singamas is not as cash
generative as PIL.
Singamas can therefore be considered
an underperforming asset for which
divestment may be an option but now may
not be the best time to test that particular
market.
The conclusion must therefore be that
PIL is likely to pursue its straightforward
and proven path of organic growth,
maintaining its flexible approach to
port selection, vessel acquisition and
deployment and rotations to ensure
it continues to follow its customers
demands and to maintain its prominent
position in its chosen trades.
Uniquely among liner companies, PIL owns a
stake in container builder Singamas.
Photo: Bloomberg
CARRIERS
Alastair Hill is a qualified accountant with
over 30 years experience in the container
shipping and wider transport industry
having started with Sea Containers in
commercial and business development
positions . He has worked forK Line UK,
UTT (Interbulk) in the Far East and other
tank and dry box lessors and managers.
He is an independent consultant/interim
manager and has also worked in Qatar
and Guyana on development projects.
THE VIEW FROM THE BRIDGE
INSIGHT FROM THE CSUITE /JOHN MEREDITH
EXTENSIVE quay length is a strategic asset
for container terminals seeking to handle
the most efficient mix of large boxships
and smaller feeders.
John Meredith, deputy chairman
of Hong Kong-based Hutchison Port
Holdings, believes that long, linear quays
and matching alongside container
stacking areas are winning ingredients
for ports that seek to handle ultra large
container vessels.
One of the biggest problems for ports
around the world even today, he says
is that they were built and set up for
general cargo, without a nice rectangular
shape for containers.
He adds: Ports had to be converted
from handling general cargo, where there
was no specific need for the efficiency of a
yard layout, to serving the requirements of
a modern containership.
Slowly, around the globe, ports had to
knock down offices, knock down sheds,
line up pavements and stacking areas in
order to meet the high productivity levels
required by a containership.
Dr Meredith believes that it is only
recently and normally associated
with big land reclamations that
custom-built ports have had the most
efficient layouts for container handling
productivity.
Dr Meredith cites Barcelona in Spain
as an example of where an old port area
originally designed to handle general
cargo underwent some subsequent
conversion work to handle containers.
It was only when we moved into
the new port zone of Barcelona, with
automated operations, that we swung from
reasonable productivity to nearly double
what we were doing before.
This was achieved by building from
scratch, in a reclaimed area, a proper
port facility designed for containers,
everything being rectangular-friendly, with
no buildings in the middle of the yard, a
completely clean-swept aircraft carrier
type deck.
Dr Meredith believes that the container
ports of the future will need large areas
with clear access to containers, and long
quays.
Those container ports with linear, mile
after mile berth length are going to be the
winners. Those that have rectangles and
come back on themselves we even see
this on the new Maasvlakte 2 development
A LONGING
FOR QUAY
LENGTHS
Hutchison boss John Meredith
speaks to Roger Hailey about
his vision as he assumes a new
role at the worlds largest
terminal operator
in Rotterdam are not going to be the
ports of the future.
Dr Meredith acknowledges that mile
after mile of linear quay line will not be a
practical option for most new ports.
However, those ports with the longest
and straightest possible quay line will be
able to serve the greatest number of ultra
large container ships and feeders at the
same time.
These monster ships are getting longer
and longer. Every time you think you have
got the length right, you dont, and you
have to add another phase, but in the
same straight line.
These new vessels love straight long
lines of berth length without suddenly
stopping for a rectangular. Obviously you
do need to come back on yourself up to a
point, if only for a breakwater.
NEXT MONTH:
ALE?????????? ? ?? ? ?? ? ?? ? ?? ?PE
HPH has made acquisitions of adjoining
berths in Hong Kong from other port
groups in order to achieve a longer linear
length for its terminals.
We acquired that particular two berth
operation because it gives us four long
berths in a line, which is what we needed.
There wouldnt be any point if somebody
gave us a 90 degree berth to the existing
two that we have.
Dr Meredith witnessed first hand the
development of container handling in
ports geared for non-unitised cargo.
When the first 20 ft containers arrived
in Hong Kong aboard general cargo vessels
in the early 1970s, Dr Meredith was not
convinced that the idea would last.
Each container had to be man-handled
because the ships were not designed for
these damn things and the shore-based
equipment was not very convenient
either. The boxes had to be lashed on
deck, and then there was the problem of
moving them around the tween decks. The
containers had wires on all four corners,
leading up to one central wire which went
up to the jib crane.
Each and every box would take around
15 minutes to put in place on board ship,
much longer than it would take to swing
cargo on board with a well operated ships
derrick system.
By comparison, HPHs semi-automated
terminal at Barcelona today can move
up to 52 boxes per hour, per crane. The
average around the world is 30 moves per
hour per crane, and rising.
Says Dr Meredith of the early box
experiment: Initially, there was a lot of
discussion about whether these things
would really ever work, and ultimately
they built cellular guide ships to solve that
particular problem.
But, at first, it was very hard to justify
how these things would be stowed on
deck and lashed down securely, jammed
between ships derricks and the side rails.
Apart from the physical labour involved
in moving boxes around the hold of a non-
cellular vessel, there was also the problem
of wasted space due to their rectangular
shape versus the natural curvature of a
ship. With general cargo, cartons could be
packed into every nook and cranny.
Adds Dr Meredith: We then handled
containers for the Tung Group because
Tung was converting some of his general
cargo ships with cell guides, to overcome
this problem of stowing them below deck.
But the problem on the quayside still
remained. The equipment tended to be
jib-operated cranes and it took a long time
before purpose built cranes came in.
An early trend was established, says Mr
Meredith: The ships, as even up to today,
tended to be the leaders and the ports
tended to follow.
Asked about mistakes made by
the ports industry with the advent of
containerisation, Dr Meredith remarks that
port operators were caught out by the
initial tariff structure associated with the
standard 20 ft box.
First of all we had a 20 ft box that was
8ft tall, and with a tariff rate set against it.
All of a sudden, the lines introduced an 8ft
6ins high box, which paid the same tariff
as before. The ports argued that the lines
There will be fewer
calls, but larger vessels,
but I think the market
will adjust, with
more cargo moving
because the box rate
is attractive enough to
encourage even more
global trade
were getting more cargo through, but the
lines replied that it was costing the ports
no more to handle it.
And then came the 9 ft box. The
container kept going up in height, but also
longer, to 40ft. The carriers again argued
that port operators had the same single
movement and so why should they charge
more for a 40 ft box than a 20ft?
As a result, port operators income
shrank because fewer container moves
were going through the port. The boxes
were bigger but the shipping lines were
not prepared to pay a differential for the
varying size of box.
So was established a bone of contention
between port operators and shipping
companies that still prevails today, in some
aspects.
Dr Meredith says that the growth in
global trade, and the increase in empty
boxes, allowed the port operators some
clawback, as they were still being paid to
handle a non-revenue earning container.
Looking back at an industry that now
accounts for 160m teu of revenue earning
container moves per year, Dr Meredith
believes that containerisation, from its
shaky start, will continue to grow, despite
some fundamental changes.
The shortening of ship commissioning,
from four to five years to less than 12
months, has seen a commoditisation of
the container market, which has changed
the economics of the shipping line supply
side.
Huge fortunes were made in the
old days by the shipowners, but that
is extremely difficult today, given a
commoditised market where they are all
vying for the same cargo.
Ports will continue to meet the
challenges of larger vessels, probably
beyond the current 18,000 teu benchmark.
I am very cautious now, because I am
one of the guys who said containerisation
was never going to work. With the value of
hindsight and with my lesson learnt from
before, I know that the world moves on.
Maybe the whole market will change.
There will be fewer calls, but larger vessels,
but I think the market will adjust, with
more cargo moving because the box rate is
attractive enough to encourage even more
global trade.
Dr Meredith, who saw the rise of the
private terminal operator as states began
selling port concessions in the 1980s,
believes that the US and some Asian
countries could benefit from a further
round of privatisation such as in Hong
Kong and the UK.
I still maintain that it is the best way
a state can go. The US, Japan and Taiwan
which still have the old system of a
state-operated port leasing out facilities
to shipping lines are running into
problems.
The need to make infrastructural
investments as the ports get older is
beginning to hit them. Somebody has
to fund that investment in dredging and
replacing equipment. The private sector is
better placed to do this work.
Although an advocate of private sector
involvement in ports, Dr Meredith believes
that some non-industry investors, such a
pension funds, paid well over the market
price, and now realise that.
Adds Dr Meredith: Everybody at the
time said what a smart idea it was: a good
long-term investment and steady cash
flow. But what they missed was the huge
multiples that these entities which were
HPH has acquired adjoining berths in Hong
Kong from other port groups in order to achieve
a longer linear length for its terminals.
