Tight capacity seen in container sector ahead

The container shipping industry is expected to experience tight capacity next year due to limited access to new capital or bank financing for ship building coupled with tight supply of new containers, said United Arab Shipping Co (UASC) Malaysia Sdn Bhd country general manager Desmond Yong.

“Trade volume is also expected to continue to grow in line with this year’s trend indicating a possibility of a global container trade reaching 11.1% growth or a total of 138 million twenty-foot equivalent units (TEU).

Desmond Yong ... ‘Security, environment and oil price will have major effects on the business.’

“Although various regional trade sectors may see differing demand as well as supply trend – vessel lay-ups, extreme slow steaming, service or capacity diversions will continue to be the options for lines to strike a balance in revenue.

“Looking ahead, three major factors will have major effects on the business, namely security, environment and oil price, which will require sector players to adjust their business process to a new mode of operation,” Yong told StarBiz.

In general this year, Yong said the trend of global demand was exceeding boxship supply due to cancellation of ship deliveries and the high demolition rate earlier this year.

As for Malaysia, Yong indicated that there were a number of positive developments which had materialised this year, with some shipping lines and manufacturing base making Port Klang their hub.

“The challenges ahead for next year is really on how Malaysia can focus on seizing this golden opportunity by enhancing and strengthening Port Klang, making it truly a convenient and business friendly hub for the shipping lines and manufacturers.

Yong said there were a number of areas that the country needed to benchmark against neighbouring countries in order to increase local efficiencies.

“As for shipping lines sustaining their hub at Port Klang, areas we do need to watch out for are some untimely and outdated practices and policies within the industry, which do not make it any easier for shipping lines to conduct their business.

“And there is indeed an urgent need by various authorities and sector players to jointly make the necessary improvements,” he said.

Meanwhile, Wilhelmsen Ships Service managing director Winston W.F. Loo foresaw a pickup in demand in the near term (next month) running up to the Chinese New Year festival, before it tapers off.

This year, Loo said it had been a decent year for container operators despite rates being “softer” compared to 2009.

“Rates for both the main East-West trades have remained fairly decent supported by shortage of containers as well as shortage of spaces in the early part of the year.

“Rates were as high as US$2,000 per TEU to European main ports during the first quarter.

“Unfortunately, the rates continued to slip from thereon by an average of US$200 per TEU per quarter.

“Present rates out from Malaysia hovers around US$1,300 – US$1,400 per TEU,” he said.

Going forth, Loo said many carriers had announced general rate increase (GRI) to be implemented with effect from Jan 1, with average increase of between US$250 and US$300 per TEU.

On the other East-West trade of Asia-US-Asia, Loo said it started off the year poorly, averaging US$1,800 (West Coast) and US$2,900 (East Coast), but gained strength during the second quarter.

“Implementation of the peak season surcharge of US$600 per forty-foot equivalent units (FEU) for West Coast and US$800 per feu (East Coast) in June were very successful.

“This success prompted the shipping lines to further implement a GRI averaging US$600 per feu (West Coast) and US$800 per FEU (East Coast) from July 1.

“Unfortunately, some could only hold for two weeks before mitigation starts creeping in due to both supply and demand pressures. After that, rates continued to decline.

Presently, Loo said the rates out of Malaysia hover around US$1,900 to US$2,000 per FEU (West Coast) and US$2,900 – US$3,000 per FEU (East Coast).

“In the near term, we foresee that volume to the United States out of Malaysia will remained stagnant, thus rates will remain under pressure going into next year,” he said.

Source: BizStar