informa ci 201404

www.containershipping.comAPRIL 2014

Data Hub: Load Factors ..............................08

Data Hub: World Fleet Update ...............10

Trade Routes: Transpacifi c ........................16

TT Club Column: Liability risk .................50

MAERSK LINE: HOW IT ACHIEVED ITS 2013 RESULTP32

LOGISTICS

EXCLUSIVE: THE LOGISTICS OF THE UK MILITARY WITHDRAWALP34

CARRIERS

TRANSPACIFIC: LOW TAKE-UP OF MULTI-YEAR CONTRACTSP25

MORE INSIGHTCARRIERS

FORWARDTHINKING

CHIEF EXECUTIVEPANALPINA

THEPETER ULBER

INTERVIEW

Port Metro Vancouver is already close to Asian markets. And with unprecedented infrastructure investment in our gateway, we’re getting even closer.

We’re building land-side projects that boost rail and road efficiency. We’re increasing our container terminal capacity and reducing on-dock dwell through collaboration with supply chain partners. And we’re operating with longshore labour certainty to 2018.

As a result, we’ve taken up to 3 days out of your supply chain. That brings your goods closer to market and you closer to your customers.

Fold to

Fold to

Fold to

VANCOUVERVANCOUVER

SHANGHAI

DALIAN

KAOHSIUNG

SHENZHEN

KAOH

SHENZHENHONG KONG

TOKYO

YOKOHAMAD

ONG KONGONG KONGH

TOKYO

SHENZHENSHENZHEN

BUSAN

is better.Closer

April 2014

CONTAINERISATION International was first published in 1967, six years before AP Moller-Maersk entered the container shipping trades. Maersk was a latecomer to this sector of the industry which had started to emerge in the late 1950s.

The legendary Maersk Mc-Kinney Moller was only finally persuaded to join the box trades in the early 1970s. The first containership to carry the Maersk Line brand name was the 1,800 teu Svendborg Maersk, delivered in January 1974.

The actual decsion to set up a container line had been taken in February 1973 when the partners, led by Mr Moller, agreed that “Maersk Line should develop a largescale, door-to-door full container service that will replace the present services operating between the US/Canada and the Far East”.

Maersk Line’s extraordinary ascent over the next 40 years into the world’s largest containership operator is charted in a new book: Creating Global Opportunities ― Maersk Line in Containerisation 1973-2013.

The book, due to be officially launched in early May, documents not just Maersk Line’s rise to the top, but the economic backdrop against which a shipowner from a small north European country took on the world.

And in chapter after chapter, Containerisation International is cited as the source of industry facts, figures and commentary. Former editors Jane Boyes and John Fossey are also quoted on numerous occasions throughout the 442-page study by Chris Jephson and Henning Morgan.

Containerisation International has been one of the most valuable resources for those working in, analysing, or writing about the industry, ever since the monthly magazine first came out nearly 50 years ago. An earlier editor, Richard Gibney, coined the phrase twenty foot equivalent unit ― or teu ― one of the few genuinely global standards despite being an imperial measure.

Jane Boyes retired a few years ago and John Fossey was succeeded in 2012 by former Lloyd’s List ports and logistics

Editor-in-chief – Containers Janet Porter(+44 (0) 20 7017 4617) [email protected]

Editor Damian Brett(+44 (0) 20 7017 5754) [email protected]

Art editor/sub editor Heather Swift(+44 (0) 20 7017 3207) [email protected]

Content sub editor Karen Thomas(+44 (0) 20 7017 6071) [email protected]

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Informa plc, Christchurch Court, 10-15 Newgate Street, London EC1A 7AZ Telephone: +44 20 7017 5000

Incorporating

an informa business

Audited by ABC. Total circulation 10,017 Jan – Dec 2011

Containerisation International is published monthly by Informa plc. Printed by Wyndeham Grange, Southwick, Sussex. Distributed in the US by Pronto Mailers Association. US Periodicals Postage Paid at Middlesex NJ 08846. POSTMASTER: please send US address corrections to: Containerisation International c/o Pronto Mailers Association, P.O.Box 177, Middlesex, NJ 08846. Sources, uses and disclosures of personal data held by Informa plc are described in the Official Data Protection Register. No part of this publication may be reproduced, reprinted or stored in any electronic medium without the express permission of the publishers.

© Informa plc ISSN: 0010-7379

Times may change, but Containerisation International remains at the forefront

INTRODUCING OUR NEW EDITOR

editor Roger Hailey, who guided the publication through some challenging times. Roger has now decided to move on to an air cargo publication ― but promises to write the occasional article for us on the relative merits of air and ocean freight.

In his place, I am delighted to announce that Damian Brett, who joined the editorial team a year ago, has been appointed editor. Damian has shown that he has a very good understanding of all aspects of the container industry, and also recognises the need to keep adapting the way we deliver news, data, analysis and insight to subscribers in this digital age.

Incidentally, in this issue, Damian talks to Maersk Line chief executive Søren Skou about how the line managed to produce such strong results in 2013 when most other box lines remained in the red.

Like Maersk, Containerisation International may now be a well-established industry fixture, but the only way to remain either the world’s leading container line, or the bible of the container shipping world, is to be flexible and forward-thinking. Our new editorial team will be just that.

Janet Porter, editor-in-chief – containers

Join us on:Group name:

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APRIL 2014

www.containershipping.com CONTAINERISATION INTERNATIONAL 01

April 2014

STRIKING A DEALTough talking as US employers remain confi dent of striking labour agreement

P22

LOW TAKE-UP FOR MULTI-YEAR DEALSTranspacifi c service agreements are being renegotiated, but why do so few extend beyond 12 months?

P25

MOVING FORWARDPanalpina chief executive Peter Ulber on his company’s plans to expand its sea freight business

P26

LA TAKES ACTION$1bn investment programme proves commitment to the port

P30

DATA HUB

TRADE STATISTICSPositive trade performance on European routes is not being matched by positive utilisation rates

P04

DATA HUB

LOAD FACTORSLooking at the likely vessel utilisation rates for the key European trade lanes

P08

DATA HUB

WORLD FLEET UPDATEPanamaxes still facing peril, but delayed Panama Canal reopening may off er some respite

P10

FREIGHT RATE INDICATORSMore of the same for 2014 as overall spot rates on major trade lanes from Asia are in line with last year’s levels

P14

14

“I don’t think there is a shipper or forwarder

out there who does not believe in the need for

larger vessels”

CARRIERS

DATA HUB

DATA HUB PORTS

CARRIERS

PORTS

TRADE ROUTE INTELLIIGENCEManaging greater expectations on the transpacifi c trade lane

P16

CHOICE WIDENS FOR US SHIPPERSThe soon-to-be-enlarged Panama Canal is not the only option for those looking to move cargo to the US heartlands

P19

VIEW FROM THE BRIDGE

02 CONTAINERISATION INTERNATIONAL www.containershipping.com

CONTENTS / APRIL 2014

P26

PETER ULBER

VIEW FROM THE BRIDGE

April 2014

LONG BEACH READY FOR CARGO FIGHTPort goes toe-to-toe with rival Los Angeles and attempts to put upheaval behind it

P31

HOW DID THEY DO THAT?Maersk Line’s Søren Skou on how the company managed another year of profi t growth in diffi cult circumstances

P32

LOGISTICAL BATTLEGROUNDAn EXCLUSIVE report from Ian Aitchison on the UK military withdrawal from Afghanistan

P34

RUSSIA’S GROWTHContainer volume growth slowed last year but is still above the global average

P48

LIABILITY RISKSAndrew Kemp of the TT Club outlines additional liabilities being undertaken by freight forwarders

P50

FREIGHT RATESRichard Ward of FIS says cutting costs is only half the battle for profi tability

P51

BARGING INWaalhaven Group’s various services mean it faces a wide range of challenges

P52

PORTS

GUEST COLUMNISTS

SEARCHING FOR THE KEY TO SUCCESSAlastair Hill takes a look at the winners and losers in the 2013 results announcements

P40

CHANGING LANESFreight forwarder growth is in line with the market, but 2013 results mark strategy changes for the big players

P43

NEWS ROUND-UPFMC clears P3 alliance

P45Latest carrier results

P46Hapag-Lloyd/CSAV merger edges closer

P47

CARRIERS

LOGISTICS

BOX WORLD BRIEFING

CARRIERS

FORWARDERS

PORTS

LOGISTICS


ISSUE 3/VOL 47

04 CONTAINERISATION INTERNATIONAL www.containershipping.com April 2014

DATA HUBTRADE STATISTICS

SUPPLY/DEMAND INDICATORS FOR CONTAINER SHIPPING

DATA PROVIDED BY:

BASED on the actual results for the fourth quarter of 2013, MDST estimates that exports from Asia (excluding intra-regional trade) have grown by a remarkable 8.3% in the fourth quarter of 2013, compared with the same quarter a year ago, reaching almost 11.7m teu.

The positive performance witnessed in the last three months of 2013 can be explained by the early Chinese New Year. Usually the holiday is accompanied by the pressure of moving cargo before the factory closure for the holiday season; this year this pressure

was worsened by the fear of incurring delays as experienced by shippers last year.

With an increase of some 8%, exports to North America registered the highest growth between the fourth quarter of 2012 and the fourth quarter of 2013. Positive results are also estimated for the other dominant corridor, Asia to North Europe, where MDST estimates an increase of 6% during the same period.

As a consequence, at a global level MDST estimates that ― excluding intra-regional trade ― total loaded maritime volume will have

grown by almost 7% during the fourth quarter of 2013, compared with the same quarter the previous year (+4.5% comparing the full-year results in 2013 with full year 2012).

Similar results for 2013 have been announced by Maersk Line; in its annual report, the shipping line indicated an annual growth of 3.5% in the global market for containers.

The positive performances in trade data, however, have not been accompanied by positive performance on the shipping line’s utilisation levels.

SUPPLY AND DEMAND GAP PERSISTS

North America to north Europe North America to Mediterranean

Leading indicators: headhaul from north Europe ‘000 teu. Italics = projectedCommodity 2012 2013 2014 2015

11 Beverages 188 184 189 19378 Road Vehicles 174 175 186 19589 Miscellaneous Manufactures 169 190 204 21674 General Industrial Machinery 163 156 148 15562 Rubber Manufactures 129 136 135 153Overall headhaul index 100 105 110 117Overall backhaul index 100 103 107 113

Leading indicators: headhaul from Mediterranean ‘000 teu. Italics = projectedCommodity 2012 2013 2014 2015

66 Mineral Manufactures 118 140 151 16489 Miscellaneous Manufactures 64 76 87 9182 Furniture 57 65 73 7611 Beverages 51 52 46 4905 Vegetables & Fruit, Nuts 50 52 58 60Overall headhaul index 100 108 113 120Overall backhaul index 100 105 97 106

North America to north Europe (‘000 teu) North America to Mediterranean (‘000 teu)

1,758 904

2,478 1,083

1,809

2.9%

948

4.9%

2,592

4.6%

1,175

8.5%

1,877

3.8%

879

-7.3%

2,727

5.2%

1,221

3.9%

1,993

6.2%

958

9%

2,910

6.7%

1,301

6.6%

2012 20122013 20132014 20142015 2015

North Europe to North America (‘000 teu)North Europe includes northern Europe, Scandinavia and the Baltic

Mediterranean to North America (‘000 teu)Mediterranean includes North Africa and the Black Sea

• Underlying westbound trade grew by 3% in 2013 and is expected to growth by some 4% in 2014.• Underlying eastbound trade grew by 4.6% in 2013 and is expected to grow by 5% in 2014.• Of the leading headhaul commodities, road vehicles and misc. manufactures show most growth. • Annual headhaul growth from 2013 to 2017 is forecast at +5%.• Service capacity westbound in the fourth quarter of 2013 is estimated to be 6% above the fourth quarter of 2012.• Y-o-Y in the fourth quarter of 2013, freight rates and profits are estimated to have increased and utilisation level is estimated to have fallen.

• Underlying westbound trade grew by 8.5% in 2013 and is expected to grow by 4% in 2014.• Underlying eastbound trade grew by 5% in 2013 and is expected to fall by 7% in 2014.• Of the leading headhaul commodities, mineral manufactures shows most growth.• Annual headhaul growth from 2013 to 2017 is forecast at +4%.• Service capacity westbound in the fourth quarter of 2013 is estimated to be 14% above the fourth quarter of 2012.• Y-o-Y in the fourth quarter of 2013, freight rates, estimated utilisation and profit are estimated to have decreased.

20122012 20132013 20142014 20152015

Positive trade performance not accompanied by positive utilisation performance

For example, Maersk Line reported that in 2013, global nominal capacity has grown by some 8.4% year on year. Slow-steaming and scrapping have made a small contribution towards a reduction in the gap between supply and demand.

MDST estimates that the persisting gap between supply and demand is likely to further weaken rates, as shown in graph A, which shows that the gap in the fourth quarter of 2013 is estimated to have reached a level of 24 points down from 21 in the previous quarter (2006 Q1 = 100).

As more larger ships come on-stream it is inevitable that rates will remain depressed. However, the economies of scale these new ships offer in terms of fuel economy are so powerful that they will be able to ride out the inevitable depression in rates over the short term. This has been clearly demonstrated in Maersk Line results for 2013, which showed increasing profitability despite falling mean rates.

