P3 Network Choice of Ports Contentious
Considering the partners preference for container hubs and terminals, P3 Network comprising of Maersk Line, MSC and CMA CGM, obviously had to make difficult decisions in the choice of ports covered by the Network. Although the P3 Network in its’ schedule of 87 different ports to which 334 calls will be made for a week, only 07 ports will handle more than 10, P3 vessel calls per week. They are, Shanghai (21), Ningbo and Shenzhen (17 each), Tanjung Pelepas (PTP) (13), Singapore (12) and Busan (11). On the Far East route it is evident that Singapore with 3 calls a week has lost out to PTP, 7 calls per week. PTP operated by Maersk Line’s sister company APM Terminals holds a 30% share. On the way ports which are called en-route between two trade ends, the new Red Sea port of King Abdullah in Saudi Arabia which is affiliated to MSC features with 03 port calls per week. In terms of port of calls many Ports have become casualties, implications of which will be discussed in a later article.
Container Lines Continue to Lose
As reported in DynaLiners during the 09 months of 2013 the turnover of Singapore based APL container shipping division contracted by a hefty 9% year-on-year to USD 5.4 billion. Its 09 months operating results (core EBIT) improved substantially, but has remained at a negative USD 130 million. APL’s 09 months container carriage declined by 3.2% year-on-year to 4.3 million TEU.
During the same period China Shipping increased its turnover by only 1% year-on-year to USD 4 billion. Notwithstanding this, its operational loss doubled to CNY 1.88 billion, while its January-September 2012 net loss zoomed from CNY 224 million to CNY 1.67 billion (USD 304.6 million). During January-September 2013 turnover of Cosco’s container operations rose by 3% compared the same months of last year to CNY 31.7 billion (USD 5.2 billion), while carriage rose by 8% to 6.4 million TEU. Despite the above, due to a quarterly net loss of CNY 3.14 billion (USD 505 million), parent China Cosco Holdings posted a 09 months net deficit of CNY 2.3 billion (331 million).
To overcome the carrier’s liquidity problems, Korean Air Lines Co. (directly and indirectly 25.3% controlled by Hanjin Group owner Mr. Cho Yang) will provide KRW 150 billion (USD 141 million) to its (half) sister Hanjin Shipping. Hanjin Shipping is 36% owned by Hanjin Shipping Holding, in which, in its turn, Korea Air Lines has a 16.7% shareholding.
During 09 months of 2013, OOCL posted a turnover on its container operations of USD 4.2 billion, a significant reduction of 6% year-on-year. Its carriage declined by approximately 1% to 3.9 million TEU, while average revenues per TEU dropped by around 5% to USD 1,079. Over the first 09 months of 2013, Samudera Shipping Line’s turnover reduced by a huge 19% year-on-year to USD 268.7 million, resulting in a net group loss of USD 8.2 million, compared to a USD 5.0 million profit made during the same period of last year. Carriage slipped by 17.3% to 1.024 million TEU.
Increase in Layup/Idle Vessels
Based on data provided by Alphaliner as of 21st October 2013, the layup box container shipping fleet stood at 188 ships – 521,000 TEU. This is a substantial increase of 18% capacity than the 443,000 TEU 02 weeks earlier. As mostly the larger vessels became idle whilst the smaller once were phased back in, the number of ships waiting for employment, increased by 07.
Hapag-Lloyd Consortium Breakup will not Affect Operations
The Albert Ballin consortium, which held a 78 per cent stake in Hapag-Lloyd, has dissolved ahead of schedule, but it is unlikely to have immediate operational impact on the world’s fifth biggest container carrier.
The move is likely to strengthen the arm of incoming chief executive Rolf Habben-Jansen, giving him a freer hand, commented London’s Lloyd’s list.
The dissolution will also allow former participants to dispose of their shareholdings individually if they so wish. Control of Hapag-Lloyd passed to the consortium in 2008, after Singapore’s Neptune Orient Line withdrew its offer to purchase the company from German tour operator Tui following the financial crisis.
TUI, which has long been keen to sell Hapag and back to its core business selling package tours, retains a 22% interest and has long been hoping to mount an initial public offering for Hapag-Lloyd.
Sources aware of the situation said the consortium had from the outset been regarded as something with a five-year lifespan, which had been due to end by January anyway.
In the event, participants decided to pull the plug a few months early. A looser co-operation framework is unclear whether or not it will be signed.
The Albert Baillin consortium is led by the city-state authority in Hamburg, which owns 36.9 per cent, and logistics entrepreneur Klaus-Michael Kuehne with 28.2 per cent.
Other participants are insurers Signal Iduna with 5.3 per cent and Hanse Merkur with 1.8 per cent; HSH Nordbank with 2.9 per cent; and private investors Friedhelm Behn and Detlev Meyer, both in the fashion business, who together hold 2.9 per cent.
Disappointing North Europe’s Peak Season
The Asia-Europe container trade in both directions were disappointing, recording a slight uptake from July to August, but was better than last year’s lacklustre season. Westbound cargo flows in 2013 from Asia to North Europe, covering the peak of the peak season in August stood at 844,000 TEU compared to 837,000 TEU in July and 793,000 TEU in June. Figures from Container Trades Statistics (CTS) through August shows a one per cent increase in year-to-date volume to 6,183,000 TEU over last year.
Like westbound services, eastbound vessel demand also increased, but in this case by 3.5 per cent in August to 615,400 TEU, but it fell 1.3 per cent in September to 607,100 TEU followed by another reduction of 1.4 per cent in October, down to 600,000 TEU.
Utilisation differed wildly as expected. Asia-Europe routes achieved 100 per cent ship utilisation in August, but it didn’t last into September, when a slippage sparked a minor rate war as carriers fought to retain market share while worked to fill their ships, said London’s Drewry Maritime Research.
Europe-Asia utilisation was more pronounced with space on vessels sailing from Northern Europe to Asia declining from 67 per cent in July to 60 per cent in August and with September heading down, taking freight rates with it. The International Monetary System (IMF) estimates 0.3 per cent GDP growth in Europe this year, compared to last year’s 0.1 per cent, offering more reason to hope with its prediction of 1.4 per cent growth in 2014. Ocean carriers’ response was to increase overall westbound vessel capacity by three per cent in August, up to 844,300 TEU, achieved by not cancelling sailings, said Drewry analysts in London.
But sailings were cancelled in September, including three from Maersk’s AE7 service, bringing total capacity down by 1.3 per cent to 834,000 TEU, which was followed by another 11 cancellations in October, reducing capacity by another 1.4 per cent to 822,000 TEU, they said.
Guidelines to Boost Container Seal Security
The International Seal Manufacturers Association (ISMA) has published industry best practice guidelines in compliance with ISO 17712:2013 Clause 6, standards relating to container seals.
The new version of ISO International Standard 17712, Freight containers – Mechanical seals, published in May 2013, contains a significant change in Clause 6, Evidence of tampering.
These new requirements take effect on May 14 and the impact on international commerce could be significant because of the way regulators, major shippers, carriers, and others use ISO 17712, said the ISMA.
Under it, virtually all maritime containers will require high security barrier seals certified by accredited third parties to conform to the new requirements, according to the ISMA statement.
Said ISMA chairwoman Mette Jordan: “The new Clause 6 requires careful thought and innovation by manufacturers to get it right. The transition window is tight. Security seal users need to be confident their suppliers can implement and be certified to have a timely quality management system in response to 17712:2013’s novel requirement. To assure the efficacy and quality of the guideline, ISMA members will test the process themselves for the first Clause 6 certification cycle.”
The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP)