Group welcomes capacity generated by container shipping consolidation
The new container alliances are scheduled to start their new networks on April 1, but it is still too early to tell what will be their actual impact on port operations, according to DP World’s management.
In an earnings call for the company’s 2016 results, key executives said the consolidation activities could mean that operational realignments and adjustments would be needed in light of perhaps three shipping lines, for example, that previously called at separate terminals subsequently calling at one terminal now.
The executives added that the extra capacity stemming from all this consolidation activity was "exceedingly helpful" for the group's terminal operations, especially with the major alliances all slated to call at its UK terminals.
While optimism and enthusiasm is a good thing, it could be said that containership carriers may very well have something else coming. There are too many megas coming into service, and this avalanche of empty boxes is threatening to upset the tenuous ocean freight rate gains of the past six months.
March 1 marked the six month anniversary of the Hanjin bankruptcy, whose sudden and brutal death likely saved the box-ship industry from losing 3-5 other carriers.
Hanjin’s filing instantly took 93 ships and some 600,000+ TEU’s off the market. While not ignoring the horrific financial losses being suffered by Textainer, Danaos, and others due to Hanjin, their bankruptcy stopped what was likely the greatest container rate collapse of all time. Rates immediately skyrocketed, giving the carriers an opportunity to stop the financial bleeding.
While rates have slightly slid since Chinese New Year, they are still almost double those of last summer when the market average price in the Xeneta spot rates index at the end of June stood at $1034 (China Main ports – North Europe Main | 40’ container).
Today (March 3, 2017), the Xeneta spot rates index shows the market average price for a 40’ box from China Main ports – North Europe main ports at $1761, up 252% since the same time last year when the same box was moved on the same corridor at a market average price of $499.
Mega Vessels with Overcapacity | What Gives?
During the loom of last year, carriers continued to cancel sailings, re-jiggered their basically ineffective alliances, and scrapped a record amount of containerships – but now it all may come undone as previously contacted megaships begin to arrive. The new vessels threaten to upset the tenuous supply-demand ratio of boxes-to-cargo that was finally beginning to balance.
Just last week MSC received the 19,472 TEU MSC Rifaya, and within the next 30 days will take delivery of two more 19,500 TEU vessels. And where will this almost 60,000 new TEU’s be dropped? Into the already-bloated Asia-North Europe routes. UASC will be be adding to the glut; they have six 18,800 TEU megas (totalling112,800) along with eleven 15,000 (165,000) TEU vessels on order.
That’s 337,800 empty TEU’s arriving into a market that’s already flooded with 1.3 million TEU’s (340 ships) laid-up capacity; with this many empty boxes, can the market still bask in the rally from the past few months? Tighter capacity measures have indeed been taken by carriers to band aid the challenge as the megas soon invade the scene. Is it enough?
Maersk Takes a Pragmatic Approach
Maersk, on the other hand; took a realistic view of the marketplace and pushed their 2017 deliveries of nine 14,000 TEU vessels (126,000) out to 2018-2019. They said they did not have to make any penalty payments to the shipyards, and if volumes improved there were sufficient ships that could quickly be chartered. That’s perhaps some of the common sense thinking others in the industry should also display.
This won’t be easy on the S. Korea and Chinese shipyards, most of whom are already looking at shortened order books and increasing lay-offs. Government assistance will likely be required by the yards, but with 1.6 million TEU’s of new vessel capacity arriving in 2017, another 12-18 months of collapsing rates will surely bring more carrier bankruptcies and turn those temporary layoffs at the yards permanent.
While these are not pleasant decisions to make, the rest of us may be wondering, what’s the point with all the mega ships if they will be sailing empty? There are still too many boxes competing for too little cargo, and until the world economies improve, the carriers need to take a realistic look at the cargo – container relationship and decide accordingly. As I always say, the market remains unpredictable.
At Tuscor Lloyds we have the knowledge to piece together
At Tuscor Lloyds we know heavy transport projects are not for the faint of heart. Together with our network of heavy haulage specialists we have completed some impressive projects around the globe. To celebrate our new campaign we’re talking you through some of the biggest, heaviest pieces we have ever shipped, standing on our heads…
UK to Mexico – 125 tonnes
Cargo: Turbo Generator Parts Cargo Weight: 2 pieces at 62.5 tonnes each = 125 tonnes Cargo Origin: UK Cargo Destination: Mexico Special Requirements: Heavy duty swivel hook crane (70t capacity), Mafi Trailers, Flat rack Containers
This consignment totalled 125 tonnes. That’s the equivalent of 10 double Decker busses but to Tuscor Lloyds it’s child’s play. The wooden cases contained turbo-generator parts, with both items shipped as separate breakbulk and out of gauge consignments. The weight of the cargoes (62.5 tons each) required them to be loaded onto mafi trailers (from the low loaders) using ship/shore cranes. Just some of the specialist equipment required in heavy transport logistics.
UK to Canada – 230 tonnes
Cargo Origin: Liverpool, UK Cargo Destination: Halifax, Canada Industry: Oil & Gas Service: RORO Cargo: Steel Wire Reel
This 230 ton consignment for one of our regular clients in the oil and gas industry consisted of 5 cable reels collected from Liverpool, UK and delivered to Halifax, Canada. With dimensions of 3 x 2.6 x 3.1 meters and a weight of 46 tons each it was no small feat securing the cargo for smooth sailing.
China to UK – 260 Tonnes
Cargo description: Biomass Boiler Cargo Weight: 260 tonnes in total Cargo origin: Changsha, Hunan Province China Cargo Destination: UK Special Requirements: Floating crane, Flat rack containers, OOG Permits, split shipment, river barge.
Having worked on similar jobs from mainland China, Tuscor Lloyds were quickly recommended for the project, which was to be the first of many throughout the summer. The boiler and components were consolidated into 46 pieces weighing 260 tonnes in total (the equivalent of 130 average sized cars or 52 African elephants.) The pieces consisted of one 83 ton Breakbulk item at 15 metres in length as well as 7 x flat rack containers holding the remaining Out of Gauge Cargo.
Cargo: Trucks, Land rovers, Generators, Fuel Truck, Support Equipment Cargo Weight: 475 tonnes approx. Cargo Origin: Aqaba, Jordan Cargo Destination: Feslixstowe, UK Special Requirements: Hazardous Cargo, Escort required in Jordan due to Military cargoes.
Tuscor Lloyds projects team moved a total of 475 tonnesof support equipment from Aqaba, Jordan to Felixstowe, England. The cargo included a variety of trucks, generators and land rovers, as well as some of the shippers own containers. In notoriously difficult terrain the teams experience was called upon to ensure smooth transit on land and great coordination for the transhipment arrangements.
At Tuscor Lloyds we have the knowledge to piece together any shipment.
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