For this edition, MDST has observed the European trade lanes, reporting an increase of some 3% in deep-sea import volumes to north Europe and the Mediterranean during the fourth quarter of 2013 compared with the same quarter in the previous year (with a decrease of circa 1% for the fourth quarter of 2013 compared to the previous quarter).

Trade from north Europe to America is projected to grow by 5% by the end of 2014 and it is forecast to continue to grow at 4% per year from 2014 to 2017. Specialised machinery grew but general industrial machinery and beverages fell,

North Europe to Mid-East Gulf & Indian subcontinent Mediterranean to Mid-East Gulf & Indian subcontinent

North Europe to Mid-East Gulf & Indian subcontinent (‘000 teu)North Europe includes northern Europe, Scandinavia and the Baltic

Mediterranean to Mid-East Gulf & Indian subcontinent (‘000 teu)Mediterranean includes North Africa and the Black Sea

1,469 1,655

1,041 986

1,435

-2.3%

1,817

9.8%

1,080

3.7%

1,114

13%

1,473

2.6%

1,955

7.6%

1,133

4.9%

1,226

10.1%

1,600

8.6%

2,109

7.9%

1,214

7.1%

1,300

6%

2012 20122013 20132014 20142015 2015

Mid-East Gulf & Indian subcontinent to north Europe (‘000 teu)Mid-East Gulf & Indian subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh

Mid-East Gulf & Indian subcontinent to Mediterranean (‘000 teu)Mid-East Gulf & Indian subcontinent includes Gulf states, India, Pakistan, Sri Lanka & Bangladesh

• Underlying eastbound trade fell by 2% in 2013 but is expected to grow by 3% in 2014.• Underlying westbound trade grew by 4% in 2013 and is expected to grow by 5% in 2014.• Of the leading headhaul commodities, food and paper show the most growth.• Annual headhaul growth from 2013 to 2017 is forecast to be +6%.• Service capacity eastbound in the fourth quarter of 2013 is estimated to be 18% below the same quarter previous year.• Y-o-Y in the fourth quarter of 2013, estimated utilisation and freight rates are estimated to have decreased and profits is estimated to have improved.

• Underlying eastbound trade grew by almost 10% in 2013 and is expected to grow by 8% in 2014. • Underlying westbound trade has been growing by 13% in 2013 and is expected to grow by 10% in 2014. • Of the leading headhaul commodities, mineral manufactures, animal feeds and fruit & veg show the most growth.• Annual headhaul growth from 2013 to 2017 is forecast at +7%.• Service capacity eastbound in the fourth quarter of 2013 is estimated to be 30% above the fourth quarter of 2012.• Y-o-Y in the fourth quarter of 2013, estimated utilisation, freight rates and profits are estimated to have decreased.

2012 20122013 20132014 20142015 2015

* Excludes intra-regional trade. ** Forecast. On the basis of trade data available in mid-August, the consultancy projects the following changes in underlying demand along the main trade lanes for loaded containers for the forthcoming 12 months (4Q 2013 – 3Q 2014 as compared with the previous 12 months). For explanatory notes that define how data has been organised please see www.boxtradeintelligence.co.uk.

2011-2012

2012- 2013

2013-2014**

North America to Europe -6% +4% 0%

North America to Asia +5% +8% +11%

Asia to Europe -3% +3% +11%

Asia to North America +6% +5% +6%

Europe to Asia +1% +2% +2%

Europe to North America +6% +6% +5%

North America exports * +2% +5% +6%

North America imports * +6% +4% +5%

Asia Exports * +3% +5% +9%

Asia Imports * +7% +5% +8%

Europe & Med Exports * +5% +4% +4%

Europe & Med Imports * -2% +3% +7%

Intra Asia +6% +4% +8%

Intra Europe +4% +6% +4%

Global overview +5% +5% +7%

Leading indicators: headhaul from north Europe ‘000 teu. Italics = projectedCommodity 2012 2013 2014 2015

64 Paper & Paperboard 105 104 103 11105 Vegetables & Fruit, Nuts 68 52 78 7809 Miscellaneous Food Products 66 70 70 7777 Electrical Machinery 60 55 58 6328 Ores & Scrap 55 48 32 37Overall headhaul index 100 98 100 109Overall backhaul index 100 104 109 117

Leading indicators: headhaul from Mediterranean ‘000 teu. Italics = projectedCommodity 2012 2013 2014 2015

08 Animal Feedingstuffs 286 325 281 35366 Mineral Manufactures 173 181 170 18805 Vegetables & Fruit, Nuts 164 178 181 18527 Crude Fertilisers & Minerals 99 98 108 11089 Miscellaneous Manufactures 67 72 70 74Overall headhaul index 100 110 118 127Overall backhaul index 100 113 124 132

Underlying unitised trade growth rates (year on year)

www.containershipping.com CONTAINERISATION INTERNATIONAL 05April 2014




while traffic in the eastbound direction increased by 5%. Trade from the Mediterranean to North America is projected to grow by almost 4% by the end of 2014, with all leading commodities rising. Growth from 2014 to 2017 is forecast at 5% per year. Eastbound traffic is expected to decline by some 7% in 2014.

Trade from northern Europe to the Gulf and Indian subcontinent is projected to grow by 2.6% by the end of 2014, with paper and paperboard and food products bucking the trend, and is forecast to grow at the rate of 7% per year from 2014 to 2017.

Trade from the Mediterranean to the Gulf and Indian subcontinent is projected to grow by 7.6% by the end of 2014, being led by animal feeding-stuffs and mineral manufactures. It is forecast to grow at the rate of 6% per year from 2014 to 2017.

Trade from northern Europe to east and southern Africa is projected not to grow in 2014, but it is forecast to grow by 8% per year from 2014 to 2017.

Trade from northern Europe to Australasia is projected to grow by 2% by the end of 2014, being led by electrical machinery. It is forecast to grow by 6% per year from 2014 to 2017.

North Europe to East & South Africa North Europe to Austalasia & Oceania

North Europe to E&S Africa (‘000 teu) North Europe includes northern Europe, Scandinavia and the Baltic

North Europe to Australia & Oceania (‘000 teu) North Europe includes northern Europe, Scandanavia and the Baltic

331 358

310 150

334

0.9%

354

-1.1%

290

-6.5%

136

-9.3%

334

0%

362

2.3%

275

-5.2%

114

-16.2%

371

11.1%

391

8%

302

9.8%

123

7.9%

2012 20122013 20132014 20142015 2015

E&S Africa to north Europe (‘000 teu) East and South Africa includes East African countries and their hinterland

Australasia & Oceania to North Europe (‘000 teu) Australasia & Oceania includes Australia, New Zealand and Pacific Islands

• Overall southbound trade grew by 1% in 2013 and is expected to be flat in 2014. • Underlying northbound trade fell by 6.5% in 2013 and is expected to fall 5% in 2014. • Of the leading headhaul commodities none show consistent growth. • Annual headhaul growth from 2013 to 2017 is forecast at +6%.• Service capacity southbound in the fourth quarter of 2013 is estimated to be 9% below the fourth quarter of 2012.• Y-o-Y in the fourth quarter of 2013, estimated utilisation, freight rates and profits are estimated to have decreased.

• Overall southbound trade fell by 1% in 2013 and is expected to grow by 2% in 2013. • Underlying northbound trade fell by 9% in 2013 and is expected to fall by16% in 2014.• Of the leading headhaul commodities, road vehicles, misc manufactures and paper show consistency.• Annual headhaul growth from 2013 to 2017 is forecast at +5%. • Service capacity southbound in the fourth quarter of 2013 is estimated to be 8% below the fourth quarter of 2012.• Y-o-Y in the fourth quarter of 2013, estimated utilisation is estimated to have remained stable, freight rates and profits are estimated to have decreased.

2012 20122013 20132014 20142015 2015

This data is provided by Box Trade Intelligence in collaboration with MDS Transmodal. Much more detail is available directly from BTI (www.boxtradeintelligence.co.uk), including tonnages and estimated teu at the country x country x 3,000 commodities level, individual ship deployment and estimated revenue, profit, rates and utilisation at the tradelane and individual ship level.

Leading indicators: headhaul from N Europe ‘000 teu. Italics = projected Commodity 2012 2013 2014 2015

08 Animal Feedingstuffs 286 325 281 35366 Mineral Manufactures 173 181 170 18805 Vegetables & Fruit, Nuts 164 178 181 18527 Crude Fertilisers & Minerals 99 98 108 11089 Miscellaneous Manufactures 67 72 70 74Overall headhaul index 100 110 118 127Overall backhaul index 100 113 124 132

Leading indicators: headhaul from N Europe ‘000 teu. Italics = projected Commodity 2012 2013 2014 2015

72 Specialised Machinery 28 19 19 2078 Road Vehicles 23 22 20 2289 Miscellaneous Manufactures 21 22 20 2164 Paper & Paperboard 20 21 18 1977 Electrical Machinery 17 16 14 15Overall headhaul index 100 99 101 109Overall backhaul index 100 91 76 82

Supply - based on actual data Demand - based on actual data

Demand seasonally adj

60

80

100

120

140

160

180

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013 Q4Supply Index=1692012 Q4 - 2013 Q4

% change quarter on quarterSupply=4.5%Demand=7%

2013 Q4Demand Index=146

2013

Q3

Graph A: Global supply v demand and seasonally adjusted demand index 2006 (Q1=100)

April 20148 CONTAINERISATION INTERNATIONAL www.containershipping.com

DATA HUBLOAD FACTORS

THE ACE OF TRADESDamian Brett takes a look at the likely impact of supply and demand on some of the key European trade lanes

Europe to Middle East Gulf & Indian subcontinent

Load factors on services from Europe to the Middle East Gulf and Indian subcontinent are expected to perform well this year, staying above the 84% mark in three of the four quarters.

These utilisation levels are down to expectations for strong cargo growth in 2014, with MDS Transmodal expecting volumes to reach more than 3.5m teu, an increase of 8.4% over the year.

Utilisation levels will be roughly in line with last year, as volume growth is matched by capacity additions, measuring 8.2%.

3

Northern Europe to east coast of South America

This year is set to be a mixed one for vessel load factors on services from northern Europe to South America, with improvements compared with 2013 being chipped away through the addition of larger vessels.

Volumes are set to continue to grow at a decent clip, with analysts projecting increases of around 6% in 2014. Meanwhile, our projections show that first-quarter capacity actually decreased compared with the January-March period of last year.

But carriers have been busy adding ships to services as the quarter progressed ― Hamburg Süd has opted to deploy new 9,700 teu ships in its Brazil/River Plate-North Europe loop and Mediterranean Shipping Co also filled a gap in its Samex schedule.

The effect has been to boost capacity by an estimated 7.7% at the start of the second quarter compared with the start of the first quarter.

This trend is expected to continue as the year progresses and utilisation levels for the peak season will be below last year’s levels.

As well as being below last year, load factors will also fail to breach the 80% mark meaning it could be a tough year for shipping lines.

1

East coast of South America to northern Europe

As with all trade lanes, capacity deployment decisions are mostly based on expectations for the headhaul direction and unfortunately for services from South America to north Europe, carriers are adding large amounts of capacity on this trade lane on the back of 6% volume growth in the opposite direction.

Sometimes this is mitigated by strong demand growth in the backhaul direction, but analysts are expecting volumes to increase by the lesser amount of 2% on services from South America.

As a result, load factors are expected to be weak and also below last year’s levels, peaking at 75% in the fourth quarter.

2

2

1

4

East coast South America to northern Europe: average vessel utilisation

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

Northern Europe to east coast South America:average vessel utilisation

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

Europe to Middle East Gulf & Indian subcontinent: average vessel utilisation

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

April 2014 www.containershipping.com CONTAINERISATION INTERNATIONAL 9

6

OUR METHODOLOGY: The freight rate forecasts shown in the tables are mainly based on projections of estimated average vessel utilisation in each trade lane, combined

with other relevant circumstances. The fuller the ship, the more likely rates will rise and vice versa. Cargo forecasts are based on the latest information from all sources available to

Containerisation International’s editorial team. These will always be conservative, and only take account of normal seasonal variations. Fleet capacity information is derived from

Lloyd’s List Intelligence. Current shipboard capacity in each route is estimated by deducting space lost for broken stows and wayport cargo from the operating capacity offered on

every vessel in that tradelane. This is projected forward by estimating where newbuildings are likely to be deployed, as well as where replaced vessels are likely to be cascaded into.

Average vessel utilisation is simply one divided by the other. It should be noted, therefore, that the resulting freight rate trends only reflect what should theoretically happen if ocean

carriers continue acting according to form. They do not take into account dramatic changes in strategy, such as mass lay-ups, service consolidation and more hub and spoke operations.

Middle East Gulf & Indian subcontinent to Europe

Load factors on vessels from the Middle East and Indian subcontinent are expected to peak at 83% in the first three months and 80% in the third quarter.

These levels should be enough for carriers to at least maintain freight rates at the previous quarter’s levels. Bearing in mind this is the backhaul trade, these are decent figures.

Load factors for 2014 are also better than last year as volumes are expected to surge by as much as 10%.

On the capacity front, larger ships were deployed in Maersk Line’s dedicated loops, ME2 and ME3. The G6 Alliance’s wayport calling loops, 6 and 7, and MSC’s Falcon loop also saw larger tonnage, while gaps in some other services were filled.

For the full year, capacity is expected to increase by just over 8%.

