News / Feeder line chief warns deepsea carriers to focus more on value rather than cost

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With the Asian feeder market continuing to face a number of challenges, one of its leading operators used this week’s TOC Container Supply China event in Singapore to call for deepsea carriers to focus more on the “value” that feeders provide.

Francis Goh, managing director of X-Press Feeders, told delegates: “Main line operators remain very focused on cost and not on value, and I really hope this will change.”

He added that the tender system developed in recent years by some deepsea carriers – that saw feeder operators bid for contracts in online auctions – did not always work in favour of customers.

“There are 10 to 12 main line operators that conduct these tenders, which can be a ruthless process when there’s oversupply. It has the advantage that it locks in the cost for the deepsea carrier, but service quality can go up or down,” he said.

He also outlined a number of challenges that were continuing to undermine the feeder business, including widely fluctuating charter rates, poor port performance and weak freight rates.

“We are facing rising charter rates against falling freight rates,” he said, explaining that between March 2014 and March 2015, daily hire rates for a 4,000 teu vessel had increased by 87% to $14,500 per day, largely due to a spike in demand for vessels caused by the congestion at US west coast ports.

In a rather tongue-in-cheek remark, he suggested that feeder operators should introduce a “CHAF” fee for deepsea carrier customers – a Charter Hire Adjustment Factor.

However, he also hoped that charter rates for this class of vessels would fall back down once the expanded Panama Canal opens.

One problem that is unlikely to go away, however, is the issues that feeder operators have with ports.

“The port challenges that we saw last year are going to come back. That is very much out of our control and there’s not much we can do to counter it.

“We can speed up the vessels, but the distances between the ports are not very much, so the effect is negligible,” he said.

He explained that a one-vessel service between Singapore and Surabaya, where the full turnaround time is one week, some four and a half days are spent at sea and two days in ports.

“When the ports don’t behave there’s nothing a feeder company can do. There are no alternative ports. In a soft charter market we could charter additional tonnage, but in a hard market it is very difficult for feeder operators to catch up, because there are no extra ships.

“And feeders aren’t going to speed up the ships to get a berth because it’s just so expensive,” he said.