Photo: Bloomberg
HPH has made acquisitions of
adjoining berths in Hong Kong from
other port groups in order to achieve a
longer linear length for its terminals.
not really structured in ports knowhow
and knowledge paid for some of these
assets. This is now coming home to roost.
The funds definitely disrupted the
market place because most of the big
operators like ourselves the people who
did it for a living were suddenly out of
the market. Most of the product that came
up for sale was quickly eaten up by these
funds and insurance companies.
Dr Meredith also holds strong views on
the mistakes made in both Europe and
Asia, regarding non-container handling
revenue streams.
Some ports in Europe and Asia are too
reliant on income from shipping groups. As
the lines consolidate, but are also pretty
financially strapped, it is extremely difficult
for port operators to get a decent income
from the shipping companies alone.
In Latin America the setup is much
better, from a port operators point of view.
Their income is derived as much, if not
more, from the landside operation, and
does not rely on shipping companies.
Because the landside operation is
spread over a wider group of people paying
their bills, it is a much better structure
CASCADE OF LARGER SHIPS
An increasing cascade effect will put
pressure on ports, in Latin America
for example, to accommodate larger
vessels when they have been happily
handling those with an 8 m draught.
And those ports which were relaxed
about whether or not they had a main
line call will find themselves under
pressure to develop new facilities or
they will find themselves marginalised.
ULTRA LARGE BOXSHIPS
There will be fewer ship calls but
larger vessels, and we have only to look
at the airline business to see the market
for bigger airliners.
If I had to make a bet, I would say
the market will adjust. There will be
more containerised cargo as a
result of the larger vessels coming
on stream.
Freight that did not go in boxes may
be containerised, because the rate is
attractive enough to encourage even
more global trade than before. But
whether the lines will make any money
out of it is a different matter.
PORT STRATEGIES
The biggest problem from a port
operators point of view is to get the
income needed from the shipping
lines to justify these long linear port
facilities, these new reclamations and
the investment in cranes.
20,000+ TEU VESSELS
The limitations are going to be
probably more on the seaward side,
with the Malacca strait and the
canals.
We have got the new Panama
Canal opening, probably in 2015, and
immediately half the worlds new
container tonnage cannot go through
it, because the new canal is not wide
enough.
FUTURE ROLE
If we are to develop further and further
afield, then a lot of my time is either
looking after the existing ports we have
and/or finding new ones.
It is very hard to do the role of both
chairman and managing director, so it is
time to split it up.
My deputy is coming in to assume
the role of managing director and I can
do what a chairman normally does,
the political side. Which is what most
organisations do.
Dr Meredith continues: We
had one occasion where I had to be in
Australia, Panama, the Bahamas and
London, all the appointments with
either presidents or prime ministers,
and all in the same week.
It is just physically impossible to do
that anymore, if at the same time you
are responsible for operating the ports
business.
DR MEREDITH ON....
for the port than relying on a dwindling
number of consolidating shipping groups.
And what is his view on the mega-
alliances of shipping lines; are they good
or bad for the container port operators?
They are good for some ports and bad
for others. Again, we go back to those long,
linear quays. Those ports that have got it
are going to be very favourably received
by the industry because they have the
ability to handle multi vessel interchanges,
which these guys want to do.
Those who dont have that ability are
going to be caught out.
Dr Meredith (left) at the opening of Brisbane Container Terminals: Its very hard to do the role of
both chairman and managing director, so its time to split it up.
BOX WORLD BRIEFING
HAPAG-Lloyd could achieve
its long-term goal of a stock
exchange listing next year
if plans to team up with the
container arm of Chiles
Compania Sud Americana de
Vapores are successful.
The two revealed that
they were in talks about a
possible merger in early
December, then signed a
non-binding memorandum of
understanding in late January
as negotiations progressed.
That paved the way for
due diligence to begin,
with each side opening its
books for the prospective
partners to examine the
others balance sheets,
look at customer contracts,
terminal commitments, ships,
and investment plans, and
sift through other usually
highly confidential corporate
information.
Only when both sides are
satisfied will the deal go
through and there are no
guarantees at the moment.
Hapag-Lloyd reached
the due diligence stage
in 2008 when Neptune
Orient Lines made a binding
offer, reported to be in
the 3bn-3.5bn range
($4.1bn-$4.8bn), before the
Singapore carrier pulled
out in October of that year
as the markets started to
deteriorate.
Germanys premier line
had been put up for sale by
parent company Tui, under
pressure from shareholders,
including Norwegian
shipowner John Fredriksen.
With NOL out of
the picture, a German
Hapag-Lloyd and CSAV courtship
signals new round of consolidation
consortium consisting of
local entrepreneur Klaus-
Michael Kuhne plus the City
of Hamburg rallied round
to keep Hapag-Lloyd out of
foreign hands.
But that solution was never
meant to be a long-term
arrangement, with Hapag-
Lloyds executive board
chairman Michael Behrendt
stating on numerous
occasions that an initial
public offering was the
eventual goal.
Choosing the right time
was the big problem, though,
with the volatile container
trades making it hard to find
a window of opportunity.
Hapag-Lloyd then
embarked on merger
negotiations with compatriot
Hamburg-Sd earlier last
year, with a combination of
the two lines looking ideal on
paper, given their geographic
proximity to each other and
compatible trade lanes, one
focused more on the east-
west trades, the other a
north-south specialist.
But by all accounts, family-
owned, debt-free Hamburg
Sd did not want to be a
junior partner in the enlarged
group, despite having a
smaller fleet than Hapag-
Lloyd, which ranks among the
top 10 in the world.
A year before Hapag-
Lloyds takeover talks with
NOL, Chiles CSAV had
stunned the industry by
ordering 12,000 teu ships,
and then booking more on a
long-term charter basis.
At that stage, only a
handful of carriers led
by Maersk, Mediterranean
Shipping Co and CMA CGM
had gone for vessels of
that capacity. Furthermore,
the Chilean line had no
significant presence in
the Asia-Europe trades
when it embarked on an
over-ambitious expansion
programme that pushed it
into the top 10 for a while,
but almost destroyed South
Americas largest shipowner.
Now under different
management and scaled back
to a much more manageable
size, CSAV has been looking
for partnerships that would
help it cope with a container
shipping industry that is
evolving into a small number
of powerful consortia.
Hapag-Lloyd is a member
of the G6 alliance, along
with Asian lines APL, OOCL,
NYK Line, MOL and Hyundai
Merchant Marine, that has
been strengthening its
partnership in the main
east-west trades in response
to the planned P3 vessel-
sharing agreement of Maersk,
MSC and CMA CGM. Both are
awaiting regulatory approval
before moving ahead with
their plans.
How the combination
of Hapag-Lloyd and CSAV
will work out, assuming
shareholders agree to the new
structure, remains to be seen.
But in a stock exchange
statement, CSAV said the aim
was to become a shareholder
in Hapag-Lloyd, with a 30%
stake initially, rising to 34%
after two planned capital
increases, totalling 740m,
to be competed within 12
months of the transaction.
The second fund raising
will be part of Hapag-Lloyds
stock market listing within a
year of the merger.
CSAV also said that that the
new company would become
the worlds fourth largest
container line, with combined
carrying capacity of around
1m teu, annual cargo liftings
of nearly 7.5m teu and yearly
sales of almost $12bn.
Together, the pair expect
to take some $300m of costs
out of the network, while they
also hope to upgrade their
fleet. CSAV has 9,300 teu
ships on order, while Hapag-
Lloyd is in the process of
taking delivery of a 10-strong
series of 13,200 teu vessels.
Janet Porter
CARRIERS
Hapag-Lloyd and CSAV began due diligence in late January.
BOX WORLD BRIEFING
Zim eyes brighter
future after
nancial rescue
ZIM Integrated Shipping
Services hopes that its
troubles are finally over and
that it can start planning
for the future after parent
company Israel Corp reached
provisional agreement with
creditors on a wide-ranging
debt restructuring package in
late January.
The Israeli lines financial
difficulties date back to
privatisation in 2004 and
a subsequent newbuilding
programme that coincided
with the start of the global
economic down turn.
That forced Israel Corp
to step in with a rescue
plan in 2009 that included
capital injections and lower
ship charter rates. But, still
weighed down by huge
debts, Zim continued to
underperform.
Under the terms of the
new settlement that Israel
Corp detailed in a filing to
the Tel Aviv stock exchange,
creditors have agreed to write
off a large amount of debt
in exchange for equity, and
postpone loan maturity dates.
The proposals still have to
be agreed by counterparties
but, if they are accepted, Israel
Corp will see its shareholding
reduced from 99.7% to about
32%.