4

DATA HUBFREIGHT FORECASTERNEXT EDITION: AMERICAS

DATA HUBLOAD FACTORS

Asia to northern Europe

EMERGING data from Container Trades Statistics shows that the year started strongly, with January Asia to Europe volumes increasing by 8% compared with the same month in 2013.

This is partly explained by an earlier-than-usual 2013 Chinese New Year, forcing shippers to rush cargo out of Asia before factories closed for the holiday.

For the full year, analysts are expecting demand on the trade lane to grow by around 4-5% this year, following on from 2% in 2013.

Apart from the two weeks immediately after Chinese New Year, the number of gaps left in schedules through carriers temporarily pulling out ships was considerably less than occurred at the same point in the last two years.

These gaps aside, larger vessels on G6 loops six and seven, and Maersk Line loops AE2, 7 and 10, resulted in capacity growth of 1.8% between the start of the first and second quarter.

For the full year, capacity is expected to increase year on year slightly above demand, but roughly speaking load factors will be in line with 2013. Utilisation rates will peak at 92% in the third quarter.

Under normal circumstances, these load factors would put the shipping lines in a strong position, but as discussed previously, the Asia-Europe trade generally requires slightly higher than normal load factors before it becomes a seller’s market.

6

Asia to the Mediterranean

Services from Asia to the Mediterranean are also set for a good year in terms of utilisation levels as demand growth is expected to outstrip capacity additions.

The region is continuing to recover from the effects of the Mediterranean financial crisis and the Arab spring. Therefore volumes are growing strongly each year.

According to CTS data, liftings jumped by 8.3% year on year in 2013 to 5.3m teu. For 2014, analysts are expecting another increase of around 6%.

Meanwhile, carriers are being careful with additions and our projections show year-on-year growth in capacity of around 2.4% for 2014.

This careful approach can be seen in the small 0.6% addition in capacity between the start of the first and second quarters. All this means strong vessel utilisation levels for the year, reaching as high as 95% in the second quarter.

5

5

3

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

Asia to northern Europe: average utilisation rates

Asia to Mediterranean: average vessel utilisation

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

Middle East Gulf & Indian subcontinent to Europe:average vessel utilisation

0

20%

40%

60%

80%

100%

Q115

Q414

Q314

Q214

Q114

Q413

Q313

Q213

Q113

KEY: Green (84% and above): Carriers should be able to protect rates or even improve prices, unless the market has hit the top or sentiment dictates otherwise. Grey (80%-83%):

Freight rates should be fairly steady compared with the previous quarter unless market sentiment dictates otherwise. Red (79% and below): Carriers are likely to have a tough time

improving rates and prices could well decline compared with the previous quarter, unless the market has hit the bottom or sentiment dictates otherwise.

PANAMAXES IN PERILDelayed canal opening may help, but scrapping is still the best option, reports James Baker

Teu Size range In service March 2014 On Order 2014 On Order 2015 On Order 2016+ Total vessels on order

Total teu on order*

No Teu No Teu No Teu No Teu

0-499 343 95,741 2 251 2 210 - - 4 510

500-999 730 551,049 7 5,597 1 606 1 540 9 6,743

1,000-2,999 1,859 3,368,147 57 96,390 63 123,750 11 23,352 131 243,492

3,000-4,999 926 3,831,047 32 137,080 10 38,200 9 34,600 51 209,880

5,000-7,499 617 3,719,943 29 162,550 10 62,200 - - 39 224,750

7,500-9,999 340 2,916,643 40 355,431 61 551,214 24 221,762 125 1,128,407

10,000-12,999 69 769,132 15 157,686 13 134,362 5 50,000 33 342,048

13,000-15,999 134 1,816,658 17 228,816 22 309,850 13 184,500 52 723,166

16,000+ 9 157,680 12 215,490 31 556,910 1 18,800 44 791,200

Total 5,027 17,226,040 211 1,359,291 213 1,777,302 64 533,554 488 3,670,196

World Cellular Fleet – March 2014 (excluding newbuild postponements and cancellations under negotiation)

Delays to the completion of the Panama Canal could bring respite to the panamax sector.

THE number of ships on the water in the global fleet dropped minutely again last month as four more ships went to scrap than entered the fleet.

However, total capacity keeps on climbing as larger ships take over from smaller

ones: another 81,000 teu of capacity joined the fleet in March.

In practical terms that capacity equates to another four and a half 17,700 teu vessels, and there are more of those to come. CMA CGM

confirmed at the end of the month a story Containerisation International had broken two weeks earlier: that it was increasing the size of its vessels on order at Shanghai Waigaoqiao Shipbuilding and at Samsung Heavy

Industries from 16,000 teu to a nominal 17,700 teu.

The move brings CMA CGM into the realm of its P3 peers, Maersk Line and Mediterranean Shipping Co, which both already have 18,000 teu vessels either on

Source: Lloyd’s List Intelligence

DATA HUBWORLD FLEET UPDATE


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Vessels laid-up – Week ending March 27, 2014

Notes: Lloyd’s List Intelligence monitors reported and AIS movements of commercial vessels worldwide. This extract identifi es vessels with no recorded movement in the past 25 days.

Inactive teu size range

Owner operator Chartered in /unknown Total % total fleet

No of ships Teu No of ships Teu No of ships Teu

0-499 13 4,253 96 23,342 109 27,595 28.8%

500-999 12 7,505 52 38,060 64 45,565 8.3%

1,000-2,999 15 24,134 47 85,783 62 109,917 3.3%

3,000-4,999 7 29,488 25 100,970 32 130,458 3.4%

5,000-7,499 9 57,602 17 103,264 26 160,866 4.3%

7,500-9,999 2 18,326 4 35,098 6 53,424 1.8%

10,000-12,999 - - - - - - -13,000+ - - - - - - -

Total 58 141,308 241 386,517 299 527,825 3.1%


Vessels delivered – March 2014

Vessel name Shipyard Teu Reefer plugs

DWT Knots Beneficial owner Operator Deployment

MOL Quasar Hyundai Samho Heavy Industries 14,000 - 150,936 - Neptune Orient Lines (NOL)

Mitsui O.S.K. Lines (MOL)

Asia-Europe

Thalassa Elpida Hyundai Heavy Industries 13,800 - 151,200 23 N.S. Lemos Evergreen Marine Asia-Europe

Leverkusen Express

Hyundai Heavy Industries 13,200 - 140,700 - Hapag-Lloyd Hapag-Lloyd Asia-Europe

Hyundai Hope Daewoo Shipbuilding & Marine Engineering

13,050 - 152,700 24.8 Hyundai Merchant Marine (HMM)

Hyundai Merchant Marine (HMM)

Asia-Europe

CSCL Winter Dalian Shipbuilding 10,000 - 112,000 - China Shipping China Shipping Container Lines

Transpacific

Hanjin Buddha Jiangsu New Yangzijiang Shipbuilding

10,000 - 115,177 - Washington Marine Hanjin Shipping Transpacific

APL Detroit Daewoo Shipbuilding & Marine Engineering

9,200 - 107,000 - Neptune Orient Lines (NOL)

APL Middle East Gulf/Indian Subcontinent -Asia

Ever Loyal Samsung Shipbuilding & Heavy Industries

8,452 942 104,409 24.5 Evergreen Marine Evergreen Marine Middle East Gulf/Indian Subcontinent -Asia

Ever Lenient Samsung Shipbuilding & Heavy Industries

8,452 942 104,409 24.5 Evergreen Marine Evergreen Marine Middle East Gulf/Indian Subcontinent -Asia

Box King Zhejiang Ouhua Shipbuilding 4,834 600 56,300 21 Box Ships - -

Pegasus Tera Hyundai Mipo Dockyard 1,000 - 12,217 - Pegas Namsung Shipping

Regional Asia


the water or on order. The alliance, which received the green light from the US Federal Maritime Commission last month, plans to use larger vessels to boost utilisation and increase efficiency across the three lines’ fleets.

The pull of larger ships appears to continue unabated. United Arab Shipping Co’s order for an additional 18,800 teu vessel at Hyundai Heavy Industries means there are now 44 vessels over 16,000 teu on order, comprising nearly 800,000 teu capacity.

Vessels on order now represent more than 500% of

the total existing fleet in this size sector, compared with an orderbook of 21% across the whole fleet.

Not everyone is convinced, however. Small ship stalwart Evergreen has defended its decision to stick with its 30-strong order of 8,500 teu vessels, of which 12 are still to be delivered. Nevertheless, Evergreen, which resisted the move to larger vessels for many years, appears to now acknowledge that vessels in the 14,000 teu range are the way of the future.

Evergreen argues that its 8,500 teu ships are more flexible than larger vessels and can be

deployed on more routes. This flexibility has also been noted in the ailing panamax sector, with charter rates for panamaxes finally seeing some good news last month.

Braemar Seascope reported a “significant” number of panamax vessels booked on spot charters. The extra interest has resulted in an increase in prices for the larger panamax vessels of as much as $1,000 per day.

Much of the demand for panamaxes has been due to their deployment on intra-Asia routes. Delays to the completion of the Panama Canal expansion could also bring

respite to the panamax sector, according to Braemar.

Nevertheless, the panamax sector remains overtonnaged and scrapping will offer the only real long-term solution to depressed rates. While nine of the 15 ships sent to breakers yards last month were panamaxes, these were all older units, with an average age of over 20 years.

Moreover, only 32 panamaxes were recorded as laid up during the final week of March, representing just 3.4% of the panamax fleet.

Again, this has had an effect on prices for secondhand tonnage on the market.

Figures from VesselsValue.com show that prices for a 10-year-old 4,000 teu panamax fell by 5.6% month on month in March. The only positive note in vessel sales was in the post-panamax sector, where cascading and potential use on an expanded Panama Canal have helped boost prices for older tonnage. The price of a 10-year-old 6,500 teu post-panamax soared by 8.3% in March compared with a month earlier.



Valuations for post-panamax, panamax and handymax container vessels

Note: All values in $m

Age Capacity (teu) March 17, 2014 ($m)

February 17, 2013 ($m)

Monthly change ($m)

March 17, 2013 ($m)

Yearly change ($m)

0 4,250 33.7 34.1 -0.4 36.3 -2.6

5 4,250 23.3 23.9 -0.6 25.1 -1.8

10 4,000 13.4 14.2 -0.8 14.8 -1.4

15 4,000 9.2 8.9 0.3 8.7 0.5

20 3,750 8.7 8.4 0.3 7.5 1.2

25 3,750 8.7 8.4 0.3 7.8 0.9

Panamax Source: Vesselsvalue.com




Monthly change ($m)

March 17, 2013 ($m)

Yearly change ($m)

0 1,400 18.3 18.5 -0.2 18.5 -0.2

5 1,400 13.3 13.4 -0.1 12.7 0.6

10 1,400 8.7 8.8 -0.1 7.8 0.9

15 1,400 5.2 5.2 0.0 4.5 0.7

20 1,400 3.6 3.4 0.2 3.0 0.6

25 1,400 3.6 3.5 0.1 3.1 0.5

Handymax Source: Vesselsvalue.com

Current and historical values for tankers, bulkers and containers.Daily updated sales lists, vessel specifi cations and ownership information.Data exports, valuation certifi cates, interactive charts and automated alerts



Monthly change ($m)

March 17, 2013 ($m)

Yearly change ($m)

0 7,000 65.5 66.4 -0.9 59.7 5.8

5 7,000 48.7 46.6 2.1 41.4 7.3

10 6,500 30.0 27.7 2.3 24.1 5.9

15 5,500 15.0 13.5 1.5 14.2 0.8

20 4,500 9.6 9.3 0.3 8.3 1.3

Post-panamax Source: Vesselsvalue.com


Vessel name Teu DWT Speed (knots) Config Year built Price ($m) Purchaser

Santa Pelagia 5,015 66,821 26 Gearless 2005 14.0 Swizterland

Merkur Star 2,638 39,528 20 Gearless 1996 Undisclosed China

Commander 2,764 35,770 23 Geared 2004 11.0 Turkey

Maersk Vigo 1,678 22,300 21 Geared 2002 11.0 UK

Maersk Valletta 1,678 22,300 21 Geared 2002 11.0 UK

Maersk Vancouver 1,678 22,300 21 Geared 2001 11.0 UK

Sea Breeze 779 8,965 15 Geared 1999 1.70 China

Vessels sale and purchase – March 2014

Notes: C=cellular; GL=gearless; G=geared; NC=non-cellular; MPP=multipurpose; U/D=undisclosed Source: Braemar Seascope

Vessels demolished – March 2014

Vessel name Built Teu Broken date Broken place Shipbreakers Previous Beneficial owner

Don 1995 4,729 19-Mar-14 Alang Indian Breakers Diana Shipping

Marathonas 1991 4,437 01-Mar-14 Alang Indian Breakers Danaos

Otse 1994 4,230 21-Mar-14 Alang Indian Breakers Ernst Komrowski Reederei

Repton 1994 4,230 30-Mar-14 Alang Indian Breakers Ernst Komrowski Reederei

Irene 1994 4,024 17-Mar-14 Alang Indian Breakers Tsakos Shipping and Trading

Hanjin San Francisco 1996 4,024 06-Mar-14 Alang Indian Breakers Hanjin Shipping

River Elegance 1994 3,800 05-Mar-14 Xinhui Chinese Breakers China Ocean Shipping (Cosco)

Dabat 1991 3,604 19-Mar-14 Alang Indian Breakers Ernst Komrowski Reederei

Baltario 1992 3,604 21-Mar-14 Alang Indian Breakers Ernst Komrowski Reederei

MSC Ayala 1985 2,073 28-Mar-14 Alang Indian Breakers Mediterranean Shipping Company (MSC)

Santi 1996 2,000 19-Mar-14 Alang Indian Breakers Rickmers Reederei GmbH & Cie KG

Buxsailor 1993 1,684 29-Mar-14 Alang Indian Breakers Gebab Konzeptions

Carol 1991 1,208 29-Mar-14 Alang Indian Breakers Hermes Maritime Services


DATA HUBFREIGHT RATE INDICATORS


A CONTACT at a leading shipping line recently remarked that freight rates ― while volatile ― had settled into an almost quarterly pattern, with shipping lines increasing prices to a certain level, then decreasing them for a couple of months until they reach a level that is unsustainable for the box lines, which then toughen their stance and manage to increase them again.

