Welcome to JOC Sailings. Let us know what you think.
  | Not registered?
Home > Maritime News > Ocean Carriers Consider New Capacity Cutbacks

Ocean Carriers Consider New Capacity Cutbacks

Created by HButler on 10/13/2011 1:05:54 PM

Struggling with sliding rates amid plentiful capacity on major world trade lanes, several container line executives say they are starting to consider whether to lay up some vessels in a search for greater supply-demand equilibrium.

“If we have to do it, we will do it, yes,” CMA CGM Executive Officer Rodolphe Saade said this week at The Journal of Commerce annual TPM Asia conference.

Several carriers have withdrawn trans-Pacific services recently after peak season surcharges failed to hold for any extended period and spot rates have slipped back, prompting a forecast from Alphaliner that carriers will lose a collective $300 million this year on the trade lane. Some believe losses on the trans-Pacific could be double that figure. Conditions for the carriers are even tougher on Asia-Europe lanes, where the deployment of large vessels is keeping rates at low levels.

Saade said capacity already is withdrawing from the toughest markets.

“It is taking place now on some trades. Is it taking place enough? No,” he said. “More capacity needs to come out.”

Tim Smith, the North Asia CEO of Maersk Line, said shipping lines are wary of discussing capacity plans publicly after an outcry from shippers over widespread industry layups in 2009 led to an inquiry by the Federal Maritime Commission over allegations of collusion. “We’re very careful these days about commenting about these sorts of things,” he said.

But he said Maersk, the world’s largest carrier, is continually looking at how to provide strong services while making a financial return. “Trying to get the right balance in these two objectives is not easy. We are trying to prioritize and we will look at this very carefully. There may be some periods of lower demand where we may trim some capacity in some services,” he said.

Alphaliner estimates idled capacity has grown by about a third in the last three months, but the approximately 300,000 TEUs of capacity in layup in October still amounted to only about 2.2 percent of the world’s available fleet capacity.

Capacity has come out of markets only slowly, Smith said, because vessel operators are seeing a “slow, seeping sickness” rather than a rapid downturn.

Hanjin Shipping’s Christian Sur said the South Korean carrier already is looking going to “slack season” capacity deployment. “We will have to consider winter capacity management.” That means, he said, “suspending some services to cope with the traditional slowdown after the holiday shipping season.”

And Sur, noting the 1.45 million TEUs of capacity due from shipbuilders next year, suggested the scheduled deliveries of large vessels may not keep capacity plentiful. “We will have to look at the market and ask ourselves, are we going to deploy these vessels? That decision is not without cost – we would have to pay the shipyards to keep these ships,” he said. “But this may be the lesser of two evils.

“There may be different choices that different carriers make. At the moment, the conditions don’t look good for the demand to need these ships. So we may not need to actually deploy them if the market is not that strong,” Sur said.

- The Journal of Commerce.

print
 



 
©2013  |   About Us  |  Advertise  |  Contact Us  |  Privacy + Terms  |  JOC Group Inc.