Zims debts will be more
or less halved to $1.5bn, an
amount thought to be more
appropriate for the size of the
company.
Israel Corp, in which Sammy
Ofers younger son Idan is
the majority shareholder, will
also provide Zim with $200m
of fresh capital, and waive
$225m of deferred debts that
arose when ship charter rates
were reduced in 2009.
According to Lloyds List
Intelligence data, Israel Corp
is the owner of 41 ships
either in service or on order
for Zim. Under the provisional
agreement, shipowners that
are also interested parties
will receive charter rates that
are some $1,000 a day below
rates to be paid to those that
are not interested parties.
As well as Israel Corps
ownership of vessels that are
chartered to its subsidiary,
there are six still registered to
Sammy Ofer Group Monaco,
which is being split between
the late shipowners two sons.
Eyal Ofer, chairman of the
UK operation Zodiac Maritime,
is now also principal of
newly-formed Zodiac Group
Monaco.
Idan Ofer is no longer
associated with this business.
His shipping interests have
been transferred to Eastern
Pacific Shipping, Singapore.
Along with Udi Angel, Idan
Ofer also owns XT Group,
which has five ships on
charter to Zim, most in the
4,250 teu size bracket.
German and Greek
shipowners too have vessels
on charter to Zim.
The largest is the 5,527
teu Allegoria, owned by Peter
Dhle. A pair of 5,027 teu
vessels are chartered from
Erck Rickmers company ER
Schiffahrt.
Conti Holdings has two
4,860 teu ships chartered
to the Israeli line, Zim San
Francisco and Zim Ontario.
Rickmers Reederei has
chartered out the 4,350 teu
Zim Texas. A pair of 4,330
teu vessels operated by Zim
are owned by NSC Holding.
Reederei Claus-Peter Offen
also has a vessel in Zims fleet,
the 2,061 teu Santa Giorgina.
Greek owners are also
caught up in the restructuring,
with four 4,250 teu vessels
owned by Danaos, and Zims
fleet including a Costamare
trio of 4,800 teu ships.
The agreement paves the
way for Zim to return to the
shipyards with orders for
vessels in the 13,000 teu size
category.
Containerisation
International understands that
stakeholders have told Zim
they support fleet upgrade
plans and recognise the need
to acquire more efficient ships.
The Israeli line was able to
cancel orders for 12,600 teu
ships placed with Samsung
Heavy Industries at the height
of the market when vessels
of that capacity cost around
$170m.
Prices have since fallen by
some 40%, and Zims new
shareholders are expected
to give the go-ahead in the
coming months for a fresh
round of ordering that will
enable the carrier to stay
competitive.
Once the debt write-down
deal has been signed off, Zim
is expected to push ahead
with commercial development
plans. That includes closer
co-operation agreements with
other global carriers, and a
focus on expansion in trades
where Zim feels it already has
a competitive edge, including
the Black Sea and Pacific
north-west trades.
Earlier plans to split Zim
into two businesses, with an
eventual initial public offering
for the international arm, have
been dropped, with the Israeli
carrier to be kept as a single
entity.
Janet Porter
CARRIERS
Zim is expected to push
ahead with commercial
development plans once
the deal is signed off.
BOX WORLD BRIEFING
More Asia-Europe sailings cancelled
CMA CGM and its partners
have announced fresh Asia-
north Europe cancellations in
February, bringing the total
capacity to be removed from
the market during the month
to more than 13%.
The French carrier will
cancel five sailings during
February, anticipating the
reduced production during
the lunar new year period
in China starting February
4, and to adjust its offer to
meet reduced demand on
services out of China.
However, it plans to
increase the number of port
calls on other services to
maintain optimum coverage
during the period.
The services to be
cancelled are a sailing on
the FAL 1 service, leaving on
February 5; two sailings on
the FAL 7 service, one leaving
on February 4 and another on
February 11; one sailing on
the FAL 2 service, leaving on
February 12; and one sailing
on the FAL 3 service, leaving
on February 13.
CMA CGM offers seven
Asia-north Europe services
and one service that operates
from Oceania to north Europe
with stops in Asia.
It operates the FAL 1
service with United Arab
Shipping Co and the FAL 2
service with UASC and China
Shipping Container Line. FAL
3 is its own operation and it
takes slots on Mediterranean
Shipping Cos Lion Express
service for FAL 7.
CMA CGM is not the only
carrier to cancel sailings in
February.
The G6 Alliance will void a
total of three sailings during
the month and Maersk Line
will cancel four sailings.
The 12 sailing cancellations
announced so far by carriers
represent 13.6% of the
total average monthly vessel
capacity that operates on
the trade lane. There are a
maximum of 95 sailings that
encompass the trade lane
each month.
February is often the
slowest month of the year
for carriers operating on the
Asia-north Europe trade lane.
Container Trades Statistics
figures show that in February
2012, 595,680 teu was
transported on the trade lane.
That is 20% lower than the
monthly average for 2013.
The service cancellations
come as reports suggest that
there is a shortage of capacity
on the trade lane as shippers
rush to get cargo out of China
before the new year factory
closures.
Contacts have reported
that some shipping lines
are charging shippers and
forwarders extra fees to
guarantee their cargo is
loaded, even if they have
contracts with shipping lines.
This is not without
precedent. In 2010, Maersk
Line launched its Priority
Product upgrade, which
allows customers to pay extra
for priority loading when
space is tight.
The service comes with
a money-back guarantee if
cargo cannot be loaded.
The Priority Product
upgrade is only available at
the time of booking and is
not a replacement for your
ordinary contract, Maersk
Line said.
When you try to book a
shipment and find that we
are unable to accept your
booking due to high demand,
you will now be offered the
Priority Product upgrade
option.
So when a booking
rejection or a delayed
shipment would normally be
the only other alternatives,
we give you a choice to load
your cargo.
Damian Brett
CARRIERS
CSCL upgrades container newbuildings
CHINA Shipping Container
Lines has upgraded its five
18,400 teu newbuildings at
Hyundai Heavy Industries
to 19,000 teu, making them
the largest containerships in
the world, according to the
shipbuilder.
HHI said in a statement
at the end of January that it
commenced construction of
the first in the series of five
ships in Ulsan, South Korea,
scheduled for delivery in
November. The remaining
four will be hitting the water
by the end of the first quarter
next year.
CSCL in May 2013
awarded the worlds biggest
shipbuilder a contract worth
$683m, or $136.6m per
vessel, the lowest price paid
to date for vessels in the
18,000 teu+ range.
The deal, first unveiled
in a Lloyds List interview
with then-CSCL chairman Li
Shaode in April, came at the
same time as a similar order
by United Arab Shipping Co
to form an Asia-Europe string.
The extra capacity
comes with little cost, less
than $500,000, but it is an
optimisation that can be
achieved right away and
offers greater economy of
scale, a Shanghai-based
CSCL executive said. Such
an estimate would cap the
newbuilding price at $137m.
A spokesman at HHI
said the company had not
conducted similar upgrades
before and would only
know the exact price once
construction is finished.
The ships, measuring
400 m in length, 58.6 m in
width and 30.5 m in height,
will feature a 77,200 bhp
electronically-controlled main
engine and two EcoBallast
seawater treatment systems,
the shipbuilder said.
The main engine will
maximise fuel efficiency
and reduce noise, vibrations
and carbon emissions by
automatically controlling fuel
consumption to suit sailing
speed and sea conditions said.
Jing Yang
BOX WORLD BRIEFING
CONTAINER vessels remain
on course to plug the cold-
chain logistics gap presented
by a shrinking fleet of
conventional reeferships.
Analyst Dynamar predicts
that the conventional
reefer fleet will more than
halve to around 100m cu
ft in ten years, assuming
no substantial new orders,
equivalent to some 320
conventional reeferships.
Boxships continue to
grow in capacity, as does the
number of installed reefer
plugs on board them, while
the number of refrigerated
containers is also on the
increase.
Despite a 2013 moratorium
on new refrigerated boxes
Boxships to plug reefer gap
by Maersk Line, an estimated
200,000 reefer teu have been
manufactured, says Dynamar.
This puts the total reefer fleet
at 2.3m teu, each one making
a maximum five full voyages
per year on inter-continental
liner services.
With nearly 900m cu ft,
reefer container capacity
exceeds conventional space
by a factor of four and a half.
Dynamar estimates that
95m tonnes of cargo was
carried in non-reefer capacity
in 2013, or 2.5% of the
worldwide seaborne trade
of dry cargoes of all kinds.
It equals around 14,800
laden conventional reefer
ships of an average 500,000
cu ft capacity, or 3.1m fully
laden 40ft high cube reefer
containers.