In the first quarter of 2014, this pattern can be seen when looking at the Shanghai Containerised Freight Index’s composite index, which is made up of a weighted average of all-in spot rates from 15 trade lanes from Shanghai.

It peaked in the third week of the year at 1,188 index points before beginning a slide towards 929. In the week ending March 21, shipping lines were able to increase rates again and the index leapt to 1,067 points.

Last year, the index increased week on week by more than 100 points on four occasions; once in March, once in June, once in November and once in December.

This year, the average weekly index level for the first quarter was 1,176 points, compared with 1,179 during the same period last year, indicating that freight rates are roughly in line with 2013.

Meanwhile, average weekly bunker prices ― in Rotterdam at least ― are below last year’s level, meaning there

MORE OF THE SAME FOR 2014Global spot market freight rates on major trade lanes from Asia are in line with last year’s levels but performance varies between various trade lanes, reports Damian Brett

The average weekly freight rate on the trade lane for the first quarter of this year stood at $1,679 per teu compared with $1,258 during the same period last year, reflecting a strong January and February.

On services from Asia to the Mediterranean, the weekly average for the first quarter stands at $1,710 per teu compared with $1,209 last year.

Volume data for January ― the latest month available ― showed liftings on the trade lane were up 8.3% year on year at 1.4m teu.

Transpacific Freight rate performance on the transpacific trade lane is of particular importance during the first quarter of the year as it can influence the levels at which shipping lines and shippers sign their annual contracts.

This year, it looks like spot market rates are behind last year’s levels. The Transpacific Stabilization Agreement’s price indices for January ― the latest month for which figures are available ― stands at 82.42 points from Asia to the US west coast and 76.7 points to the US east and gulf coast.

This compares with January last year when the indices stood at 87.84 and 78.06 points respectively.

The SCFI also indicates that spot market rates are below last year’s levels.

The SCFI component for services from Asia to the US west coast has recorded a first-quarter weekly average of $1,975 per feu this year, compared with $2,319 per feu last year.

The east coast component has a first-quarter weekly average of $3,302 per feu for the first three months of this

2010 2011JanNov Jan

120

110

100

90

80

70

60

June

200

8 =

100

USWC/IPI USEC/Gulf

60

80

100

2013Jan

20142012Jan

Source: Transpacific Stabilization Agreement

300

600

900

1,200

1,500

Mar

Feb

Jan

Dec

NovOct

Sept

Aug

Jul

Jun

May

Apr

Mar

Feb

Jan

Dec

NovOct

Sep

Aug

Jul

Jun

$ te

u/M

T

2012 2014

Composite (index level)Average Bunker price(Rotterdam HS 380 $/metric tonne)

2013

Composite is a weighted average of 15 major tradelanes out of China; Mar 14 data is up to Mar 28 2014 Source: Shanghai Shipping Exchange & Containerisation International

Figure 1: Shanghai Containerised Freight Index monthly average: June 2012 – March 2014

Figure 2: TSA revenue per feu index (excluding bunker) November 2010 – Jan 2014

Note: Asia to US services = average price per feu. Asia to Europe and Med = average price per teu. Correct as of March 30

Latest Shanghai Containerised Freight Index trade lane figures

Asia - Med $1,401

Asia - Europe $1,214

Asia - USEC $3,278

Asia - USWC $1,824

Source: Shanghai Shipping Exchange

should be an increase in carrier profitability in the first quarter of this year, compared with the same period in 2013.

Asia-Europe Freight rates on the Asia-Europe trade roughly reflected the pattern experienced on a global level; with spot rates starting the year strongly

before declining until the end of March when carriers managed to implement a general rate increase.

This year’s attempt to increase rates during the first quarter ended up as a bit of a confused affair, with certain carriers announcing a mid-March price push, which was undermined by other carriers aiming for the beginning of April and others going for mid-April.

All of this resulted in the failure of the mid-March push, but shipping lines did manage to increase prices in the last week of March/first week of April by $371 compared with the week before, to $1,214 per teu, according to the SCFI.


DATA HUBFREIGHT RATE INDICATORS

April 2014

Notes: figures are mid points between bids and offers Source: Freight Investor Services

Table 2: Container Trades Statistics all-in monthly freight rate index. Average rate in each trade lane for 2008 = 100

Notes: * Western Asia = South Asia and Middle-East region, +Tenerife to Lobito. Source: Container Trades Statistics

Tradelane Oct-13 Nov-13 Dec-13 Jan-14

Asia to Europe 66 76 80 90

Europe to Asia 85 86 87 83

Europe to North America 87 87 87 86

North America to Europe 94 93 91 90

Europe to Western Asia* 87 87 87 85

Western Asia* to Europe 78 77 77 77

Europe to South & Central America 105 103 105 101

South & Central America to Europe 94 93 90 92

Europe to Australasia 85 84 84 83

Australasia to Europe 101 101 101 95

Europe to Sub-Saharan Africa 70 70 70 68

Tradelane Apr-14 May-14 Q3 Q4

Asia to North West Europe $ per teu 1,075 1,000 1,262 1,100

Asia to US west coast $ per feu 1,862 1,800 2,025 1,975

Table 1: Container freight rate swaps forward curves

year, compared with $3,473 per feu during the same period last year.

That’s not to say the period was without success for the carriers. They have managed to implement general rate increases on two occasions ― once in mid-January and once in mid-March.

The TSA has also brought forward a mid-May recommended general rate increase of $300 per feu to mid-April, just weeks before the new annual contracts are due to begin.

Transatlantic It appears to have been a difficult start to the year for carriers operating on the transatlantic trade lane. The freight rate index produced by Container Trades Statistics for services from Europe to North America stood at 86 points in January compared with 90 during the same month last year.

In the opposite direction, the index stood at 90 in January

2014 compared with 95 a year earlier.

Rates on the trade lane have been declining since August/September last year. As Containerisation International went to press, there was no indication from major carriers of preparations for general rate increases on the trade lane.

Freight rates on the Asia to Europe trade largely mirrored the performance of global prices.

Correct as of March 30

DATA HUB


THE dynamics of the transpacific container trades are rapidly changing. So too is the definition.

For some services classified as transpacific never cross the Pacific Ocean. Maersk Line, for example, has two loops with the TP pre-fix that head from Asia to North America via the Indian and Atlantic oceans.

This is all part of the cascade effect as the new generation of 14,000 teu ships or larger push out the 8,000 teu-9,000 teu vessels from the Asia-Europe trades to other routes.

Many of these are now in services to both sides of the US, but with the Panama Canal unable to take anything larger than 5,000 teu at the most through the existing locks, carriers are increasingly using the Suez Canal route for loops from southeast Asia to North America.

Even so, New York’s Bayonne Bridge and water depth restricts the east and Gulf coasts to ships of around 8,500 teu, whereas much larger vessels are now seen regularly on the west coast.

Not so long ago, an 8,000 teu ship in Los Angeles, Long Beach or Oakland would have been a very rare sight. These days, they are becoming the workhorses, with panamaxes declining in popularity.

Lloyd’s List Intelligence data shows that the biggest ship deployed on the Pacific is the 13,092 teu MSC Altair, which has been calling at Long Beach and Oakland in the Pearl River Express since March 2012.

The arrival of bigger ships should help profi t goals on the transpacifi c trades, but smart capacity management is critical, writes Janet Porter

MANAGINGGREATER EXPECTATIONS

deploying a fleet with average nominal capacities of a little over 6,000 teu.

Although ship sizes are increasing, Drewry’s director of research for containers Neil Dekker says the lines have done a good job at managing capacity, so far, with growth of just 1% projected for the peak third quarter of 2014 compared with the same period last year. That has helped to keep headhaul load factors at an average of 86% in 2013, with capacity tight during the high season. Carriers are now targeting rate increases of $300 per feu for cargo moving from Asia to the US west coast, and $400 for the east coast, in annual service contracts that come up for renewal on May 1. Current contract rates average around $1,700 per feu from Asia to the Pacific seaboard.

Most leading carriers are forecasting demand growth in the 3%-6% range this year, buoyed by improved US consumer confidence. That was supported by recent Global Port Tracker figures published by the National Retail Federation and Hackett Associates that predicts a 3.5% increase in import containers moving through US ports in the first half of the year to 8m teu. Last year saw growth of 2.3% to 16.2m teu.

The over-riding goal for carriers is to make a profit on this route. The sums are

DATA HUBTRADE ROUTES

French line CMA CGM has three 11,356 teu vessels in the same string, CMA CGM Libra, CMA CGM Leo and CMA CGM Centaurus.

Cosco Container Lines introduced the 13,092 teu Cosco Fortune onto the Pacific in February this year, with calls in Long Beach and Canada’s Prince Rupert.

Most of the terminals in the Los Angeles-Long Beach port complex either have the water depth to handle this class of ship or will have soon. The one limiting factor for some facilities is the Gerald Desmond Bridge that connects downtown Long Beach with Terminal Island, but it is now being replaced with a higher one. The terminals on the ocean side of the bridge are easily accessible.

Ships of this capacity are still unusual on the Pacific, with just two in excess of 13,000 teu and 12 in the 10,000 teu-12,999 teu size bracket, but there are many more in the 7,500 teu-9,999 teu range now serving the North America trades.

Drewry Maritime Research estimates that average nominal ships sizes in the Asia-US west coast trades have risen from just over 6,000 teu in January 2012 to almost 6,700 teu at the start of this year. Of the new mega-alliances being formed, the P3 vessel-sharing agreement looks likely to have the size advantage on this trade with ship capacities averaging just over 8,000 teu, according to Drewry, with the G6 and CKYH alliance ― excluding new member Evergreen ― both


TRADE ROUTE INTELLIGENCE

CMA CGM Libra: one of three 11,356 teu ships operated by CMA CGM on

the transpacific trade lane. Photo: Dietmar Hasenpusch

DATA HUBTRADE ROUTES

complicated. According to Drewry, lines break even on current contract rates at 85% utilisation with ships of 9,000 teu. But the lower slot costs of vessels of

12,000 teu units would put the bottom line into the black, given bunkers of $620 a tonne and round voyage ship speeds of 17 knots. The challenge is to keep

10,000-12,9993,000-4,9995,000-7,499

7,500-9,9991,000-2,999

% of total Asia-North America (teu)

0

10

20

30

40

50

60

70

80

90

100

13,000-15,999

26.7%

34.7%

31.8%

4.6%

Figure 1: Teu range proportion among Asia-North America operators

0 5,000 10,000 15,000 20,000 25,000 30,000

PIL

Wan Hai Lines

Matson

UASC

Westwood

Zim

CSCL

MOL

NYK

K Line

HMM

Yang Ming

OOCL

Maersk Line

Hapag-Lloyd

CMA CGM

MSC

COSCON

APL

Hanjin Shipping

Evergreen

Figure 2: Weekly operated teu on Asia-North America routes via Panama or Suez Canals



load factors above the critical 85% as more large ships arrive on the Pacific, by ensuring smaller tonnage is moved elsewhere in sufficient numbers.

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WHEN Maersk Line chief executive Søren Skou disclosed just over a year ago that one of the carrier’s Asia-US east coast services would be switching to a Suez Canal routing, the news did not attract a great deal of attention.

Mr Skou, though, was fully aware of the implications, predicting at the time that this was one of the consequences of ship cascading that could have a far-reaching impact on the whole industry.

Twelve months on, his foresight is proving to be spot on.

The dynamics of the container shipping industry are changing rapidly, but not in the way most had been anticipating.

For whereas over the years there has

been much speculation about the effect of the enlarged Panama Canal on the transpacific trades, and how intermodal services via US west coast ports would compare with all-water services to the east coast once the new locks were completed, far less attention was paid to the Suez Canal alternative.

Six years ago, an estimated 90% of Asia-US east coast services went via the Panama Canal. These days, though, the figure is closer to 50:50, with the Suez Canal gaining market share almost by the week.

Both of Maersk Line’s US east coast loops now go westbound from Asia via Suez Canal, even thought they are still

categorised as TP services and fall under the remit of the Transpacific Stabilization Agreement.

Of the six Asia-US east coast strings operated by the G6 Alliance, four use the Suez Canal route.

Data prepared by the TSA shows just how rapidly trade patterns have changed.

