News / Shortsea operators suffer as new ocean alliances put feeders out of work

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Hub-and-spoke feeder calls have fallen “drastically” following this year’s deepsea container carrier alliance reshuffle.

According to X-Press Feeders’ chief executive, Tristan Howitt, ocean freight rates and volumes have shot up in 2017, with the Far East, Indian Subcontinent and Middle East trades all performing well.

“However, we can’t say the same for the shortsea hub-and-spoke feeder sector,” he told The Loadstar.

“After April – when the three major alliances and new service coverage came into place – there was a marked increase in direct calls to traditional ports where, previously, lines would feeder these volumes via transhipment hub ports like Singapore, Port Klang, Kaohsiung and Busan.

“For example, for the first time this year there are direct calls to Jakarta on transpacific and European services and direct calls from Thailand to Europe. There’s also been an increase in Vietnam and North China direct calls,” he added.

Mr Howitt said while absolute market volume had increased, feeder volumes have fallen, “quite drastically” on some trades, despite the fact that most trades were strong either from a volume or profitability perspective.

“We also noticed two trends. First, there was increased feeder demand at secondary ports such as PAT Bangkok Terminal in Thailand and Cat Lai in Ho Chi Minh City.

“Second, with bad weather conditions and long port stays faced by the alliance services, there are often delays in schedules and omissions.

“We’ve sized our ships according to current demand, and should there be any shortage of capacity we will find ways to cater for it. So far, we are pleased to say that we have not left any cargo behind.”

X-Press Feeders owns 32 ships and operates more than 100. With volumes of 5.6m teu in 2016, it ranked as the world’s 18th-largest container line.

Mr Howitt expects volumes to be slightly higher in 2017 after expanding services in Latin America’s west coast, the Baltics, Iberia and throughout South-east Asia.

Industry consolidation, improving supply and demand fundamentals and newly acquired carrier pricing power could see the liner industry achieve an operating profit of around $5bn this year, according to Drewry.

Mr Howitt said the shrinking pool of deepsea competitors would not necessarily impact how carriers structure their feeder calls.

“While many carriers are getting larger through M&A, and on certain feeder tradelanes definitely have the scale to run in-house services, there are still many important factors favouring the use of common feeder services. Service frequencies, variable costs versus fixed costs and feeder operating capabilities are three.”

Meanwhile, X-Press Feeders also reports delays at two port congestion hot spots in the Indian subcontinent.

“Chittagong continues to suffer, with current vessel berth waiting time ranging from five-to-seven days,” said X-Press Feeders’ senior director, Nelson Sequeira.

“The primary reason is that the port is unable to cope with the growth, as throughout is above terminal handling capacity, and there has been a lack of investment.

“Around 70% of Dhaka-bound cargo is de-stuffed inside the port area, which is taking up yard space and causing congestion, which results in poor productivity and overall inefficiency,” he added.

Kolkata is another congestion hotspot. Mr Sequeira said the port “remains volatile”, with average turnaround times of seven-to-nine days.