Dynamar senior analyst
Dirk Visser said: In 2013 we
saw a promising start for the
conventional reefer operators:
full ships, high rates.
Expressed in time charter
equivalents per cu ft per day,
freight rates amounted to
$0.79 per cu ft for the smaller
vessel segment at the start of
the year.
This further increased to
a (non-weighted) average of
$0.90 for the first half, the
highest level since 2008.
In addition, they enjoyed
higher rates for the limited
reefer boxes their ships can
accommodate thanks to Maersk
Lines initiative to increases
reefer container freight rates by
$1,500 across the board.
The conventional sector
has continued losing cargo
to containers. Since 2012,
the number of boxships
operating on the reefer-
weighted south-north routes
has increased by 46 units to
nearly 780 vessels with an
average capacity for 4,100
teu, up from 3,800 teu.
All the boxships combined
on all routes offer space for
443,000 teu and 62,000
plugs per week. In all,
the carrying capacity gap
between the conventional
refrigerated fleet and the
reefer container continues to
widen, says Dynamar.
Roger Hailey
A PROMINENT shipper group
is urging the European
Commission to stop treating
shipping as a special case as
far as competition rules are
concerned.
The Global Shippers
Forum, which represents
cargo interests around the
world, has come out in
support of a repeal of the
block exemption currently
granted to liner shipping
consortia.
Consortia Regulation
No 906/2009 expires in
April 2015, and Brussels
is considering whether to
renew it or let the industry be
treated in the same way as
other sectors.
Shippers call for an end to EU consortia rules
At present, a shipping
line consortium has a
block exemption from EU
competition laws if its market
share is below 30%. A larger
alliance is not necessarily
unlawful, but members must
conduct a self-assessment to
ensure there is no abuse of
its dominant position.
Both the planned P3
Network between the three
largest container lines in the
world and the expanded G6
alliance would exceed the
30% limit on key trade lanes.
Some lawyers, who argue
that the rules should be
renewed, also want this
threshold to be raised to
bring it into line with other
jurisdictions where up to
50% may be permitted.
Consortia are co-operation
arrangements between
shipping lines, such as
vessel-sharing agreements,
that cut costs and improve
operating efficiencies.
However, members continue
to compete on price.
Brussels favours this
type of collaboration, but is
working towards a situation
where all industries are
treated the same.
The GSF has said that it
favours the commissions
general policy of
repealing sectoral block
exemption regulations. Its
recommendation was meant
to ensure that there will no
longer be any special treatment
of the maritime sector under
EU competition law, the group
said in a statement.
GSF secretary- general
Chris Welsh said: As it is
now well established what
the acceptable parameters
of consortia agreements
should be, there is no longer
any obvious need for a block
exemption regulation safe
harbour as self-assessment is
quite sufficient for standard
consortia agreements.
The GSF said the merits
of standard consortia
agreements still exist in the
absence of any BER.
Janet Porter
REGULATION
SHIPPER
QUESTION marks continue to hang over
the P3 Network as regulators in Europe,
the US and China take a close look at
the proposed tie-up of Maersk Line,
Mediterranean Shipping Co and CMA
CGM on the Asia-Europe, transpacific and
transatlantic trade lanes.
While regulators scrutinise the
alliance, lawyers are working behind the
scenes to ensure the network is or isnt
implemented, depending on whom their
clients are.
One law firm that has taken a close
look at the network, and what steps
the member shipping lines should take
to ensure it is given the go-ahead by
regulators, is McGuire Woods.
McGuire Woods partner and specialist
in European competition law Matthew
Hall says he expects the network to be
approved by Brussels, although he says
it may not be as straightforward as the
carriers are hoping.
Brussels-based Mr Hall says that
when examining whether an alliance or
partnership will be anti-competitive, it is
first necessary to establish whether it will
be covered by the European Commissions
block exemption for liner shipping
consortia.
In the case of the P3 Network, its market
share appears set to exceed the 30%
threshold limit set out in the regulation.
Passing on the benefits
However, Mr Hall says this does not
automatically mean that the P3 will be
banned by Brussels.
He explains that if the shipping lines can
show that the overall efficiencies they will
gain from the P3 Network will be passed
on to customers, they could be given an
exemption.
He explains: If you are looking at
co-ordination of timetables, space and
vessel pooling, short of price fixing, if you
are below 30% you get an automatic
exemption.
If an alliance is above 30%, the
members need to take their own view on
if it produces enough efficiencies to get
around the anti-competitive side of it, or
counterbalance the anti-competitive side
of it.
Looking at whether it would be suitable
for an exemption, the key is going to be
apart from dealing with those things
Matthew Hall points out that if the lines can
show that the overall gain from the P3 Network
will be passed on to customers, they could be
given an exemption.
Competition law specialist says he believes P3 Network will be approved in
Europe, but carriers may have to make adjustments, writes Damian Brett.
TIME TO COMPROMISE?
ANALYSIS/P3 NETWORK
CARRIERS
PSA_Powering_A4_FA.indd 1 20/3/2012 1:14:38 PM
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H H H H H
Thomas Riber Knudsen
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Pacic Region,
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Christian Brath
Head of Ocean
Transport Procurement
Asia, Nestle
Joyce Bliek
Director Containers
& Breakbulk, Port of
Rotterdam Authority
Tan Hua Joo
Executive Consultant,
Alphaliner
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around the edge like access to ports and
terminals and that kind of thing having
to prove that these benefits are going to
be passed on.
That means having to show that the
competition is out there or for some other
reason that they are going to pass on these
alleged cost savings and efficiencies.
Then you get into who their
competitors are and are they strong
enough to force the P3 carriers to pass on
those savings.
Mr Hall says that the very structure of
the network could cause some concern
around pricing. He explains having a
shared cost base could potentially give
rise to some pricing similarities.
Parties campaigning against the network
have already begun to suggest that the
efficiencies the lines will gain will not be
passed onto shippers.
In December, the German Shipper
Council (DSVK) said while the efficiencies
that the P3 Network will create will initially
be passed on, in the long term it will force
smaller players out of the market, leading
to decreased competition and higher
freight rates.
Taking a long-term view, the market
power created by the P3 can ultimately
lead to deterioration in quality and
service, DSVK said.
One area that Mr Hall feels the P3
carriers will need to pay especially close
attention to is access to terminals.
He feels that anything that may appear
to restrict other carriers from accessing
terminals operated by either Maersk Line,
MSC or CMA CGM will come under close
scrutiny from regulators.
Another area that may also be examined
is the sharing of confidential information
between the parties.
G6 Alliance response
Shortly after the P3 Networks
announcement, the G6 Alliance
announced that it would expand its
coverage to the transatlantic and Asia-
transpacific west coast trade lane.
Mr Hall says this announcement is both
good and bad news for the P3 Network.
The G6 Alliances decision to expand
could be helpful for the P3 as they can
say there has already been a reaction
in the market that is going to increase
competitive pressure and therefore
they can argue they are going to have to
exceed 80% on the transatlantic trade,
as it has been estimated, this could be a
cause for concern.
If you are looking at a market share of
that level between the two of them, I can
see that causing problems.
You are getting towards quite a
consolidated market there and the risk is
that its heading towards a duopoly.
They may not co-operate on price,
because in theory each party within the
respective consortia will be continuing to
compete on price, but it would be easy
for the two biggest players to withhold
capacity or share point-to-point routes, not
explicitly, but it is a lot easier for two parties
to reach implied agreement than if there
are a number of parties in the market.
So they are going to have to show
indeed the G6 as well that this wouldnt
happen because there are other smaller
parties out there that would be nipping at
their heels or that there are other parties
that could enter the market.
Compromise solution
Even if the the European Commission does
view some aspects of the P3 Network as
anti-competitive, this doesnt mean that it
will ban the partnership completely.
Mr Hall says regulators have the option
of requesting certain changes are made to
the alliance if it is to go-ahead.
These changes could be fairly minor
introducing new measures to ensure
information is kept confidential or could
be major, for instance saying the alliance
could go-ahead with two members, but not
all three, or that it can be implemented on
the Asia-Europe trade lane but not on the
transatlantic because of its market share.
The European Commission could
require modifications, Mr Hall says.
However, it is my instinct that it will not
block the whole partnership completely.
That would be my instinct, regardless
of the G6. There are obviously some
issues out there, but my instinct would be
that in this kind of a market, where there
seems to be a clear need for some kind
of consolidation and rationalisation, that
the P3 Network will ultimately be okay,
possibly with some fiddling around the
edges.
But there seems to be a lot out there
for people to use as ammunition against
it and those are the kinds of things the
members should be focusing on.
pass on the benefits they gain to their
customers, he says.
However, he adds that if the two
alliances combined market share does
ANALYSIS/P3 NETWORK
CARRIERS
June 18 2013
Maersk Line, Mediterranean
Shipping Co and CMA CGM reveal
plans to establish worlds largest
shipping line alliance, covering the
Asia-Europe, transpacic and
transatlantic trade lanes.
September 4 2013
Senior Maersk Line executive Lars
Mikael Jensen is revealed as chief
executive of the P3 eet operations
centre that will be set up in London.
October 17 2013
The P3 carriers unveil the headline
details of their proposed network
and reveal they are working towards
a launch during the second quarter
of 2014.
October 24 2013
The P3 vessel sharing agreement is
led with the US Federal Maritime
Commission and made public.
November 20 2013
The FMC reveals that it has met
senior executives from the three
P3 lines and extends the deadline
for public comment on the proposed
tie-up until the end of November.
December 3 2013
The G6 Alliance announces it will
expand to the transpacic west
coast and transatlantic trade lanes
to match the coverage of the
P3 Network.
December 5 2013
European Commission reveals that
it has been in contact with the P3
carriers and is gathering market
information.
December 6 2013
The FMC delays the eective date of
the P3 agreement in the US just two
days before it was set to go-live by
requesting extra information from
the member lines.
December 17 2013
The FMC meeting between regulators
from the US, Europe and China takes
place to discuss alliances. Ocials
outline their various regulatory
frameworks and the eects of carrier
co-operation on international trade.
P3 NETWORK
TIMELINE OF EVENTS
THE VIEW FROM THE
IT IS perhaps unfair that the Mediterranean
is lumped together as a single area. If you
include the Black Sea, it is the point where
the Middle East, North Africa, western
Europe, eastern Europe and Russia meet.
Therefore, it is hardly surprising that
performance within the Mediterranean
varies drastically, with each country
affected by the issues at work within the
regions to which they belong.
The container volume figures released
each month by Container Trades Statistics
are a testament to this. Although all
regions saw growth in 2013 compared
with 2012, this masks the fact that
compared with 2011, many countries saw
declines. For example, volumes from Asia
to the western Mediterranean and North
Africa in the first 10 months of 2013 were
down 14% on the same period in 2011.
In contrast, volumes from Asia to the
eastern Mediterranean during the first ten
months of 2013 were 3.4% ahead of the
2011 level.
Developments within the container
shipping industry also add to the mix, making
the region dynamic and difficult to predict.
One container shipping line operating in
this maelstrom of change is Turkish carrier
Arkas Line, which is owned by Arkas Holding.
As well as owning the shipping line,
Arkas Holding also operates Marport Main
Terminal and Marport West Terminal,
and owns feeder operator EMES, several
shipping agencies and various logistics
service providers.
Cascading opportunities
Arkas Holding chairman Lucien Arkas
admits that times are tough in the
Mediterranean. In fact, he says this is the
longest period of difficulty that he has
known during his 50 years in the industry.
The problems are largely created by too
many ships and weaker cargo growth a
problem repeated the world over. As a result,
carriers not traditionally associated with the
Mediterranean are expanding services in the
region in order to use up spare capacity.
Often the global operators use larger
ships, which offer better economies of
scale than the smaller ships.
But Mr Arkas says that there are still
opportunities. He also thinks many of the
larger operators misunderstand the market
and cant offer the expertise of regional
operators.
Many of the main shipping lines, apart
from perhaps Mediterranean Shipping
Co and CMA CGM, confuse intra-Asia and
intra-Mediterranean.
Its not the same thing because there
arent as many countries or as many people
and the distance between countries in the
Mediterranean is much less.
In intra-Asia you have much longer
distances and more volumes. You cant
compare the traffic between Turkey and
Spain with Japan and China. Its not the
same story.
They [the global carriers] are creating
disorder in the Mediterranean but they
dont know what they are doing. They are
all trying to find any box anywhere.
However, the larger vessel sizes being
used by the larger shipping lines are also
creating opportunities for regional operators.
One example is the Black Sea where the use
of transhipment is on the increase.
In the past they had ships of 2,500 teu-
4,000 teu coming directly from the Far East
to Ukraine, Romania and Russia, Mr Arkas
says.
But now, by increasing the size to
several thousand teu, they are too big
for these small ports. Then, they used to
tranship in Romania, but now even Romania
is out of size so they might tranship in our
terminal in Marport where we can take the
10,000 teu-12,000 teu ships.
Ups and downs
The Black Sea acts as a microcosm of the
wider Mediterranean, with the fortunes of
each country varying greatly.
One country that is experiencing growth
is Russia, says Mr Arkas, where containers
traditionally transported to the north and
then transported south are switching to
the Black Sea.
Mediterranean operators are facing up to the
challenge of weaker volume growth and vessel
cascading, writes Damian Brett.
BREAD FOR
EVERYBODY
MEDITERRANEAN OPERATORS/ARKAS
CARRIERS
Arkas: Its
been difficult
since 2008 but
we are doing
okay and we
are going to
live another
year or two
like this.
Mr Arkas explains that up until recently
the vast majority of Asian traffic destined
for south Russia would be transported
directly to St Petersburg.
But Arkas, and other shipping lines, are
now trying to re-route this traffic through
the Black Sea to reduce the distance
travelled and therefore overall costs.
At present, growth is being held back by a
need for modernisation of port facilities but
there are plans to upgrade Russias largest
box terminal on the Black Sea, Novorossiysk.
The plans will see Novorossiysk
Commercial Sea Port Groups subsidiary,
Novoroslesexport, increase its annual
container terminal capacity to 700,000 teu.
The project is planned to be completed
by June 2015 and will see berths dredged
and the purchase of additional storage
equipment, a third ship-to-shore crane and
two mobile cranes.
Russias leading box terminal operator
Global Ports is also keen to have a facility
on the Black Sea and could invest.
Moving to other countries on the Black
Sea, Mr Arkas says Ukraines potential is on
hold while the country decides whether it
grows closer to the European Union or Russia,
volumes to Romania are doing well since it
joined the EU and volumes to Bulgaria are
also increasing, although from a low base.
Mr Arkas says Poti in Georgia is
also experiencing growth by acting a
thoroughfare for cargo exported from Iran
across the Caspian Sea to CIS countries.
would compensate for it in the African
trades, Indian trades, South American
trades etc.
But when you put all the ships in all
the markets you create overcapacity
everywhere and then where are you going
to make money?
But they have to fill up the big ships first,
so lets hope they fill them up one day earlier
so they can relax and we can have peace.
Mr Arkas points out that the tough
market conditions will have lasted eight
years if, as he expects, the situation does
not improve before 2016.
We have to live with it. Its been
difficult since 2008 but we are doing okay
and we are going to live another year or
two like this. I dont see things getting any
better in the next two years, he says.
African adventure
So with the overall Mediterranean market
growing, but by weaker levels than in the
past and undermined by larger ships being
cascaded, how will Arkas Line continue
to expand in the future? Mr Arkas says
he sees lots of opportunities in western
Africa.
I think the new continent to be
discovered is Africa. Even Turkey is a very
active exporter to western Africa now.
To capitalise on the growth, Arkas Line
last year launched its second service from
the Mediterranean to West Africa.
The twice monthly service is operated in
conjunction with Marguisa Line, and CMA
CGM, which recently joined.
The service connects Algeciras and
Tangier to Bata, Malabo, Tema and Lagos.
But with western African volumes
growing quickly, isnt it only a matter of
time until more larger operators enter the
market to try and capitalise?
Mr Arkas points out that Maersk Line
recently re-delivered three of the five
ships Arkas Line had on charter to the
Danish carrier as it wanted to upgrade
vessel sizes on its West African services
from 1,600 teu to 4,500 teu.
These vessels are now being used on
West Africa services by Arkas Line.
African countries are building new
terminals and progressing, but you have
to be there. In five years time the big boys
will also be there. But fine, with 4,500 teu
they cant go everywhere in West Africa.
So we go where we can. There is bread for
everybody, he says.
Switching to North Africa, the situation
is clearly difficult as countries continue to
struggle with Arab Spring related troubles.
Mr Arkas says that Egyptian volumes are
okay, Libyan volumes are up and down,
Tunisia and Algeria are constrained by poor
infrastructure, but Morocco is doing well
because of its stability.
In the eastern Mediterranean, Turkey
continues to perform well, the Greek
economy continues to struggle and Syria
has well documented problems.
On the European shores of the western
Mediterranean, growth is constrained by the
recovering economies of Italy and Spain.
But they are big countries so they will
recover soon, Mr Arkas says. They just dont
have the volumes they had in the past.
