Hong Kong’s Orient Overseas Container Line (OOCL) more than doubled profit to US$197.2 million last year compared with US$86 million in 2011 on the back of higher freight rates and container volumes.
Profit of parent Orient Overseas (International) Ltd (OOIL) jumped 63 percent from $181.6 million to 296.4 million, reported the South china Morning Post.
The company, which is controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa, said it remained cautious on market outlook due to excess capacity and intense competition, which could pressure freight rates. Anaemic growth in the US and little improvement in Europe's economic conditions will make 2013 as "challenging" as last year for OOCL, said Ken Cambie, the chief financial officer of OOIL.
First-quarter cargo demand was as difficult as 2012 although container rates were higher than this time last year, he said.
Cambie said OOCL was looking to increase rates in the coming months as cargo contracts are renewed with freight owners on transpacific and Asia-Europe trades and general rate rises are implemented. Asked if there was concern cargo owners could resist rate rises, Cambie said OOCL was seeing a typically seasonal pattern with a weak January and this was expected to be followed by a stronger spring and summer.
Johnson Leung, the head of regional transport at Jefferies, said container lines are expected to get part of the planned $700 per TEU increase on Asia-Europe trades from March 15. Cambie said Soren Skou, the chief executive of Maersk Line, the world's largest container shipping company, expected freight rates would be higher in 2013 than last year.
But warning of potentially choppy conditions ahead, Cambie said there may be a trend of switching factory production back to the US, while Chinese manufacturers could refocus on the mainland's domestic market, creating a slowdown in exports. Both would hit cargo demand at a time when delivery of new container ship capacity will rise.
Some 274 container ships averaging 6,400 TEUs are set to be delivered globally this year, compared with 207 box ships averaging 6,100 TEUs that were delivered last year and 161 ships averaging 7,300 TEUs in 2014.
Cambie confirmed that the average load factor on OOCL's fleet of 98 ships fell to 73 per cent, down three per cent compared with 2011. But the firm was "quite happy to take 73 per cent and be profitable rather than 90 per cent and be losing money".
Jon Windham, the head of industrials research at Barclays, said OOIL "did well relatively" to comparable container lines. He added the outlook was "pretty negative, but probably accurate". Explaining the buoyant result of OOCL, Cambie said improving freight rate levels in the second quarter continued into the third quarter to give a much stronger second half.
OOCL posted a second half operating profit of $111 million against a US$38.3 million operating loss in the second half 2011. But he said there was a disappointing end to the year as freight rates and container volumes deteriorated in the fourth quarter.
CHINA Shipping Container Lines (CSCL) is teaming up with United Arab Shipping Company (UASC) on its new GEM service connecting Turkey, Port Said, Red Sea, Middle East Gulf, Pakistan and India.
The first GEM sailing is scheduled for November 22. The service will call at: Port Said, Mersin, Istanbul, Izmir, Port Said, Yanbu, Jeddah, Khor Fakkan, Sohar, Port Sultan Qaboos, Karachi, Hazira, Mundra, Khor Fakkan, Jebel Ali, Bahrain, Jubail, Khor Fakkan, Jeddah, Yanbu and back to Port Said.
For the first time, the port rotation includes the Indian port of Hazira in Gujarat state, which is located about 120 nautical miles north of Nhava Sheva and Mumbai. The first call at Hazira is slated for December 20. The ships will be handled at the new Adani Hazira Container Terminal (AHCT).
A report by Alphaliner said the GEM service will also include sections of UASC's UAE-Pakistan-India service (IMC1/IMC2) as well as the carrier's Middle East feeder service (AEC1), from where the UASC ships switch deployment to join the GEM service.
In addition to direct port calls, the GEM service will provide connections to other East Mediterranean and North African ports through relay services via Port Said and will serve a number of Black Sea ports through relay services from Istanbul.
The CSCL will provide one of the eight 3,800- to 4,250-TEU ships used to operate the service, namely the 4,250-TEU Xin Yang Shan. The other seven vessels will be provided by UASC.
Rebounding container rates helped Maersk Line post a third quarter operating profit of $547 million compared with a loss of $255 million and made parent A P Moller-Maersk raise the group's full-year outlook.
Group chief executive Nils Smedegaard Andersen cautioned rates could reverse for Maersk Line, which returned to profit after four successive periods of losses, reported Reuters.
"I think one should be careful expecting that this is now very stable," Andersen told reporters. "It does not mean there is no chance of a relapse for prices on some routes."
The container unit, a barometer of world trade as its fleet carries more than 15 percent of all seaborne containers, has struggled with profitability due to the global economic slowdown and an oversupply of vessels. Maersk Line successfully managed to implement rate hikes in the third quarter along with rivals, but spot rates on the crucial Asia to Europe route were easing again this week, worrying some analysts.
"The profits are not sustainable for Maersk Line," said Alm Brand analyst Jesper Christensen. "I believe the unit will hold up in the fourth quarter but that rates will fall to unprofitable levels at the beginning of next year," Christensen said.
