Deep Sea Carriers Attracted to Intra-Asia Routes: Analysis

By George Backwell
Tuesday, June 17, 2014
Intra-Asia Annual Volumes teu: Image courtesy of Drewry Maritime Research

Cargo growth on intra-Asia routes is attracting deep-sea carriers due to the availability of cheap charter vessels and economies of scale between China and SE Asia, but regional players also know how to form defensive alliances, reports Drewry Maritime Research in its latest 'Container Insight Weekly'.

Financially troubled deep-sea ocean carriers are increasingly seeking salvation in the intra-Asia market due to higher than usual cargo growth and the availability of cheap vessel charter rates. Seldom does a month pass without the announcement of at least one new regional service, some of which now deploy vessels over 4,000 teu.

Recent examples include:

  1. Maersk-owned MCC Transport/NYK’s weekly Japan-China-Thailand schedule calling at Tokyo, Yokohama, Nagoya, Kobe, Hong Kong, Shekou, Laem Chabang, Xiamen and Tokyo.  Launched at the end of March, it deploys three 5,000 teu vessels.
  2. NYK/K Line/Hapag-Lloyd’s Japan-SE Asia service calling at Tokyo, Yokohama, Nagoya, Kobe, Singapore, Jakarta, Singapore, Ho Chi Minh City and Tokyo, which deploys four 4,200 teu vessels.
  3. Cosco joining PIL/Yang Ming/Wan Hai’s service calling at Xingang, Dalian, Shanghai, Fuzhou, Hong King, Singapore, Port Klang, Penang, Singapore, Hong Kong and Xingang. The service deploys four vessels averaging 4,300 teu.

There is money to be made out of such services, as evidenced by Wan Hai’s financial performance since 2009. Last month the intra-Asia specialist reported yet another set of impressive financial results for 1Q14, and has consistently outperformed many of its peers since 2009 in terms of extracting operating profit out of every dollar earned (i.e. return on sales), despite not having their economies of scale. And OOCL, the next best declared performer after Maersk and CMA CGM, captured 53% of its total traffic from the intra-Asia market in 1Q14.

The intra-Asia market, including Asia/Australia, was also OOCL’s fastest growing in 1Q14, increasing by 14.5% compared to the same period of 2013, up to 723,000 teu, compared to just 3% for all other traffic.

Unlike many of its peers, most of the Wan Hai’s services are focused on intra-Asia routes. Instead of mainly competing with global players on East-West routes, it has generally preferred to seek shelter in intra-Asia trade lanes.

Measuring the way that intra-Asia routes have been growing is difficult, as there are many different trade lanes, and no centralised data source. Moreover, there are many routes served by shuttle services deploying vessels no bigger than 500 teu because of draught restrictions. There is also much trade within countries, such as China (although this is protected for Chinese flag vessels), as well as between countries, and deep-sea transhipment cargo. Maersk’s recently introduced SE Asia/China service deploying three vessels over 4,000 teu, calling at Xingang, Qingdao, Ningbo, Hong Kong, Tanjung Pelepas, Singapore and Xingang, is a good example of the latter.

According  to the Intra Asia Discussion Agreement (IADA), its member lines alone shipped 7.2 million teu on the routes shown [pictured here] in 2013, 9% more than in 2012. To put this in perspective, that is more cargo than was shipped between Europe and the whole of North America in 2013 (6.7 million teu), and over double its annual growth rate of 4.3%. IADA members include 11 of the top global deep-sea carriers (but excluding MSC and the three big Japanese lines), as well as a number of regional specialists.

Another 6.2 million teu were shipped in 2013 by all carriers (including IADA members) between China and South Korea, and between China and Japan (the two highest volume trade lanes within the intra-Asian market), where trade growth was a more subdued 1.5% due partly to Japan’s 25% currency devaluation in 2013.

The intra-Asia market is clearly competitive, as evidenced by the forced withdrawal of Swee Joo, Yanghai Shipping, Grand China Shipping, STX Pan Ocean and Hainan PO Shipping since the beginning of 2012. But, whereas many of the vessels operated by these intra-Asia fatalities were below 1,000 teu, and the same still applies to remaining small players today, Wan Hai currently deploys 72 vessels averaging 2,400 teu, ranging between 640 teu and 5,500 teu, which explains why deep-sea carriers are now interested in the market, spurred on by the ready availability of cheap charter vessels.

Not surprisingly, say Drewry, regional players are joining forces to compete more effectively against the incursions of bigger players, to try to limit further capacity growth in certain key trades. Last month Sinotrans, Pan Asia Shipping (intra-Asian arm of Coscon), and Shanghai Puhai Shipping (intra-Asian arm of CSCL) formed an operating alliance on services run between China and Japan. And China’s SITC Container Lines and Shanghai Hai Hua Shipping (Hasco) have agreed to work more closely together between China and Japan.

What this means for future freight rate levels remains to be seen, but there is much ground to recover already. Although 2013 was a difficult year for most carriers, many North-South services have been full since April, which has helped to increase rates. Northbound cargo growth of 12.5% from SE Asia to China in 1Q14 (y-o-y), was a particularly strong driver in this respect. A more detailed analysis of the intra-Asia container market will form part of the Drewry Container Forecaster 3Q14, due to be published in September.