Looking to the year ahead, Mr Arkas
thinks it will be another tough year as
carriers continue to cascade ships to the
Mediterranean. In order to fill up the huge
ships on the main east/west routes, they
cascade vessels to other trade lanes, but
this spreads the overcapacity all over the
place.
In the past, when the largest carriers
lost money in the Far East trade lanes, they
Arkas thinks many of the larger operators
misunderstand the market and cant offer
the expertise of regional operators.
MEDITERRANEAN OPERATORS/ARKAS
CARRIERS
Arkas Line fleet (January 2014)
Vessels Number Capacity
Owned 24 31,085 teu
Chartered 15 17,411 teu
Total 39 48,496 teu
RED Sea Gateway Terminal, at the Saudi
Arabian port of Jeddah, is on course for
further expansion to increase its flexibility
in handling the largest container vessels.
As a $540m greenfield project, with
commercial operations starting late in
2009, RSGT signed the first build, operate
and transfer agreement with the state-run
Saudi Ports Authority.
RSGTs 16.5 m deep water draught
facility handled around 1.4m teu in 2013.
The Jeddah Islamic Port box cluster DP
World and Gulftainer have terminals at
JIP processed a combined 4.6m teu last
year*, a 3.8% fall on 2012.
The shareholders in RSGT are three local
operators: the Xenel conglomerate
Saudi Industrial Services Co and Tusdeer
plus Malaysian Mining Corp, which is
a shareholder in the Malaysian ports of
Johor and Tanjung Pelepas, the latter being
the number 18 global box hub in 2012
with 7.7m teu handled.
RSGT chief operating officer Soren Hansen,
says: MMC is not actively involved in the
daily management and is a silent minority
shareholder. During the build up of the facility
here MMC provided some expertise but we
are a standalone entity, competing on equal
terms with Gulftainer and DP World.
Xenel built up a bonded zone near
Jeddah and decided that additional
container capacity was required at the port
to keep up with volume growth, hence the
development of RSGT on reclaimed land.
Mr Hansen adds: We have achieved a
lot over these past five years, not just the
volume growth, which is quite attractive,
but our current productivity levels are now
in the top league of international rankings
on performance.
Container dwell times at all Saudi Arabias
container ports are lengthened by the need
for a full inspection of all boxes entering the
country, with terminal operators working
with local Customs to facilitate the process.
Storage charges are retained by Customs and
not the terminal operators.
Says Mr Hansen: Each operator has their
own customs group and we are very proud
of the relationship we have with ours, where
we have found ways to set up a one stop
shop for all carriers, and set up a joint training
programme with customs employees.
Dubais DP World operates the South
Container Terminal at Jeddah, a concession
acquired in 1999, while June 2013
saw ambitious UAE-based ports group
Gulftainer assume management control
of the Northern Container Terminal after
buying a 51% stake in Saudi Arabias Gulf
Stevedoring Contracting Co.
In a 2013 year end report** on the
Middle East, UK-based Ocean Shipping
Consultants found that in the decade to
2012, throughput grew most rapidly in the
Red Sea range, at 311%, to reach 6.6m
teu. Growth accelerated from 3.7% in
2011 to 14% in 2012.
The report states: In the Red Sea range,
capacity utilisation is set to improve also,
and is likely to remain most stable across
demand cases. This is because this range
will be least affected should development
follow the path of the increased direct-
service case, as this range is most focused
on gateway traffic.
OSC said that at Jeddah, the principal
gateway port and transhipment hub on the
Red Sea, container throughput increased
by 301% over 2001-2012, and by 63%
over 2006-2012 to 4.7m teu.
The consultancy states that 43.5%
of 2012 throughput at Jeddah was
transhipment: The port is a hub for
transhipment to and from east African and
other Red Sea ports, and has recently been
the recipient of traffic diverted from El
Sokhna, due to disruptions at the port.
The anticipated completion of a rail
Volume growth feeds investment in infrastructure, writes Roger Hailey.
JEDDAH EXPANDS
TO MEET DEMAND
SAUDI PORTS/JEDDAH
PORTSIDE
The planned expansion at RSGT
will put in place the quay lengths
outlined for the original project.
Photo: RSGT
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landbridge between Jeddah, Riyadh and
Dammam in 2015 will provide a further
boost to demand.
Gulftainers group managing director,
Peter Richards, says of the companys
Jeddah facility: At NCT we have increased
the productivity by 28% since June [2013]
and we are looking to grow the volumes
there quite considerably.
Gulftainer is looking to invest around
$200m in its new Saudi portfolio, Jeddah
and Jubail, bringing in two new gantry
cranes at Jeddah by the end of this year, as
well as two large harbour cranes plus the
back up equipment.
Mr Hansen of RSGT recognises that
the container industry is undergoing
substantial change: Not only are the
shipping lines realigning but also
competition is now being added in this
market with King Abdullah port becoming
operational. Bigger ships are coming in
and we need the right to serve major
customers keep getting bigger and bigger.
He adds: We are very proud of what
we have achieved so far, but during that
period the average size of vessel coming
into Jeddah has increased and we need
to extend our current facility to offer
a competitive product to alliances or
individual shipping lines.
Presently, RSGT has seven regular calls
by fully-laden 13,000 teu or larger vessels.
The planned expansion at RSGT will put
in place the quay lengths outlined for the
original project, which were scaled back.
You can refer to it as an expansion, but I
would call it the completion of the original
project. We intend to expand our existing
feeder berth by 150 m to accommodate
8,000 teu or even slightly bigger vessels
on the feeder berth, essentially to become
a new main berth.
And on the main berth we would like to
serve two mega vessels at the same time.
We can do that today, but it is constrained.
We want more flexibility on the main
berth, to handle an 18,000 teu and a
14,000 teu vessel at the same time.
The RSGT management team hopes to
award the contract both for the construction
and supervisory work in the first quarter
of this year. The work will be carried out in
two phases, first on the feeder berth and
then along the main berth, with a 12 to
18 months delivery time, and all the work
complete by mid-2015.
The phasing and engineering aspect
of the work the terminal is on building
blocks and can be extended from the
main quay without need for a marine
approach and pile driving should make
it interruption free for container handling.
Asked about the King Abdullah Port to the
north (see side panel), RSGT acknowledges
the challenge posed but Mr Hansen states:
I think that there is a need for both ports.
Given the current growth rate for this market,
more capacity is needed, so I hope that
the two ports will complement each other
in the long term and will be a good value
proposition for the end customers.
JIPs main market is the industrial zone
cluster to the south, where most of the
warehousing and industry is located,
a good distance from KAPs potential
hinterland and thus making the new mega
port less attractive for gateway local cargo.
Most observers believe that the
presence of Terminal Investment Ltd, with
close links to Mediterranean Shipping Co
the worlds second largest container carrier
will provide more of a transhipment
opportunity for KAP.
On the long term prospects, and with
the proposed Saudi rail landbridge, Mr
Hansen says: One of the biggest markets
in the Kingdom is Riyadh, and having
that landbridge would enable Jeddah to
compete more actively for Riyadh cargo
than we do today.
If look at the [proposed] P3 alliance and
the big containerships, then these vessels
require a big hinterland market to justify
a call.
At Jeddah, we are getting into a size of
the market that is close to 5m teu and a
mix of gateway and transhipment traffic,
with Maersk Line alone at 1m teu, and so
having a landbridge will definitely further
our attractiveness to the shipping lines.
He continues: Five years from now, with
the landbridge established, the rate of
population growth, the size of this market
and the availability of government money,
then this is going to be a very attractive
place for shipping lines.
If the big Asia-Europe vessels are going
past here anyway, it is a quick stopover on
the sailing route, a quick in and out. The
landbridge will help us position Jeddah as
an attractive place for shipping lines for
direct services. And with the developments
at RSGT right now we will be able to
service these big ships.
From the look of it, we will be, with KAP,
the only ones to accommodate these big
ships on a regular basis.
*Source: Saudi Ports Authority
**Source: Middle East container port markets to 2025
SAUDI Arabias newest container
gateway, King Abdullah Port on the Red
Sea, handled its first export cargo in
January 2014 when 54 containers of
polymer material heading for Singapore
were loaded onto the 14,000 teu
capacity MSC Daniela.
KAP, described as the Saudi Arabias first
privately owned and funded port, is keeping
an initially low press profile for the moment,
but it is not a mirage and the intention is to
serve the East-West transhipment of cargo
as well as the domestic volumes.
With a first stage 2.7m teu capacity,
the port is located 100km north of
Jeddah, Saudi Arabias largest gateway
with 4.3m teu in 2013, a 3.7% decline
on the prior year*.