In the week beginning July 7, 2013, the Panama Canal handled 21,914 teu of Asia-US east coast capacity operated by TSA member lines, slightly down from the year earlier figure of 24,266 teu. By contrast, the Suez Canal handled 16,093 teu in week 28, well up from the corresponding 2012 level of 12,417 teu. As the year progressed, the Panama

There has been much speculation about the effect of the enlarged Panama Canal on the transpacific trades. Photo: meunierd/Shutterstock.com

TRADE ROUTES/CANALS

CARRIERS

Cargo from Asia can be routed via Panama or Suez canals, or overland from west coast ports, to the heartlands, reports Janet Porter

CHOICE WIDENS FOR US SHIPPERS


Canal kept losing traffic until it handled just 16,778 teu in week 50, just before Christmas. That was well down on the year-earlier figure of 21,235 teu.

In that same week, the Suez Canal handled more than the Panama Canal, at 17,384 teu, way ahead of the 2012 figure of 12,802 teu.

The trend has continued this year, and reflects the arrival of a new generation of ultra-large containerships into the Asia-Europe trades, with displaced vessels now being put onto other routes.

That has seen ships of up to 8,500 teu deployed in trades from Asia to the US Atlantic and Gulf coast ports, the limiting factor for now being the height of the Bayonne Bridge.

Even so, they are double the size in slot capacity terms of boxships that go through the existing Panama Canal locks.

The very largest panamax-class ships at the moment are 5,200 teu, with dimensions rather than actual container-carrying capacity the determining measure. Most are around 4,800 teu, with the world’s panamax fleet ageing and far less fuel-efficient than the later generation of vessels now entering service or being

Pacific coast ports have been preparing for ships of this capacity for some time, whereas east coast ports are less well-equipped, with only a couple having the necessary water depth. Furthermore, the dreadful winter across much of the eastern part of North America exposed the frailties of the infrastructure supporting Atlantic ports, with lines expressing disappointment at how some terminals performed.

But right across the country, transportation infrastructure is under pressure, according to industry leaders.

“We have to find a way to sweat the assets better than we have done historically,” says Maersk Line North America president Michael White.

But determining the best route from Asia to the US is not just a matter of comparative port efficiency and intermodal connections, but also a question of geography.

For services from northern China, the transpacific route still makes sense because of the shorter distance. But from southern China, the economies are more finely balanced with the two alternatives about equal from Vietnam.

Whether US west coast ports will be the losers of these new Suez Canal services remains debatable, since good rail connections to the US heartlands mean that the Pacific gateways are still highly competitive, and the beneficial cargo owners have well-established supply chains.

For the Panama Canal, the challenge will be to set tolls at a level that allow all-water services to be priced competitively, both against intermodal and Suez Canal alternatives.

With the exception of electronics and apparel, “price will always trump transit times”, South Carolina Ports Authority vice-president John Wheeler told the recent Trans-Pacific Maritime conference in Long Beach.

So who will be the winners? Michael Murphy, chief development officer for CentrePoint Properties, reckons it will be those ports that have a large population nearby, can attract discretionary cargo, and have the infrastructure to handle exports in order to achieve trade balance.

That’s the challenge for those US ports that want to serve the global marketplace.

switched from the Asia-Europe to Asia-US east coast trades.

Once the new locks are completed, with a target date of early 2016 now set, ships of up to 12,500 teu should be able to transit the waterway.

Ships of this class are already on the Pacific, with Lloyd’s List Intelligence data showing that the five largest are Mediterranean Shipping Co’s 13,092 teu MSC Altair, which calls at Long Beach and Oakland in the Pearl River Express service, Cosco Container Lines’ 13,092 teu Cosco Fortune, and a trio of 11,356 teu CMA CGM ships.

East coast via Suez capacity growth at the expense of Panama (teu)

Week Panama capacity 2013

Panama capacity 2012

Suez capacity 2013

Suez capacity 2012

28 21,914 24,266 16,093 12,417

42 19,171 19,424 15,335 11,895

48 18,263 23,324 17,667 13,107

50 16,778 21,235 17,384 12,802

Source: Transpacific Stabilization Agreement

Far less attention has been paid to the Suez Canal alternative, but figures are showing a growth in capacity on the route. Photo: Oleksandr Kalinichenko/Shutterstock.com

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THE stakes are high, and all those involved are acutely aware of the consequences should something go awry when two sizeable delegations meet in San Francisco next month.

On one side will be a large team of senior executives representing terminal operators, ocean carriers and stevedores. On the other will be probably an even bigger group of officials from the International Longshore and Warehouse Union.

Caught in the middle and unable to do anything more than just watch on the sidelines are US importers and exporters, ranging from the likes of supermarket giant WalMart to small mid-west farmers with little experience of international trade.

But whatever their size, beneficial cargo owners and freight forwarders, along with Washington, Wall Street, the business community and even the general public, will be monitoring events closely.

Although there will plenty of people around the negotiating table, most of the talking will be left to just two of them ― James McKenna, chief executive of the Pacific Maritime Association, which represents employers, and Robert McEllrath, president of the ILWU ― or Jim and Bob as they are better known to their respective colleagues.

What they both hope to achieve is a new contract for the 23,000 registered longshore workers employed at the 29 ports along the US west coast without any industrial action that would disrupt terminal operations, with inevitable consequences right along the supply chain.

But this is not just a local issue. West coast ports may be losing market share, but they still handle some 45% of total US container volumes. Combined volumes through Los Angeles and Long Beach came to 14.6m teu in 2013.

Furthermore, Pacific coast ports, ranging from the two southern California heavyweights and Oakland, close to San

Francisco, to Seattle and Tacoma just south of the Canadian border, support some 9m US jobs with a domestic business impact of over $1trn, according to Mr McKenna. Around 12% of US GDP is tied to cargo moving to and from US west coast ports, the PMA estimates.

Promising signsWith so much at risk, shippers started drawing up contingency plans some time ago, supposedly ready to spring into action at the first hint that talks may be running into trouble.

Yet early signs have been promising, with Mr McKenna stating in no uncertain terms that he does not anticipate any strike action.

Instead, he expects a new labour contract covering US west coast dockworkers to be agreed by the end of July without any cargo disruption.

The existing six-year contract expires at the end of June. Although a new one is unlikely to be inked by then, with the timetable likely to overrun as it did in 2006, the PMA president does not see that as a cause for alarm.

“I don’t think so,” Mr McKenna replied unequivocally when asked whether there could be a strike.

Other employers are also sounding positive about the forthcoming talks.

“We have every belief in Jim and Bob that the bargaining will take place in good faith,” says Gene Seroka, president of APL’s Americas division and a PMA board member.

“Both sides have much at stake this year as we forge ahead with a new contract to promote commerce, employment and the well-being of supply chains.”

Mr Seroka is confident that the union fully understands the competitive pressures that west coast ports face, and does not want to jeopardise their commercial standing in the global shipping and logistics industries.

Mr McEllrath has not commented, but signals from the union are nevertheless equally promising.

“Neither side can afford a strike,” one ILWU source told Containerisation International. “There won’t be any disruption.”

Despite those reassurances, shippers are unconvinced and already making contingency plans for possible labour unrest during the negotiations, having expressed concern about the relatively short time available in which to come to an agreement.

The Transpacific Stabilization Agreement wrote to the PMA in early March on behalf of cargo interests represented on TSA shipper panels, asking for the talks to be brought forward. The PMA negotiates on behalf of 72 members that operate on the US west coast, including ocean carriers, terminal operators and stevedores.

Mr McKenna does not think an earlier start date would guarantee a contract agreement ahead of the June 30 deadline.

In 2008, the two sides began talking in mid-March but failed to reach agreement before the expiry date.

“From March to the beginning of June, we got nothing done,” he told the recent Trans-Pacific Maritime conference. “There was no pressure to move.”

Starting early “is not going to change what we get done, there is plenty of time and I am optimistic we will get a contract without disruption”, he said.

Neither does he think having the government’s Federal Mediation & Conciliation Service sitting in on the negotiations would be helpful.

Their involvement “would not necessarily be a good thing ― it means we cannot do it ourselves,” he insists. The union side agrees.

But Washington will be watching, ready to intervene should the ports shut down, as happened in 2002 when the Taft-Hartley Act was invoked, enforcing a mandatory cooling off period, but only after a nine-day lockout.

Tough talking but no disruption as employers remain confi dent of reaching an agreement with the ILWU without labour unrest, writes Janet Porter

STRIKING A DEALUS PORTS/DOCK NEGOTIATIONS

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A repeat of that is what alarms the business community, although talk of shifting cargo to other gateways, such as Canadian and Mexican west coast ports, or those on the US Gulf and eastern seaboards, is seen as a largely empty threat.

Rickmers Group chief executive Ron Widdows, who spent 30 years with APL and is a former chairman of the TSA, questions where shippers who currently move cargo through Los Angeles and Long Beach ― which together form one of the world’s largest container port complexes ― could realistically go as an alternative.

“Contingency planning was always a bit of an over-used term,” he claims.

Cargo flows the way it does “because that is the way the customer wants it to ― you cannot make massive changes to your supply chain. The west coast has to work”, Mr Widdows asserts.

But nervousness within the shipper community reflects memories of what happened in 2002 when employers locked out ILWU members during protracted and confrontational talks.

More recently, there were very difficult negotiations between east coast longshore workers and employers last year.

In late 2012, a dispute involving clerical workers shut most container terminals in Los Angeles and Long Beach for more than a week when ILWU members refused to cross picket lines.

A jurisdictional dispute involving the

lost to the US east coast as more lines introduce services from Asia via the Suez Canal, to deploy ships of up to around 9,000 teu displaced by even larger vessels.

Adding to the pressure is the fact that the region seeing the fastest population growth is the US southeast.

With cargo volumes through US west coast ports growing around only 1%-2% over the past few years, Mr McKenna is warning that the picture was “not very rosy”, clouded by the “new competitive environment” in which shippers have more options than ever before.

“There is too much at risk and we cannot afford to go backwards,” he says. “Maintaining our competitive advantage is more important than ever before.”

But he will also have plenty of positive points to raise. Robotics are gradually being introduced to some terminals in Los Angeles and Long Beach, including OOCL’s state-of-the-art Long Beach Container Terminal now under construction, the TraPac facility jointly owned by Mitsui OSK Lines and Brookfield Asset Management, and APL’s Global Gateway South.

New technologies are still regarded with some suspicion in union circles, though, but Mr McKenna is in no doubt about the benefits.

Since the 2002 contract which marked the start of new technologies on the waterfront, with automation also featuring prominently in the 2008 agreement, the registered workforce has grown by 34%.

“Modernising terminals protects union jobs,” he will be telling the ILWU leadership.

Furthermore, “peaceful resolution of a new contract is critical in preserving manufacturers’, shippers’, and retailers’ confidence in the ports as reliable and problem-free gateways for products moving in and out of the US”, he says.

“We need a contract that works for all of us, one that addresses today’s economic realities, continues to provide for employees, retirees and their families, meets our new regulatory obligations and strengthens our combined efforts to fend off competition to our west coast ports as vital gateways for goods moving in and out of the US.”

Yes, the stakes are high, and there will be plenty of hard bargaining ― but both sides expect to have a new contract in place by the end of July, without any damaging industrial action.

ILWU over who should handle certain tasks at Portland almost drove away the Oregon port’s largest customer, Hanjin Shipping. A settlement of sorts was finally reached in March.

Carriers reckon that for every day a port is out of action, it takes between five and seven days to recover.

Health benefitsTop of the agenda at this year’s contract negotiations between the PMA and ILWU will be medical benefits, and in particular who should pay the tax due on so-called Cadillac plans such as those enjoyed by ILWU members, to be levied under President Barack Obama’s affordable-healthcare programme. The two sides may agree on a three-year rather than six-year contract with a view to revisiting the medical benefits should the law change after the next US presidential elections.

Pensions, automation and union jurisdiction are also expected to figure highly, with wages usually less of an issue than might be expected.

The PMA will be drawing ILWU attention to the fact west coast ports’ share of US container volumes dropped from the long-term average of around 50% to 48% in 2012 and to 45% last year, as they continued to lose discretionary cargo that moves beyond the immediate hinterland.

As well as competition from ports in Canada and Mexico, cargo is also being

Negotiators hope to avoid scenes like these, when the Port of LA was shut for more than a week in late 2012. Photo: © 2014 Nick Ut/AP

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MULTI-YEAR contracts were the future once, at least for cargo moving across the Pacific.

Both ocean carriers and cargo owners were keen to move away from the annual round of service contract negotiations that puts so much pressure on each side and invariably leaves one party feeling aggrieved. Instead, many felt it would be better to have rate and volume commitments that extended beyond the traditional 12 months in order to obtain better long-term stability and predictability.

Fine words, but the truth is that very few have been signed over the past few years, and that situation looks set to remain in the forthcoming contracting season.

The majority of contracts filed with the Federal Maritime Commission expire on April 30, a legacy of the Ocean Shipping Reform Act of 1998. That creates a hectic few weeks in the run up to May 1 as container lines and shippers try to gauge the market for the coming year and do their best to negotiate a deal that will not make them look foolish in the months ahead.

Failure in one camp is virtually a given. Almost no-one anticipated shrinking

volumes in 2009 and the associated collapse in freight rates. Few predicted the sudden recovery the following year that sent freight rates soaring.

The China-US west coast component of the Shanghai Containerised Freight Index fell to almost $950 per feu in mid-2009 as world trade stalled, but then climbed to more than $2,800 in mid-2010 on massive inventory replenishment.

