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China’s container growth on shortsea tradelanes is outpacing stagnant long-haul services, potentially creating a trend from transhipment towards more direct calls at Asian ports.
However, that growth is unlikely to lead to any increase in the use of panamax vessels.
According to Seabury maritime director Michel Looten, China’s shortsea trades with South-east Asia and India are driving growth, while volumes on the main east-west trades to Europe and the US are static.
“This will have two main consequences for the industry,” he told the TPM Asia conference in Shenzhen last week.
“First, shorter trades don’t require 14-18,000 teu ships, but much smaller tonnage. So if carriers are going to order newbuilds they are probably not going to be in that range.
“Second, the transhipment business is under threat because on the shorter trades, hub-and-spoke doesn’t make sense; you get more port pairing and direct calls.”
Furthermore, Mr Looten said, slow steaming has meant there’s “so much spare capacity that we also see a lot more direct business going on the longer trades”.
“Many people expected all of these big ships to lead to fewer port calls, but actually it has led to more, because with so much capacity it makes sense to fill the ships and go to more ports,” he added.
Tim Wickmann, CEO of Maersk Line intra-Asia specialist MCC Transport, said big ships weren’t a problem for port productivity on the shorter intra-Asia trades.
“The issue in intra-Asia is not that ports need to be ready for 18,000 teu ships, but that some of the smaller ports are growing quite considerably and the [landside] infrastructure behind them is not necessarily ready to handle this growth.”
As an example, Mr Wickmann said, MCC had experienced two-week delays this year in Myanmar after the congested downtown port of Yangon was full due to an 11-day national holiday.
“However, Bangladesh is the worst place for us,” he added. “The ports are swimming in containers and cargo is still coming in. It’s impossible to get a berth – the wait is three-to-six days.”
On vessel cascading, Mr Wickmann is often asked about using panamax vessels on intra-Asia trades since the widening of the Panama Canal cast doubt over their deployment.
He explained: “At MCC, we are not using panamax vessels and we probably never will. Intra-Asia requires frequency, direct services and flexibility, and they don’t give any of that.”
A lot of intra-Asia ports can’t handle panamax vessels, anyway, he added, and even at those that can, using them means adding an extra ship into the rotation.
“On our Thailand-Japan string, you can’t make a three-vessel service using panamax vessels because you simply don’t have enough time in the port to do the moves to fill it up.
“So, to make use of their size, you would have to put in four vessels. But the minute you do, your round trip goes from 21 to 28 days, a 30% increase in rotation time. It just doesn’t work,” Mr Wickmann added.
MCC’s data shows intra-Asia trade has grown just under 3% year-to-date – an “OK number” according to Mr Wickmann, considering intra-Asia is the world’s biggest tradelane handling roughly a quarter of global volumes.
“What you can’t see in the 3% is that the growth has been very uneven, it’s all coming from China. Taiwan and Japan have fallen considerably. China is such a big chunk of intra-Asia that when it grows the whole region grows.”
On top of this uneven growth, Mr Wickmann said, intra-Asia freight rates were currently very low.
“Freight rates are barely covering the variable cost of moving the container on and off a ship, so basically it means we are sailing ships for free on many corridors – pure charity.
“And one of the scariest parts is that our costs are the lowest they’ve ever been.
“Time charter costs have almost never been lower. And oil prices are still very low from what we saw three-to-four years ago.
“So if we’re not making money now, with today’s freight rates, then what happens when the oil price or other costs increase?” he asked.