NEW KID ON THE BLOCK
Multi-purpose KAP with ro-ro,
automotive, bulk, general cargo and
container terminals is being built by
Ports Development Co, a joint venture
between the Saudi Binladin Group and
Emaar, the Economic City.
EEC is the master planner of King
Abdullah Economic City, a $50bn
development project covering 168m
square miles, developed over three
phases, with completion earmarked for
2020.
Netherlands-based ports group
Terminal Investment Ltd, with close
links to Mediterranean Shipping Co, is
involved in the KAP container terminal
development project.
*Source: Saudi Ports Authority
SAUDI PORTS/JEDDAH
PORTSIDE
Low-key start for King Abdullah Port
THE impact of the possible
entry into force of the
International Maritime
Organizations Ballast
Water Management (BWM)
Convention is a subject that
warrants greater attention
and greater understanding.
It will only take a few more
countries ratifications to
cause the convention to come
into force.
The IMOs amendment of
the conventions schedule
for the required installation
of ballast water treatment
technology will be
Recent testing
corroborates
concerns that
current IMO
type-approvals
do not provide
confdence
that treatment
systems meet
the IMO
discharge
standard
welcomed. However, this
change does not remedy a
significant problem with the
convention.
The convention requires
not only that a vessel install
a ballast water treatment
system that has been type-
approved, but also requires
the water discharged from
that system to meet the
conventions numeric
discharge standard.
Unlike some other IMO
requirements, installation
of a type-approved system
is not enough by itself. The
GUEST COLUMNIST
BALLAST CONVENTIONS
BILLION DOLLAR BILL
Treatment type-approval remains a problem, writes Christopher Koch.
GUEST COLUMNIST
Christopher Koch is World
Shipping Council president
and chief executive
system must perform so
that the discharged water
actually meets the standard.
The convention makes the
ship responsible for the
technologys performance.
Vessel operators will be
required to invest many
billions of dollars in ballast
water management systems
to comply with the BWM
convention if and when it
enters into force.
In return for this
investment, vessel operators
need to have confidence
that installing an IMO
type-approved treatment
system will allow their
ships to comply with the
BWM convention discharge
standard. A shipowner today
can have no such assurance.
It is this same problem
that led the US, which has
accepted the conventions
discharge standard for its
national regime, to require
treatment technologies
to be tested using a more
refined and rigorous set of
testing procedures if they
are to receive US type-
approval.
These more rigorous
procedures, known as the
Environmental Technology
Verification protocol, were
developed because of the
recognised shortcomings of
the current IMO guidelines.
The US will not allow a
vessel owner to meet its US
legal obligations by installing
a ballast water treatment
system that is only type-
approved under the current
IMO testing guidelines,
because the current IMO
type-approval guidelines are
considered insufficient to
ensure that a system meets
the conventions discharge
standard.
Instead, US law requires
the installation of ballast
water treatment systems
once such systems have been
US type-approved under the
ETV protocol.
Recent testing corroborates
concerns that current IMO
type-approvals do not
provide confidence that
treatment systems meet the
IMO discharge standard.
Three ballast water
management systems, which
have already received IMO
type-approval based on
the current IMO testing
guidelines, have been tested
under the more refined ETV
protocol. Each of those three
systems failed to meet the
IMO discharge standard. The
problems with the current
IMO guidelines are real and
require resolution.
This is not solely a
US-centric concern or
problem.
Shipowners and operators
need and deserve a
regulatory regime under the
convention that ensures that
treatment systems that are
IMO type-approved will in
fact reliably and effectively
meet the mandatory
discharge standard.
A regulatory regime that
requires vessel operators
to invest billions of dollars
in treatment technology
and that holds vessels
legally accountable for the
technologys performance,
but which type-approves
treatment technology that
fails to achieve the required
performance standard,
would obviously create an
untenable situation for ship
owners. That is the IMO BWM
convention regime as it
stands today.
Unless this problem of
issuing type-approvals to
systems that may not perform
is addressed before the IMO
BWM convention enters into
force, shipowners will face
two serious problems.
The first problem is that
their billions of dollars of
investment in type-approved
treatment technology may
not put them in compliance
with the Convention.
The second problem is
that they could be required
by the convention to
install IMO type-approved
systems that may prove
unusable in the US if the
BW treatment system fails
to meet the IMO standard
when tested under the ETV
Protocol.
A system that is found to
fail the IMO standard may
be deemed unacceptable in
other port States as well.
The fact that the
convention has not yet
come into force provides an
opportunity to address this
problem before the industry
is placed in an untenable
position. Whatever solution is
ultimately adopted, this issue
warrants the attention of the
IMO to find a resolution.
Vessel operators will be
required to invest billions
of dollars in ballast water
management systems.
Photo: Dietmar Hasenpusch
GREATER care of reefer
equipment and attention to
the accuracy of information
pertaining to cargo are crucial in
avoiding damage to and loss of
perishable goods in transit.
Temperature controlled
cargoes are inherently
perishable and present greater
challenges and risk exposures
for the logistics operator than
ambient cargo.
As the worlds specialised
reefership fleet declines, it is
predicted that containers will
be utilised for up to 75% of all
maritime temperature-controlled
cargo shipments by next year. So
the process of correctly packing,
handling and monitoring
refrigerated containers and their
cargo is one that will continue to
demand attention.
While perishable cargo is
often high-paying freight, it
can also give rise to high-value
exposures; a container of lobster,
for instance, could hold a value
nearing $500,000, giving
adequate incentive for extra care
to be taken.
As an insurer of this supply
chain process, TT Club has
experience of how things can
go wrong, sometimes as a result
of the most straightforward of
errors or misunderstandings.
We find that the majority
of insurance claims involving
perishable cargo occur due to:
Confusion over Celsius and
Fahrenheit
Poor communication of
requirements (plus versus minus
temperatures)
The container not being
monitored or plugged in
throughout its journey
Across Europe we have
experienced instances of
ambient cargo, such as bread
and chocolate, being mistakenly
shipped in deep-freeze
conditions, which has resulted
in a dramatic deterioration of
the cargo, leading to claims of
total loss.
Conversely, and perhaps more
commonly, we experience cargo
such as fish, animal carcasses
and dairy produce which
should be shipped under deep-
freeze conditions, below -18C,
which arrive at the consignee
for example at +18C. Such
issues inevitably result in the
consignee rejecting the cargo
and potentially significant claims
exposures, not just for the value
of the cargo but also the costs of
disposal.
There are innumerable
opportunities throughout a
supply chain for such errors,
which can be catastrophic in
terms of the sound condition of
the cargo.
Often the simplest of errors
result in high-value claims
from cargo owners. Foodstuffs
especially are subject to
stringent restrictions to ensure
safety through the food chain.
These will often dictate that
even the smallest abuse in
temperature can result in the
refusal of cargo condemned as
unfit for consumption.
Hopefully, these experiences
can help point the way for
forwarders, carriers and logistics
operators to avoid such cargo
loss. In the first instance it is
vital to know the shipper when
handling temperature controlled
cargo. It is fundamentally the
responsibility of the shipper to
provide specific instructions
and requirements regarding the
carriage of the cargo, which the
forwarder needs to understand
correctly.
It is increasingly the case,
however, that the shippers
responsibility is delegated to
the logistics service provider,
not least when full supply
chain managed operations are
undertaken. In these cases the
PROBLEMS WITH
REEFER BOXES?
PERISH THE THOUGHT
TT Clubs claims executive, Mike Yarwood, outlines the
key elements in managing risk and minimising claims.
operator assumes responsibility
for the entire supply chain.
Whatever the circumstance the
logistics provider should actively
seek advice, clarification and
agreement from the shipper
regarding such requirements,
and contracts specifying these
should be regularly checked,
especially at renewal.
It should also be noted that
industry regulations and
therefore carriage requirements
have the potential to change
fairly regularly for perishable
cargoes. A useful guide to such
regulations is IATAs Perishable
Cargo Regulations (PCR) manual.
While produced mainly for air
cargo specialists it has useful
guidance for transport by all
modes. It provides an outline of
the most current and efficient
practices for perishable cargo
operations including foodstuffs
and pharmaceuticals.
Thus, for the majority of
cargoes, the shipper will
declare a set temperature
at which the cargo is to be
maintained throughout the
duration of the transit. For less
sensitive chilled cargo, a range of
GUEST COLUMNIST
Know your shipper
Understand the correct
requirements for the
specific cargo being
transported and verify
them
Ensure accurate
information is
passed through the
contractual chain
Ensure equipment
is in good order and
monitor the entire
cool chain
While produced mainly for air
KEY POINTS
GUEST COLUMNIST
There are
innumerable
opportunities
throughout a
supply chain for
errors, which can
be catastrophic
in terms of the
sound condition
of the cargo
Mike Yarwood is claims
executive at the TT Club.
acceptable temperatures may be
stipulated.