When the market moves against contract parties in such a way, one or the other is likely to walk away from its commitments, but attempts by the Federal Maritime Commission to offer a dispute resolution service have not made any progress.

But neither has the concept of long-term contracts that might have helped to smooth out the volatility over a period of years.

“Multi-year contracts are not happening,” says Brian Conrad, executive administrator of the 15-member Transpacific Stabilization Agreement.

Although pricing benchmarks such as the SCFI or World Container Index now exist that should make it easier to construct a multi-year agreement, both carriers and shippers still have their doubts about the concept.

As Maersk Line North American president Michael White acknowledges, “multi-year contracts are easy to talk about, harder to do”.

Furthermore, despite the extreme rate swings of four or five years ago, the transpacific trades are far less volatile than the Asia-Europe trades, thanks in part to annual contracts that account for the lion’s share of ocean cargo that moves from Asia to the US.

Consequently, most container lines have signed only a handful of agreements covering freight rates and volume commitments that extend for more than the typical 12 months.

“It’s something clients want to talk about, but what we are lacking right now is the mechanism by which rates can be constructed to have long-term viability,” says Gene Seroka, president Americas for APL.

Likewise, most other leading carriers are seeing similarly low numbers.

“It’s very small. I am surprised,” Cosco executive vice-president Howard Finkel told the recent Trans-Pacific Maritime conference.

“Not many have embraced the idea.”NYK’s North American president William

Payne has had a similar experience with only a few long-term contracts on the company’s books.

Alliance partner Hapag-Lloyd appears to have negotiated more, though, with Wolfgang Freese, head of the German carrier’s American region, disclosing that around 15% of service agreements with customers were long-term, with the goal to raise that to nearer 20%.

Should there be more interest, then carriers say they are ready to enter in to discussions with their customers about the most suitable mechanism.

“The conversation gets a little bit deeper each year,” says Mr Seroka.

“And if the client thinks it is important, then so do we.”


The truth is that very few multi-year contracts have been signed over the past few years.

Photo: halfpoint/Shutterstock.com

REGULATION/TRANSPACIFIC SERVICE AGREEMENTS

CARRIERS

The 2014-15 transpacifi c service agreements are being negotiated, but why do so few extend beyond 12 months, asks Janet Porter

LOW TAKE-UP FOR MULTI-YEAR CONTRACTS

THE VIEW FROM THE BRIDGE

INSIGHT FROM THE C-SUITE /PETER ULBER


PANALPINA wants to expand its sea freight business, viewing both ocean rate volatility and mega shipping alliances as key opportunities on the pathway to growth.

Not that the Switzerland-headquartered logistics operator is a small fry in the deep sea. It is currently Europe’s fourth-largest ocean slot purchaser, recording a 7.7% surge in volumes to nearly 1.5m teu in 2013, well above the global market increase of 3%.

Chief executive Peter Ulber joined the SFr6.7bn ($7.6bn) turnover multimodal group in May 2013, following the departure of Monika Ribar, who left after 23 years with the group and seven years in the top job.

It has been an interesting few years. Since 2009, Panalpina has paid around $130m in fines to the US Department of Justice relating to antitrust and other issues, plus SFr60m combined to the European Union and Swiss antitrust authorities, while also taking an unrelated SFr30m impairment on a Norwegian acquisition.

All of this against the backdrop of the post-2008 global economic crisis.

Since joining, Mr Ulber and the Panalpina management team have simplified the reporting structures and made Europe a standalone region, while also creating greater financial transparency from group level down to business units, allowing loss-making operations to be more easily identified.

“It is clear to me that over the last few years Panalpina had to deal with issues within the company, so it is not a reflection on the management.

“Following the 2010 crisis, Panalpina had a hard time coming back into profitable numbers. The other issues are solved and we

MOVING FORWARDPanalpina chief executive Peter Ulber talks to Roger Hailey as the company looks to expand its sea freight business

now have the job to bring the company back into profitability and to growth.”

He adds: “That is a significant job, as it is always difficult to do both, to grow and to improve profitability at the same time. That is the reality of the challenge we are dealing with, and last year gave us indication that it is possible. I am fairly sure that we will continue that in the next year as well.”

Announcing Panalpina’s full-year 2013 results, Mr Ulber said: “We recovered from 2012 and gained market share in a low growth environment in 2013. I am happy to state that we outperformed the market in both air and ocean freight, but there is still a lot of room for profitability improvements, especially in logistics and ocean freight.”

Ocean freight net forwarding revenues of nearly SFr2.8bn (SFr2.6bn in prior year) came as gross profit per teu remained steady at SFr329, resulting in a divisional gross profit increase of 7% to SFr491.9m.

“Following the 2010 crisis, Panalpina had a hard time coming back into pro� table numbers. The other issues are solved and we now have the job to bring the company back into pro� tability”




Photo: Panalpina

A CAREER ON THE UPPETER Ulber has an impressive career in the global freight forwarding and logistics.

After his studies at the International School of Logistics in Hamburg, he held various management positions from 1985 to 2011 at Kuehne+Nagel in Europe as well as North and South America.

As a member of the management board from 2008 onwards, he was responsible for both sea freight and air freight at K+N, as well as having overall responsibility for the global sales organisation.

As a result of a series of strategic acquisitions by K+N, he was also involved in the company’s expansion in Europe, Asia and America. At the end of 2011, he went into business as co-founder and partner of the Charleston Enterprise Group.




AIR TODAY, OCEAN TOMORROW

With global air freight in the doldrums, ocean is a growth business. Panalpina added 41 less-than-container load ocean services to its network in 2013, reaching 450 weekly worldwide, and expects to reach 500 services by the end of 2014.

Automotive and manufacturing industries accounted for almost 30% of its ocean LCL volumes in 2013. Consumer and retail, and fashion customers were close behind with 25%, with hi-tech and telecoms customers in third place.

Scene is setSo, the scene is set for an increase in sea freight volumes, but what is the scale of Panalpina’s ambitions and how does it view its commercial relationship with individual shipping lines and the broader alliances?

Mr Ulber does not accept the suggestion that forwarders are sales agents for the carriers: “I do not believe that a good relationship with a carrier should be, or could be, defined as being a sales agent. It might have been like that in the past, but certainly not any more.

“We have a very strategic partnership with a number of lines, based on what one can do for the other. There is a lot of back-office integration with those carriers.

“Look at what is happening in the container industry and the big alliances that are being formed. Shipping lines are beginning to commoditise their services, and for me that offers an opportunity for a sensible partnership between a forwarder and the carrier.

“Carriers, who offer only a commodity in the future, can differentiate themselves to a customer via forwarder relationships. We might even become closer.”

Panalpina, which operates two Boeing 747-8 Freighters, has important commercial relationships with airlines. How do those differ, compared with the links to container carriers?

Says Mr Ulber: “I think that, on average, the relationships between a shipping line and a forwarder are much more strategic, not just price driven. When I sit in front of the [shipper] customer, that is where I have to start. I have to log what my customers want from me.

“They want flexibility, they want to make sure ― for example ― that Panalpina is well connected with each of the carriers in the different alliances, so that we can take large container bookings ― say 200 teu ― all at the same time.”

Is the move to container freight a long-term trend?

OCEAN carriers are seeing a shift in cargo from air freight to deepsea containers. Is this a long term trend?

Says Peter Ulber: “The shift of certain commodities from air to ocean is a fact, and there are several reasons for that.

“One is financial necessity, the reality that a lot of the larger technology items ― be it DVD players, PCs or screens ― are a lot cheaper and therefore can absorb a longer transit time.

“Another factor is that the very low-level interest rates mean that financing your inventory is not such a big deal right now. But once

the interest levels come back up, companies will make a different calculation again.”

Mr Ulber believes that certain products will stay with ocean freight in the longer term.

“Some goods have moved to ocean freight and new supply chains evolved. It is not an ongoing process that more and more air freight will switch to ocean freight, because life is getting faster and consumers want their goods more quickly.

“Products that we don’t even know about will come to market, and will have to be launched. It it is not a slow death of air freight.”

Photo: Panalpina




Panalpina, along with the other forwarder majors, has seen a growing number of very large beneficial cargo owners move away from direct carrier negotiations, primarily due to the rate volatility of the market.

“It used to be a lot easier, sitting down with the carriers once a year to agree a rate, and then meet again a year later. But today the rates move so quickly, up and down, that many large shippers have difficulty in managing them,” says Mr Ulber.

“Increasingly the shippers demand that we perform the management of their ocean freight volumes. It might still be, in some cases, that the customer negotiates freight rates directly with the carrier, but then they let someone like Panalpina manage that relationship afterwards.

“We might do the LCL and some secondary trades. It is one thing for those multinational companies to negotiate the basic transatlantic and Far East westbound rates, but not the secondary trades.”

Panalpina suffered a hit on the Asia westbound trades in the last quarter of 2013 when it took a position that the rates would soften, but they did not.

“Rates go up and down in a matter of weeks, if not days, so there is a certain portion of the market where you have to speculate and, overall, Panalpina is quite conservative in that respect.“

Adds Mr Ulber: “There will always be some risk in the business, but we have strengthened the trade management because you need more expertise nowadays to handle these volatile markets.

“That is the same reason why some of the larger shippers are coming to forwarders, because they do not quite have the expertise any more to handle these situations.”

Panalpina, fresh from its 8% surge last year, is aiming for a 1.5 multiple on benchmark global ocean freight volumes in 2014, implying a 6%-7.5% growth in total teu. Swiss rival Kuehne+Nagel, the top ocean freight slot purchaser with 3.6m teu last year, is also aiming for a 1.5 multiple in 2014. So, where is that traffic coming from?

Mr Ulber says that two parties are losing out, the shipping line direct bookings ― part of an ongoing trend as shippers avoid direct engagement with the box lines ― and the small and medium forwarders who cannot control those shifting, large shipper volumes.

There has been no rate discount to fuel volume growth, says Mr Ulber: “If you look

at Panalpina’s gross margins, it is one of the highest in the industry, and when you compare that with the peers we are certainly at the top in gross margin.

“And if you look at how much profit a forwarder makes per teu, and that is how we measure it, over 50% has nothing to do with the ocean freight rate, it is to do with management fees and value added services.”

Productivity gapPanalpina has identified a 20% “productivity gap” in its ocean freight data processes which is being addressed by the new SAP Transport Management operational system.

Although SAP TM is company-wide, it will be rolled out first in sea freight and is already live in Singapore, Mexico, Italy, Switzerland and Germany.

“It replaces our current legacy systems in how we enter shipping data, how we receive shipping data and how we exchange it with the carriers and ourselves from origin to destination.”

Adds Mr Ulber: “It provides visibility and delivers status information to our customers. It creates documentation and is an integrated system where you input information once and then it lives throughout the process.

“One reason for our productivity issues today is that we have to put in some of this information multiple times, in order to exchange it with different parties.

“That is the main part of the 20% productivity gap. The other part is that the customer portfolio at Panalpina consists right now mainly of smaller shippers and there you do not have the same productivity as if

you handle a 70,000 teu account. We need a good mix of large and small shippers.”

And larger containerships too? “I don’t think there is a shipper or forwarder

out there who does not believe in the need for larger vessels. There is now a race among the carriers to further reduce slot costs.

“There are investors with enough money to finance even larger vessels, possibly up to 24,000 teu, using LNG as fuel, all of which on paper can potentially reduce the slot cost by another 30%, which is what the Triple-E has already done.”

Is big so beautiful for the forwarders?: “I think the positive effect for Panalpina is that a single carrier is not going to fill up a 24,000 teu ship on its own, hence you have these alliances.”

Mr Ulber makes the point that the problem for carriers in a mega alliance is how they differentiate their service to the shipper, given that the boxes are not necessarily going on their own vessel and they do not have full control of what happens.

“It becomes very difficult for any carrier to differentiate themselves, and if the customer comes to Panalpina and says I need a weekend arrival, we can arrange that with our portfolio of different carriers that are part of different alliances.”

Despite its ocean freight growth target, Mr Ulber is comfortable with Panalpina’s fourth place in the global league table, based on freight forwarder teu volumes.

“We don’t really have ambitions like that, and I don’t find the league tables all that sensible. We certainly want to be in the top five, but for the reason that belonging to this club gives you a different recognition in the market.

“You are invited to all the request for quotations by default, so that is why it is important. But whether number four or number five, I cannot see the advantage.

“K+N is the largest and the most profitable one, but there are also companies out there significantly larger than us, but they are not more profitable.

“Scale alone is not the answer to make money. You need a certain base and it is not easy to make money with 200,000 teu, but once over 1m teu, then you can certainly play with the big boys.”

Thus Mr Ulber’s message: “Panalpina is committed to the ocean freight industry and we will play a much more significant role in shaping it through innovations and solutions in the future.”

“Shipping lines are beginning to commoditise their services, and for me that o� ers an opportunity for a sensible partnership between a forwarder and the carrier”

PORTS

US PORTS /LOS ANGELES


THE Vincent Thomas Bridge, which spans the Port of Los Angeles’ main channel, may be older than the connecting and crumbling Gerald Desmond Bridge to Long Beach, but it is not breaking up and in urgent need of replacement.

Neither is the country’s third largest suspension bridge too low for the new generation of containerships to pass under, as is the case in New York where the Bayonne Bridge needs to be raised.