The Maersk group said it still expected a modest positive result in 2012 for Maersk Line, based on higher average rates in the second half, but downgraded growth estimates for seaborne container demand to three percent from four percent.
It did not offer outlook for next year, but raised its 2012 group net profit forecast to US$3.7 billion from "slightly above" last year's $3.4 billion result. Group net profit jumped to $933 million in the third quarter from $371 million in the same period last year, lagging an average forecast of $1.20 billion by analysts in a Reuters poll.
Maersk Oil reported a 33 percent fall in operating profit to $1.16 billion, lagging forecasts.
Shipowners are struggling with an oversupply of vessels that could intensify next year. Raising rates and cutting costs are amongst ways the companies can cushion falling volumes as trade slows worldwide.
The group said last month it would step up investment in its oil, ports and drilling businesses to cut its exposure to the volatile container shipping industry.
The shipping downturn has forced banks to pull back from shipping finance amid a four year-long downturn that is likely to extend well into 2013. Maersk could decide to increase its planned bond issue program, Smedegaard said.
"Our bond programme is still of a limited size and what will decide how large it will be is how the banks' behaviour will change in the future," he said. "If the banks view credit for large companies increasingly in terms of bonds, we will definitely increase our bond programme," Smedegaard said. The group's four core businesses are Maersk Oil, APM Terminals, Maersk Drilling and Maersk Line.
JAPAN's second biggest container line, NYK, has posted an annual loss of JPY44.7 billion (US$571 million)in the liner trade business, down 250 per cent against last year's profit of JPY30.2 billion for the fiscal year 2011, ending on March 31, 2012.
NYK, the world's 13th largest container carrier, attributed the loss to high bunker prices and a decline of freight rates for its core trade lanes, saying overcapacity was to blame.
Overall group revenues declined 6.7 per cent to JPY 1.80 trillion. Revenue for the liner business was JPY418.7 billion, resulting in an operating loss of JPY43 billion.
The poor performance in liner trade business was the main cause of NYK's deficit for fiscal 2011. The company said in its annual report that the supply-demand balance had deteriorated with the completion of numerous large containerships, mainly on European routes, which resulted in plummeting rates.
Sluggish cargo movements were also experienced, which were worsened by the "Great East Japan Earthquake and flooding in Thailand."
The company said it had taken actions to tackle the problems. One of the main cost reduction measures was the practice of slow steaming to reduce bunker oil consumption, resulting in cost savings of JPY30 billion.
This saving, said NYK, combined with reductions in selling, general and administrative expenses and variables expenses in the liner trade business, contributed to a total cost reduction of JPY34.5 billion.
However, its "measures were unable to fully absorb a larger-than-expected downturn in market prices," said NYK.
For fiscal 2012 ending March 31, 2013, NYK chief financial officer Kenji Mizushima said: "We plan to achieve profitability through further cost reductions and contributions to business results from businesses with stable freight rates, which we are focusing on expanding under the medium-term management plan."
CHILEAN shipping major CSAV, the world's 17th largest carrier, posted a loss of US$1.25 billion in 2011 down from a $182 million profit in 2010 with an operational decline of $959 million and 1.2 per cent fall in revenue to $5.15 billion.
In the fourth quarter, the carrier lost $145 million on operations, posting a $280 million loss on discontinued operations with a $205 million provision for losses to be incurred in 2012 as a result of a restructuring started last May.
CSAV has announced it intends to make its SAAM terminal, tug and logistics businesses into a separate company. Its SAAM unit's operating profit was up 15 per cent to $64 million in 2011 with a 18 per cent rise in revenue to $426 million.
Also, the company has undertaken a second shareholder stock offering which helps the carrier secure additional $1.2 billion capital.
"We are a new company today," said the carrier's general manager for shipping containers Oscar Hasbun. "Through this restructuring we are better prepared to face the scenario affecting the industry and on a better footing for benefiting when market conditions improve."
CSAV said 90 per cent of its operations are joint services, compared with 30 per cent in early 2011. It has been returning chartered ships and building its self-owned fleet to exceed 30 per cent in the second half of the year from nine per cent at the outset of 2011.
source: Shippingazette [dot] com
The volume containers which transit at the Port of Singapore continued to decrease. In 2009 as many as 60-65 percent of containers from Tanjung Priok, Jakarta has to transit in Singapore, while in 2010 only 20 percent, but now only 18 percent. In 2011, Pelindo II has discharged nearly 6 million units of 20-foot container.
"This accomplishment is due to the better performance of Tanjung Priok, Jakarta, the equipments more complete. The container to East Asia has shipped without transit in Singapore, "said Director of PT Pelindo II, RJ Lino.
Lino said in 2012 Pelindo II is also working to achieve the standard port of the world. "In the ports of the world, after (vessel) berthing, only took 15 minutes for loading and unloading. In Tanjung Priok still need 15-30 minutes, but at the other Indonesia ports it took two hours, "he said.
Lino asserted, Pelindo II will help the government accelerate work Inaport site so that standard is reached. "What also becomes the bottleneck is the desire to go up and down the quarantine on all vessels. That's a long time, "he said.