Drewry's View
Deep-sea ocean carriers will continue to use cheap charter rates to become further established in the intra-Asian market, and then use their own tonnage afterwards to squeeze out smaller competitors on routes where vessels over 2,000 teu can be safely deployed. Strong cargo growth is helping carriers to improve freight rates at the moment, but the supply/demand balance is fragile.

Source: Drewry Maritime Research


 

Maritime Reporter July 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Rosneft and NADL Sign Exchange of Assets Deal

Rosneft, Seadrill Limited and North Atlantic Drilling Limited (NADL) signed a Framework Agreement that envisages long-term cooperation in the sphere of oilfield development projects.

Norman Murray, Petrofac Chairman Quits

Petrofac, the international oil & gas facilities service provider, today announces that Norman Murray, who has been Chairman since May 2011, has resigned from

MN 100: AEP River Operations

16150 Main Circle Drive, Suite #400 St. Louis, MO 63017 Tel: (636) 530-2100  Email: info@aepriverops.com Website: www.aepriverops.com President: Keith Darling The

Contracts

Rosneft and NADL Sign Exchange of Assets Deal

Rosneft, Seadrill Limited and North Atlantic Drilling Limited (NADL) signed a Framework Agreement that envisages long-term cooperation in the sphere of oilfield development projects.

YPF Oil Extends Operating Agreement with Sinopec to 2027

Argentina's state oil company YPF agreed Friday to extend its operation until 2027 in partnership with a local unit of China's Sinopec oil in an area of ​​a

Scottish Sea Farms Orders Newbuilds

Macduff Shipyards Ltd. has received a contract worth more than £3.3 million pounds from Scottish Sea Farms for the design and build of four 19.8-meter 150T steel

Ports

China Appeals WTO Ruling on US Solar Panel Dispute

China has appealed against a WTO dispute panel report on anti-dumping duties applied on certain Chinese products by the United States, the World Trade Organization (WTO) said on Friday.

WTO Rules Against Argentina Licensing Rules in Row with US, EU, Japan

A World Trade Organization (WTO) dispute panel ruled against Argentina on Friday in a 2012 case brought by the United States, European Union, and Japan against

New Partnership Targets Enhanced Tracking Solutions

Globe Tracker International, a  global asset tracking, monitoring and data sharing, has announced  a strategic relationship with Total Soft Bank Ltd. (TSB), a global

Finance

Sinopec's Profit up at 32.5 billion yuan in 1H, 2014

Asia's largest refiner - China Petroleum & Chemical Corporation announced Friday night, according to international accounting standards, the first half net profit of 32.

Polynesian Shipping Sold to Neptune Pacific Line

The Board of Polynesian Shipping Line Limited, Apia informed   that the business and the Company’s associated investments have been sold to Neptune Pacific Line Limited.

Airbus May Sell Stake in Submarine Supplier

Airbus is considering a sale of its 49 percent stake in submarine supplier Atlas Elektronik as part of a reshuffle of its military business, German newspaper Die

Container Ships

Container Manufacturer Reports Profit Plunge

World-leading container manufacturer and logistics services provider Singamas Container Holdings Limited (Singamas) has  announced its unaudited interim results for the six months ended 30 June 2014.

Maersk Line Still the Leading Carrier on Reliability in Q2

During the second quarter, the overall industry reliability has improved. However, Maersk Line is pleased to have improved their performance so that they can

Evergreen Line Makes Maiden Call to Boston

Evergreen Line’s ItalLunare celebrated its maiden call to the Port of Boston with an official first call and plaque presentation on Wednesday, the Massachusetts Port Authority (Massport) announced.

Logistics

MN 100: AEP River Operations

16150 Main Circle Drive, Suite #400 St. Louis, MO 63017 Tel: (636) 530-2100  Email: info@aepriverops.com Website: www.aepriverops.com President: Keith Darling The

W.Africa Crude Slow to Trade; Nigerian Glut Fading

Angolan cargoes for October loading are so far finding buyers slowly, traders said on Friday, while there were further signs that an overhang of September-loading Nigerian cargoes is being absorbed.

US Steel Producers Win Anti-dumping Case

The United States has approved anti-dumping duties against South Korea and other producers of steel pipes for the energy sector, a victory for domestic producers

Consulting

EBDG Completes Repower of COLUMBIA

Elliott Bay Design Group (EBDG), a leading naval architecture and marine engineering firm with offices in Seattle, New Orleans and Ketchikan, Alaska today announced

Watson Named VP of Meridian Global Consulting

William H. Watson has been appointed as Vice President of Meridian Global Consulting, LLC, a Mobile, Alabama-based scalable risk mitigation specialist consultancy.

ST Engineering Singapore's Sole Ranker in Forbes' List

Singapore Technologies Engineering Ltd (ST Engineering) announced that it is the only company in Singapore to make it to Forbes’ list of The World’s Most Innovative Companies.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Navigation Pipelines Pod Propulsion Ship Repair Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1627 sec (6 req/sec)