Instead, the largest container port in the US has been able to focus investment elsewhere, including a dredging programme that is now almost finished, apart from the water depth at three terminals where the wharves have to be renewed first, including Evergreen’s Seaside Container Terminal and NYK’s Yusen Terminal. Once that is done, all of LA’s seven container terminals will be able to handle the largest ships now in service on the Pacific.

More advanced cargo-handling procedures are also being developed, led by the TraPac facility owned by Mitsui OSK Lines and Brookfield Asset Management.

By this summer, the first phase of the work to computerise two of its three the berths will be complete. This will be the first automated terminal on the US west coast, ahead of OOCL’s Long Beach Container Terminal across the bay. The project also includes redevelopment of a railyard, with TraPac soon to have on-dock rail for the first time.

The port has contributed $510m towards the upgrade, which will be repaid over the life of the lease concession, with the terminal operator paying for up to $200m worth of new equipment.

Also on the drawing board is expansion of APL’s Global Gateway South, with another 40 acres to be developed.

“These are tremendously exciting times for the San Pedro Bay ports ― this is the first time in history that Los Angeles and Long Beach would have spent over $1bn in one year on infrastructure,” says Gary Lee Moore, interim executive director for the Port of Los Angeles.

“We are doing over $1m a day at LA right now, and we are putting forward next year’s budget that will only be slightly less.”

But these have not been easy times for either Los Angeles or Long Beach, with container volumes through the two southern California ports broadly flat over the past three years. With no real organic growth, the two have been poaching customers from each other, with Long Beach ― the smaller of the two ― closing the gap when Mediterranean Shipping Co and CMA CGM switched ports because of service changes. Los Angeles’ throughput fell to 7.9m teu in 2013 from 8.1m teu in 2012. An added challenge for each, is that all three of the big container line alliances have terminals in both ports through one or other of their members.

Late last year, Los Angeles brought in a cargo incentive programme, designed to encourage container lines to use Los Angeles as their sole west coast call, rather than continue on, say, to Oakland.

Under the scheme, an ocean carrier will earn $5 per teu for each incremental container it ships through Los Angeles in calendar year 2014. The rate jumps to $15 per teu for all throughput, if a carrier’s container volume grows by 100,000 or more units in the same 12-month period.

Los Angeles is confident it has the intermodal connections to handle all the cargo,

with no need for ships arriving from Asia to make two Pacific seaboard calls in the US.

“That is our strength here, for both inbound and outbound cargo,” says Mr Moore, who stepped in on a temporary basis when former executive director Geraldine Knatz was asked to retire by the new mayor of LA, Eric Garcetti. Headhunters are now looking for a successor, and Mr Moore has decided not to apply, instead returning to his former job as LA City Engineer.

The threat of competition from the Panama Canal for cargo heading to the “battleground” midwest states has receded, but all west coast ports still have the new challenge from the east and Gulf coast ports because of Suez Canal routings for services from Asia. Then there is the imminent labour contract negotiations with the ILWU longshore union, plus tough environmental measures that drive up costs for shipping lines.

But in an interview with Containerisation International, Mr Moore expressed confidence that the intermodal connections between southern California and big inland cities such as Chicago, plus far less weather-related disruption than on the Atlantic coast, will protect LA’s market share.

“When you are number one, people are always trying to take cargo away from you,” Mr Moore acknowledges. But with a $1bn five-year programme of investing in the port, the commitment is clear.

Los Angeles’ goal is to be “the best, most efficient port there is”, he says.

The Vincent Thomas Bridge is already tall enough for the latest and largest containerships to pass under. Photo: Stuart MacKenzie

Moore: “When you are number one, people are always trying to take cargo away from you.”

Interim director Gary Lee Moore says $1bn investment programme proves commitment to port, reports Janet Porter

LA TAKES ACTION

THE Gerald Desmond Bridge, a key piece of infrastructure that is used to truck millions of cargo containers through the Port of Long Beach, is only 46 years old and is already wearing adult diapers.

Visitors on a boat tour of the port can pass underneath the bridge to see large, black nets hanging off its underside – there to catch any falling debris that sheds from the structure. Acting deputy executive director Noel Hacegaba and his staff at the port affectionately refer to those nets as “diapers” and point to their necessity as a prime example for the port’s focus on capital improvement.

The bridge replacement project represents one-quarter of the port’s 10-year, $4.5bn capital investment programme that Mr Hacegaba oversees. That specific undertaking is at the heart of the port’s continued push to expand its offerings and capabilities as larger containerships come to the US west coast.

Three years into the capital improvement campaign, Long Beach is trying to put behind it any perception of instability from a recent board shake-up as it looks to hire a new director. All of that, while trying to wrestle cargo business from its arch rival, the Port of Los Angeles, and assess the impact of the Panama Canal expansion. Long Beach handled 6.7m teu in 2013, up from just over 6m teu in 2012, whereas Los Angeles’ throughput slipped from 8.1m teu to 7.9m teu as some services switched ports.

The push for upgrading the port is crucial in not only handling but also attracting the larger 14,000 teu containerships now in operation.

“The good story for us is that we are big ship ready today and we are on pace to complete a $4.5bn capital improvement programme that will make us even more big ship ready tomorrow,” says Mr Hacegaba.

In addition to the new bridge, which is slated for completion in 2016 and will provide more clearance for larger containerships, the other major project within the campaign’s budget is the $1.3bn middle harbour redevelopment for OOCL’s Long Beach Container Terminal.

The goal there will be to take two ageing terminals off line and build a larger, more efficient facility that will expand annual capacity from 1m to more than 3m teu, or nearly half of the port’s current yearly box volume.

Once completed in 2019, that terminal on its own will rank as the fourth largest port in the country, according to Mr Hacegaba.

Speaking just hours after Long Beach mayor Bob Foster addressed the Trans-Pacific Maritime conference on the recent upheaval at the country’s second largest container port, Mr Hacegaba says any controversy is in the past. For his part, Mr Foster says critics fixate too much on the past.

The controversy ― or the “perception of instability,” as Mr Hacegaba put it ― surrounds former director Christopher Lytle quitting last year to move to Oakland, and Thomas Fields, the president of the board of harbor commissioners, being fired earlier this year.

“There is stability,” Mr Hacegaba says. “The board is united around making sure

the Port of Long Beach is on the path to greater success and prosperity ― and that includes all our stakeholders.”

As for finding a replacement for Mr Lytle, who left last July, the commissioners finally hired an international search firm in February to help fill that position. Neighbouring Los Angeles is also looking for a new permament executive director.

Looking at the changing market forces beyond Long Beach, specifically how the expansion of the Panama Canal could impact cargo volumes into the San Pedro area, Mr Hacegaba says he is confident of the port’s place in moving cargo into the interior of the US.

Even after the canal’s expansion is complete, the largest ship that will be able to pass through will be roughly 12,500 teu, which may affect a carrier’s decision to move its business to the east coast ports, Mr Hacegaba says. Also, it is still unknown how much the canal will charge in new fees.

All of that it somewhat secondary in Mr Hacegaba’s view, with the west coast advantage of intermodal transportation.

“We try to make the case to our customers that by bringing your cargo through southern California … it’s more efficient, faster and cheaper,” he insists.


Port goes toe-to-toe with rival Los Angeles as it attempts to put recent upheaval behind it, writes Alexander MacInnes

LONG BEACH PREPARES FOR CARGO FIGHT

US PORTS/LONG BEACH

PORTS

Hacegaba: “The good story for us is

that we are big ship ready today .”

MAERSK Line has once again managed to outperform many of its deepsea rivals. The Danish carrier reported profits of $1.5bn last year compared with $461m in 2012.

Making the profit result more impressive was the fact that it was achieved after revenues decreased to $26.2bn from $27.1bn a year earlier.

In line with most other carriers, Maersk Line has seen its results swing widely in recent years from a loss of $2.1bn in 2009 to a profit of $2.6bn in 2010, and then back into the red in 2011 with a deficit of $553m.

But over the past two years, the Danish line has bucked the trend, making good money when many others remained unprofitable or delivered very modest returns.

Last year’s decrease in revenues was caused by a 7.2% decline in its average freight rate to $2,674 per feu, which reflected an overall decline in market prices.

So how has Maersk Line managed to do what many of its rivals failed to do and achieve, and even increase, profitability?

The Danish carrier’s chief executive Søren Skou, who took over the role in 2012, tells Containerisation International that the starting point for understanding how it has managed to improve is its change of strategy from aggressive growth to grow with the market.

Mr Skou explains that the shipping line decided in 2012 that generating a return is more important than gaining market share and therefore it hasn’t increased capacity over the last two years.

“We operate 2.6m teu of capacity today and that is the same as we operated in the first quarter of 2012,” he says. “I think that

decision has really helped us pull out a lot of costs.”

Moreover, volumes increased by 4.1% in 2013 to reach 8.8m teu, which means that vessel utilisation levels have also improved.

Part of the process of growing with the market has involved withdrawing unprofitable strings and also developing vessel sharing agreements.

Mr Skou says that removing an unprofitable service has the double effect of cutting losses and also saving costs.

The extent of Maersk Line’s network re-organisation can be seen by analysing the number of services it has closed down since the first quarter of 2012.

Mr Skou says it has closed two strings from Asia to North Europe, its Andean service ― which covered the west coast of South America to Europe ― and its direct Mediterranean to the US product.

It has also rationalised its Middle East coverage and combined a string that went from Asia to the North American east coast via the Panama Canal with one of its European services to create a pendulum service through the Suez Canal.

It has also agreed to new vessel sharing agreements in various regions across the globe, including Latin America, West Africa, Asia and the Indian subcontinent.

“A key point to also understand is that by closing those strings we have obviously freed up a lot of our capacity and that has gone back into the network for slow steaming,” Mr Skou says.

“Today, although we operate 2.6m teu, which is the same capacity as we managed two years ago, we are offering about 8% less to the market because our vessels are sailing at slower speeds.”

As a result of this network reorganisation, sailing at slower speeds and using larger vessels, Maersk Line’s bunker consumption in 2013 was 12.1% lower than it was in 2012.

Another factor in reducing fuel consumption was that Maersk Line worked on developing an “even speed”.

This is where vessels sail at a more constant speed in order to try and remove bunker-burning speed fluctuations.

“Those are some of the real drivers, as well as work on procurement ― buying things that we need, services that we need, as effectively as possible,” says Mr Skou.

THE VIEW FROM THE


As Maersk Line reports another year of profi t growth in diffi cult conditions, chief executive Søren Skou reveals to Damian Brett how it achieved the result

HOW DID THEY DO THAT?

Figure 1: Maersk Line results2013 2012 2011 2010 2009 2008 2007 2006

Revenues ($bn) 26.2 27.1 25.1 24 20.6 28.7 26.7 25.3

Profit ($m) 1,510 461 -602 2,642 -2,127 583 217 -568

Volumes (m feu) 8.8 8.5 8.1 7.3 6.9 7 6.8 6.7

2013 2012 2011 2010 2009 2008

Average rate ($ per feu) 2,674 2,881 2,828 3,064 2,370 3,284

Average fuel price ($ per tonne) 595 661 620 458 342 520

Figure 2: Maersk Line rates and fuel price

LINER RESULTS 2013/MAERSK LINE

CARRIERS

Skou: “Frankly, I think that we as an industry have to learn to live with excess capacity.”


“My basic philosophy is: where we can, adjust the capacity down if we cannot fill the ships. It is our preferred course as opposed to indiscriminately lowering freight rates.”

As well as managing to improve bunker consumption levels, another fuel-related factor that has helped Maersk Line improve its profitability is lower bunker prices.

Analyst Dynamar’s senior shipping consultant, Dirk Visser, says its figures showed fuel prices had declined by 10% year on year.

Maersk Line’s own figures show that its average fuel price per tonne had declined to $595 in 2013 compared with $661 in 2012.

In total, the company says its bunker costs decreased by 21% year on year in 2013 as a result of lower bunker consumption and bunker prices.

SeaIntel Maritime Analysis chief executive Lars Jensen says this translates to bunker savings of $1.4bn in 2013: almost all of the shipping line’s profits for the year.

Moreover, Mr Jensen calculates that $600m of this figure is the result of lower fuel prices, something which Maersk Line has no control over.

If this $600m is stripped out of the

“Obviously the low-hanging fruit on slow-steaming have been picked but we still think there are still some opportunities.

“The other element in steaming that we can also improve on is not just the average speed but also in having an even speed ― the more even speed you can run your vessels the less bunker you will use.”

Whether Maersk Line’s decision to concentrate on costs instead of gaining market share is the right one will be judged over the course of time.

In the past, shipping lines were happy to make a loss one year as they assumed they would make a profit the following year as the market swung from overcapacity to a capacity shortage.

But Mr Skou’s belief that overcapacity is here to stay means he is confident that concentrating on costs is the right strategy.

“Frankly, I think that we as an industry have to learn to live with excess capacity,” he says.

“I don’t subscribe to the view that come 2016 we are going to have much better supply and demand situation and so on because people will continue to invest in new ships. And it doesn’t seem like that trend will slow down anytime soon.”

full-year profit result, the Danish carrier would in fact have reported profits of $910m.

This is still an impressive year-on-year increase of 97.4%, but not quite as strong as the 227.5% increase it actually recorded.

Other initiatives that Maersk Line implemented in 2013 to improve its balance sheet include reefer rate restructuring, which saw an increase in its reefer rates, changing vessels’ bulbous bows to improve fuel consumption, the elevation of navigation bridges to increase carrying capacity and the installation of economisers on auxiliary engines for the utilisation of waste heat.