In either case when sub-
contracting transport moves,
whether short inter-depot
transfers or global containerised
movements, it is essential to
ensure that clear and accurate
written instructions are passed
down the contractual chain.
The margins for error are
often very small, the difference
between minus and plus
temperature can be easily
confused in communications
and will likely have catastrophic
effects on the cargo. Freezing
an ambient cargo can be just
as damaging as overheating
a frozen cargo. Accurate
transmission of the temperature
settings through the supply
chain is clearly critical.
While the Centigrade scale
is most widely used and
recognised globally, the US for
example uses Fahrenheit. Adding
to the confusion, 0C is a widely
recognised temperature setting
for chilled cargoes, whilst 0F is a
widely recognised temperature
setting for frozen cargoes. Again,
accurate communication is the
key to avoiding potential
losses.
Once the shipping
instructions have been made
clear, the container needs to
be functioning properly. Reefer
equipment should be regularly
inspected for conformity,
especially prior to loading and
such units should be serviced
and maintained regularly. Visual
checks for damage should also
be carried out prior to packing.
Damage to the internal vents,
perhaps caused by previous
poor stowage, can severely
affect the efficiency of air flow
through the transport unit, which
in turn can result in the actual
temperature never reaching the
set point.
It is also essential to check
regularly that the data logger
equipment is fully functional.
As technology has developed in
recent years, it is now possible to
monitor this data remotely and
even for warnings to be raised
when temperatures fluctuate
unexpectedly. However, such
technology is of little value
if the data logger itself is not
operational.
Pre-packing checks and
correct packing also play an
important role. The transport
unit should be in good condition,
clean and free from odour. The
cargo must be evenly distributed
with due care taken to ensure
a free flow of air and pallets
stacked safely and securely.
Crucially, cargo should be
cooled to the desired carrying
temperature prior to loading. The
reefer unit is not intended to cool
cargo down, merely to maintain
the set point temperature. At TT
Club we have found that cargo
packed at elevated temperatures
is one of the leading causes of
cargo claims.
Where cargoes are stowed
at an elevated temperature,
the result is often that the
data logger will continue to
record higher than expected
temperatures for an extended
period through the early stages
of transit.
While in some less dramatic
examples the temperatures and
recordings do reach set point
after a number of hours, we have
experienced instances where
the set point temperature is
simply never achieved. Cargoes
are consequently rejected by
the consignee, leaving the
carrier in an unenviable position
given that he has adhered to
instructions and all his records
evidence that the unit was set
correctly.
The data logger however is
registering and recording much
higher temperatures. The initial
view following such an incident
is often that the equipment is
at fault. This, coupled with the
data logger records, provide
the consignee with a legitimate
argument to reject the cargo.
In such disputes, the party
responsible for packing cargo at
an incorrect temperature simply
remains silent, relying on the
data logger records as a defence
to any potential claim.
Through post-incident
investigations we also see
evidence of unexplained breaks
in the cool chain. Where frozen
cargo are concerned, such breaks
in the cool chain can result in
freeze-thaw activity, which can
render a cargo a total loss due to
the onset of ice crystallisation.
Such temporary breaks in the
cool chain can be attributed to
drivers physically switching the
reefer unit off during rest periods
or breaks in power supply
between modes of transport.
When running, a reefer unit can
be noisy and therefore difficult
to sleep through; whilst they are
certainly much quieter when
switched off, they tend to be less
effective.
Whilst prevention is better
than cure, if things do go wrong
when dealing with temperature
sensitive cargo, time is of the
essence. Timely intervention
after an issue has been
discovered can have a dramatic
effect in mitigating a potential
loss.
Further, following discovery of
an issue, appointing an expert to
attend and assess a cargo which
is alleged to have suffered
temperature abuse can often
result in at least a portion of the
cargo being either accepted or
saved by means of a salvage
sale.
Simple mistakes like
confusing Celsius and
Fahrenheit can have a huge
impact on the condition of
the cargo.
SHOW ME THE MONEY!
MORE ONLINE AT
CONTAINERSHIPPING.COM
UNITED Arab Shipping Co has
closed a $1.2bn syndicated
multi-tranche loan facility to
help finance its orderbook.
The loan facility is part of a
larger $1.7bn debt financing
related to UASCs $2.3bn capital
expenditure programme for
17 newbuildings, including 11
vessels of 14,000 teu and six
18,000 teu ships.
The 17 vessels include 10
vessels for which shipbuilding
contracts were signed five
18,000 teu and five 14,000 teu
vessels and seven options.
The options are still being
considered.
The $1.2bn facility finances
75% of the cost of the vessels
and is comprised of a $439m
commercial bank tranche, a
$300m Saudi riyal equivalent
tranche and a $512m tranche,
95% guaranteed by Korea Trade
Insurance.
It covers seven of the 14,000
teu vessels and five of the
18,000 teu ships.
The $493m debt financing
for the remaining five vessels is
expected to be secured shortly
under seperate facilities.
UASC said the facility was
oversubscribed by 2.2 times. All
tranches are to be fully repaid
within 12 years from drawdown.
UASC chief financial officer
UASC SECURES
LOAN TO
HELP FINANCE
NEWBUILDINGS
$1.2bn facility nances 75%
of the cost of the vessels,
writes Damian Brett
UASCs new vessels will be some
of the most technologically
advanced and environmentally
friendly containerships yet built.
Photo: Dietmar Hasenpusch
Basil al-Zaid said: In a capital-
intensive industry like container
shipping, it is critical to invest
in new assets to keep up with
market growth and to expand.
The unwavering commitment
of our shareholders as well
as the excellent support from
our regional and international
lenders has been fundamental
to the successful closing of this
facility.
The oversubscription to the
Facility by 2.2 times also shows
the financial strength of UASC.
Deutsche Bank and Qatar
National Bank acted as joint
lead underwriters and lead
bookrunners for the facility.
Lenders for the $439m
tranche include QNB, Arab
Banking Corp, Ahli United Bank
and Deutsche Bank, each acting
as a mandated lead arranger.
DVB Group Merchant Bank (Asia)
and BNP Paribas each acted as
an arranger.
Bank Saudi Fransi underwrote
the $300m tranche and acted
as bookrunner, co-ordinating
mandated lead arranger, facility
agent and account holder.
Lenders in the $512m
tranche, which was secured
in mid-November, included
Credit Suisse, which acted as
co-ordinating mandated lead
arranger, Bank of America,
National Association, ING Bank,
London Branch and Socit
Gnrale, each of which also
acted as a mandated lead
arranger.
Standard Chartered Bank acted
as lead arranger while Deutsche
Bank, Hong Kong Branch, BNP
Paribas Seoul Branch and DVB
Group Merchant Bank (Asia) each
acted as an arranger.
UASC president and chief
executive officer Jorn Hinge said:
As the UASC vision is Linking
the Middle East to the World,
we appreciate especially that
numerous regional Middle East
banks have been involved in
supporting this facility.
We are first-movers with
these green newbuildings that
will be equipped for LNG duel
fuel for the first time in the long-
haul container trades.
UASC is proud to continue
its commitment to energy
efficiency and environmental
friendliness.
Hyundai Heavy Industries
announced at end-August that
it had won an order from UASC
to build five 18,000 teu and five
14,000 teu ships, with options
for another 18,000 teu and six
14,000 teu ships.
The vessels, including six
under construction at HHI and
the rest at Hyundai Samho Heavy
Industries, an HHI subsidiary, are
due for delivery from November
2014 to January 2016.
The price of the 18,000 teu
newbuildings is considerably
more than the amount China
Shipping is paying for ships of
similar capacity. Brokers have
indicated a price close to $150m
apiece against China Shippings
$136.5m.
However, the vessels
will be some of the most
technologically advanced
and environmentally friendly
containerships yet built.
For instance, they are
prepared for easy retrofitting for
using LNG fuel in the future. Mr
Hinge said in October they could
be switched to LNG ver early in
their lifespan.
The deciding factor will be the
availability of LNG fuel, but once
the necessary infrastructure is in
place at either end of the Asia-
Europe trades where the ships
will be deployed, UASC will be
ready to make the change.
The vessels are also less
expensive than the $185m that
Maersk Line paid for each of its
Triple-E ships.
The 18,000 teu ships will
be pooled with the six 18,000
teu vessels ordered by China
Shipping and used on an Asia-
Europe service.
C
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POR 0002-13FV AN REV CONTAINER MANAGEMENT 210X297MM - INGLES.pdf 1 31/01/14 12:06
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