At the end of 2012, said Lino, Pelindo has finished installing vessel traffic information system (VTIS). With the device, vessel traffic can be regulated electronically, with no radio communication.
The bottom line, says Lino, all efforts aimed at revamping ports to reduce costs and optimize the logistics of port infrastructure without having to invest too big.
"In February 2012, a container vessel with a capacity of 5000 TEUs will be bert at Tanjung Priok, Jakarta. Soon, container vessel with a capacity of 6000 TEU will also come. With a large vessel, transiting in Singapore no longer needed, "said Lino.
Shipping industry observers from Sepuluh November Institute of Technology, Saut Gurning said, if the Korea, China, and Japan destination without having to transit in Singapore, logistics costs are more competitive.
"The container vessel which more likely to stop at Tanjung Priok, Jakarta is interesting from economies of scale. More efficient. However, it should be noted, not only the size of vessel that are important, but also requires the availability of routes and frequencies are competitive, "said Saut Gurning.
picture: google.com
MOL president Koichi Muto says last March's Japanese earthquake has hit his company hard, compounding the effect of a deteriorating business environment, which coupled with a strong yen, high fuel prices and sinking rates due to oversupply, are combining to create an industry-wide downturn.
As a result, the first half of fiscal 2011 saw the biggest loss the group has ever suffered.
"The management environment surrounding MOL remains unpredictable and clouded by imminent oversupply of vessels as more new ships reach completion, and slumping business sentiment. These factors are expected to impact containership operations, especially, where conditions are extremely harsh with the impending completion of a large number of ultra large containerships, and the prolonged slump in the economies of Europe and the US," said Mr Muto.
"Large-scale completion of new vessels is expected to continue this year, so we should prepare ourselves for a prolonged harsh business environment, and approach it with due care," he warned.
"After 2013, however, the number of new vessels completed is expected to level off, providing light at the end of the tunnel. Over the medium to long term, we predict that the excessive production capacity of shipyards in China, two-thirds of which is privately operated, will be brought into balance by the market mechanism, and we expect the oversupply of ships to be relieved," said Mr Muto.
Talking about ensuring the survival of the company he identified four key areas to strengthen, namely to provide safe transportation services at a competitive price while effectively reducing the shipping impact on the environment.
The second key area is its financial performance. To strive to improve the balance sheet and cash flow in the short term through persistent efforts to trim costs and other measures. Thirdly, its performance, in terms of ensuring that cargo is delivered in perfect condition and on time. The fourth area for improvement is sales with the goal being to build stronger relationships with customers.
With regards to slow steaming, last year most MOL ships made more diligent efforts to apply slow steaming. Mr Muto said this practice not only reduces fuel consumption, but is also expected to help mitigate the impact of oversupply in vessels and help the environment.
These sentiments were echoed by in a speech from NYK president Yasumi Kudo: "Since stagnant demand in the west and oversupply of mega-ships are predicted, our ordering of new containerships should be suspended for a while, and a light-asset business model should be adopted whereby vessels and space would be leased as needed, thereby minimising downside risks and sustaining business," he said.
According to the NYK head, strong growth in emerging economies such as in Asia would be important for the carrier, in light of the difficult economic and trading conditions currently in Europe and the US.
"I am confident that we are heading in the right direction to grow further by differentiating ourselves and focusing on emerging markets such as Asia," said Mr Kudo.
"When we focus on the emerging countries we see a different outlook ... rapid economic growth in Asia and the developing countries, which account for more than half the population of the world, is the biggest opportunity, without any doubt.
"We cannot deny the risk of weaker demand in the west having a negative effect on Asia, which largely depends on exports. However, growing demand in Asia will be the key to strong growth in the region and overcoming the slump in the west.
"Now we see a major shift in the trend, Asia is no longer only an exporting region, but creating an enormous consumer market surpassing the US or Europe," he said.
picture: google.com / source: Shippingazette.com
GERMANY's Hamburg Sud and Geneva's Mediterranean Shipping Co (MSC) will merge their Med-east coast South America services into one from mid-January.
The revised rotation will be Valencia, Gioia Tauro, Livorno, Genoa, Marseilles-Fos, Barcelona, Valencia, Suape, Rio de Janeiro, Santos, Buenos Aires, Montevideo, Rio Grande, Navegantes, Itapoa, Santos, Rio de Janeiro, Suape, Tangiers and back to Valencia.
The eight-ship will have seven vessels from MSC and one from Hamburg Sud, averaging 5,900 TEU.
Hamburg Sud now operates a service with CMA CGM, CSAV, and Zim with a rotation of Valencia, Tarragona, Livorno, Genoa, Vado Ligure, Barcelona, Rio de Janeiro, Santos, Buenos Aires, Montevideo, Itajai, Paranagua, Santos, Pecem, Tangiers and back to Valencia.
The MSC loop rotates through Valencia, Sines, Las Palmas, Salvador, Rio de Janeiro, Navegantes, Paranagua, Rio Grande, Santos and back to Valencia, deploying six MSC vessels averaging 5,341 TEU.
picture: google.com / source: shippinggazette