So will Maersk Line be able to record costs savings of a similar level in 2014?

In its outlook for the year, AP Moller-Maersk says it expects its container shipping divison’s unit cost reductions to be less than in 2013.

Mr Skou says he hopes the P3 Network will help reduce costs further, assuming it receives approval from regulators in China, following on from US approval.

“Maersk Line will continue to drive out cost in 2014 and frankly before we even get to P3 there are lots of opportunities and slow-steaming is one of the tools we have in the tool box,” he says.

LINER RESULTS 2013/MAERSK LINE

CARRIERS

THE VIEW FROM THE


IN THE midst of the tragedies of an operational conflict that has lasted over a dozen years for coalition forces and civil unrest that has being ongoing since 1973 for the people of Afghanistan, a significant logistics operation is underway to redeploy coalition forces.

After 448 British deaths and many billions of dollars spent, the logistics operation is very much in the UK public eye and generating much more media coverage than most logisticians are exposed to, with every key decision liable to be investigated by cost-conscious politicians.

Yet, like many other logistics operations, the process managed by the UK’s Joint Force Support Afghanistan, JFSp(A), is one of essentially moving parts and equipment from one place to another in the most efficient and effective way, although retail return logistics doesn’t often involve a three-stage cleaning process and five sets of paperwork from multiple UK government departments.

Explosive cargo To fight a war requires significant quantities of ammunition ― all of which has a shelf-life. Explosive cargo in the form of bullets and missiles is a key component of the cargo mix and a rather larger issue than commercial logistics operations.

As the UK’s forward operating units draw back to Camp Bastion as part of the Base Redeployment And Closure/Transfer process, a stockpile of 1,000 tonnes of previously distributed and returned ammunition has built up.

Disposing of it safely is the job of Major Alex Pettitt, the Senior Ammunition Technical Officer, responsible for the safety of the UK’s ammunition stocks in Afghanistan. A veteran of operational tours in Kosovo and Iraq, as well as a qualified driver of vehicles from motorbikes to the OSHKOSH tank transporter trucks, she demonstrates the versatility expected of members of the UK’s Royal Logistics Corps. As part of their training all RLC officers are offered membership of the Chartered Institute of Logistics.

While most ammunition is stored under ambient conditions, more expensive

ordnance, such as missiles, are kept in air-conditioned storage, increasing the requirement for power and consequently fuel storage for the diesel generators which keep Camp Bastion illuminated at night and chilled in the midday desert sun.

Ammunition not being returned to the UK due to damage or expiration is destroyed in-theatre. On the day of my visit 120 tonnes of ammunition was destroyed in the largest army controlled explosion for decades. The equivalent of 40 tonnes of explosive was detonated in a series of linked explosions several miles away in the desert. The big bang, when it

A massive logistics operation is now under way as the UK military pulls out of Afghanistan. In an exclusive report, Royal Naval Media Operations Reservist Ian Aitchison sees fi rst-hand just what this multi-million dollar move involves

THE LOGISTICAL BATTLEGROUND

EXCLUSIVE/AFGHANISTAN

LOGISTICS

The sorting tray where thousands of empty rounds of ammunition must be sifted to ensure no live rounds are packed. Photo: Ian Aitchison


came, was not so much of a bang as a big whoomph as the shockwave passed over the camp. Even the demolition monitoring team had to be 3 km away, such was the scale of the blast.

Whereas degraded explosive material returned from Iraq took years to dispose of in the UK ― due to the lack of large open deserts to conduct large detonations ― the process of utilising the Afghan desert is resulting in a much faster and more effective process.

After each explosion army technicians check to ensure there is no unexploded ordnance left, which might endanger life, before vacating the area for locals drawn to the site by the noise of the explosion. Such pieces of metal that remain are quickly scavenged by locals desperate for anything which can supplement their very poor incomes at the margins of Afghan society.

Smaller ammunition is digested by the containerised small arms incinerator, designed within the dimensions of a 40 ft high-cube container. The incinerator was developed commercially by an

equipment were misplaced, the new process is far more efficient and provides complete visibility of all parts and equipment.

This huge UK reverse logistics operation is managed via a two-stage process: stage one is deciding what is to be exported from Afghanistan, stage two is deciding how it is to be exported. The whole process is built around achieving the best value for money, conditional upon security constraints. The lessons learned from the UK’s redeployment from Iraq, Operational Brockdale ― a rather simpler logistics challenge given that Kuwait and the Gulf ports were a short drive away from the UK’s Iraq base at Basra ― are contained in a glossy bible kept handy for reference in a drawer beneath Sqn Ldr Blackwood’s desk.

Once unit quartermasters log an item as surplus to current operational requirements it is logged on the master spreadsheet under its standard Nato Stock Number (NSN). For every item there is a three-part process to evaluate its value. Part one rests with the front-line commands in the UK and the importance

army veteran and is known locally as the popcorn machine due to the sound it makes when operating. It processes approximately 20 tonnes of ammunition each week, (around 4-4.5 tonnes per day), ranging in size from 50’ calibre machine-gun rounds down to 9mm pistol bullets. By the end of 2013, over 1,000 tonnes of small arms had been processed in this safe and cost effective means.

As Major Pettitt explains: “Propellents are burned, pyrotechnics are BBQ’d and small arms are pop-corned”.

Value for money Squadron Leader Adam Blackwood’s role as Staff Officer 2 Redeployment is the keeper of the redeployment master spreadsheet. This records all of the UK materiel to be redeployed ― from tents to trucks and guns to gym equipment ― and, just as importantly, how much it is estimated to cost.

Having learned lessons from previous operations, including Operation Granby ― the UK’s involvement in the first Gulf War of 1991 ― when 150 containers worth of


LOGISTICS

A building under construction at IJC, made from containers.Photo: Ian Aitchison

LOGISTICS



they attach to an item. For some older items, they may be vital spares for a piece of equipment that is no longer manufactured and therefore it is vital they are retained and shipped back to the UK, regardless of relative shipping cost. The second part rests with Defence Equipment & Support and whether, looking across the whole of UK defence equipment, they require the item to be shipped. The final part is with Defence Supply Chain Operations Management, who look at the shipping costs and how to ship every item that needs to be returned to the UK. This process is managed via a “sentencing board”, which meets every two weeks to decide whether a piece of materiel is required or not.

Around 45% of materiel is expected to be shipped back. Of the 60% being disposed of in theatre, depending upon the item, it is either put up for sale or scrapped under commercially managed contracts.

Whereas value and weight will tend to dictate choice of shipping modes, the team at JFSpA must also consider items Attractive to Criminal and Terrorist Organisations. Aside from the obvious such as weapons and ammunitions, ACTO cargo also includes batteries, which can form part of Improvised Explosive Devices (IEDs), the main weapon used by the insurgents in Afghanistan. All ACTO cargo is flown out of Afghanistan.

As the Head of Force Movement Control Cell within JFSp(A), Wing Commander Ryan Roberts notes he is tasked with removing in two years what took six years to build. He summarises his role as “building capacity, building resilience and de-risking”.

Wing Cdr Ryan is confident the task can be achieved. As part of the logistics planning process, they were able to capture all known risks. He says the planning process is better and that UK forces have a firm grip on what equipment they have. Due to it being a no-fail mission, they made sure costs were at the upper edges of margins of error, equipment numbers were rounded up and the resources to move the equipment where rounded down. Having plugged in all the operational variables, operational analysis modeling was done through Defence Science and Technology Laboratory to prove their concepts.

As the UK’s forward operating bases have closed or been transferred to Afghan control and the surplus items have been double-checked into the overall inventory, so the accuracy of Sqn Ldr Blackwood’s spreadsheet increases.

With the UK Ministry of Defence keen to save every penny it can, the £300m ($500m) estimate for the redeployment costs are recalibrated every month to double check the latest forecast. Given finance is such a political issue, this figure

is used to ensure UK Defence ninisters are kept briefed with the latest information. So far everything is on track. By the end of 2013, around 40% of materiel and 47% of vehicles and major equipment had been shipped back to the UK at costs varying from $11,000 to $25,000 per teu.

The reverse logistics process Providing logistics support to bases beyond Camp Bastion is the role of the UK’s Combat Support Logistics Regiments,

Clockwise from top: The Enhanced Palletised Load System, capable of loading and transporting one teu across rough terrain; some of the unwanted containers being cut up and sold on a steel tonnage basis; the bio-wash pit, where vehicles such as the EPLS are washed prior to removal; and the desert container ‘warehouse’, where assorted parts are sorted and logged. Photos: Ian Aitchison


which are also responsible for bringing back all necessary equipment from the forward operating bases to Camp Bastion. Referring to their role as “combat trucking”, they are usually the last to leave a base and take pride in the fact that after their infantry colleagues have lifted-off in the relative safety of helicopters, it is left to the members of 2CSLR to drive back to base through hostile terrain.

As the threat from IEDs has grown, so too has the sophistication of the UK’s armoured

logistics convoys. The 2CSLR are able to defend themselves with armoured and armed vehicles used to clear routes in the vanguard of the main convoy. Rollers on the lead vehicles are designed to detonate any IEDs laid in the convoy’s path, preventing damage to the vehicles themselves. But should an IED crater be encountered, filling it in relies on the same British engineering that UK local councils use to fill-in potholes, namely JCB diggers, albeit scarcely recognisable when fully armoured to

protect the driver from bomb blasts, bullets and rocket propelled grenades.

For the actual cargo transport 2CSLR utilises the eight-wheeled, $1m, German-built Enhanced Palletised Load System vehicles, which are trucks capable of hauling one teu across rough terrain.

Responsibility for logging smaller items of surplus equipment back into the UK military stores stock falls to the Reverse Support Chain team. Each part has to be quality-checked, logged, documented with a unique barcode label and stored in one of ten 40 ft containers containing around 1,000 separate NSNs. By being linked into the main defence logistics computer system, the team is able to provide a unique label identifying which warehouse the part should be returned to in the UK. This system is used in the packing of containers and has enabled the logistics teams in the UK to increase the number of reverse logistics items they can handle in a day from 2,150 to 8,150, as well as increase the efficiency of UK transportation ensuring parts for Bicester are transported to Bicester and not to Donnington or elsewhere.

In addition, as the whole military supply chain system updates every 24 hours, once an item is logged, it can be reissued. This enables military logisticians in Helmand to access locally available items rather than have additional ones sent to Afghanistan from the UK.

Vehicle redeployment is no less rigorous, with all equipment subject to a three stage Proof Of Good Order (POGO) process. The first stage, POGO 1, is a thorough clean of each vehicle by their unit. While a full wash for the modern and specially designed 40-tonne Mastiff fleet takes eight hours per vehicle, cleaning out all the dust from a two-tonne Land Rover takes on average twenty-two hours. It enables vehicles to be cleaned to meet strict EC environmental standards as enforced by the UK’s Department of Environment, Food and Rural Affairs. POGO 2 is additional preparation. By following this process when a vehicle arrives back at its home unit in the UK it is properly checked and prepared for subsequent use. POGO 3 is the final checking of vehicles before departure. At the start of the redeployment process there were an estimated 3,345 vehicles to clean; by the end of 2013, 1,578 vehicles had been washed and sent back to the UK.


LOGISTICS

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NEW CONCEPT


After ten years working for NYK as the head of Group Communications for Europe and Africa, Royal Naval Media Operations Reservist Ian “H” Aitchison was mobilised last autumn to serve as the Deputy Chief of Public Affairs at ISAF Joint Command (IJC) HQ in Kabul. IJC is the three-star operational HQ responsible for all coalition activities across Afghanistan. As a joint coalition HQ, it is run by service personnel from naval, land and air forces of 49 different nations. Commander Aitchison was first mobilised for Afghanistan operations in 2001 as a member of the Royal Navy battlestaff in Bahrain.

The backbone of this international operation is the air line of communication, the C17A Globemaster, since the surface lines of communication have to rely upon third-world trucking, many hundreds of miles from the nearest seaport. “We feel the pinch when a C17 is diverted,” says Wing Cdr Roberts, “but the logistics chain doesn’t collapse.” He continues: “So far, while land transportation has proved unpredictable, it has not been unreliable.” Very little cargo has been lost between Afghanistan and the UK.

Aside from the RAF’s fleet of C17As, the UK military is making use of commercial airfreight and has a standing contract which involves regular shipment by B747-400F from the UK to Afghanistan. All cargo sent via this aircraft type is palletised, including most of the food needed to feed an army of over 5,000 plus associated contractors. Occasional use is made of AN124 planes, primarily for battle-damaged vehicles and oversized cargo, since all other mobile equipment can be driven into the back of a C17.

For items to be sent back via air, normal EC documentation standards are expected, which means that every piece of exported freight requires five forms confirming: POGO 1-3, VAT certification from HM Revenue and Customs, Free From Explosive, adherence to International Air Transport Authority regulations, and that there is nothing being smuggled alongside the legitimate cargo. This last check is conducted by the Royal Military Police, who are responsible for sealing all cargo. The final checks are conducted by the RSC Aviation Support Group, who also ensure all cargo is weighted and any tanks have associated Gas Safety Certificates.

Wing Cdr Roberts is also dealing with three tiers of infrastructure built at Camp Bastion to support over 11,000 UK troops at the peak of operations. Tier one relates to camping kit ― tents, field generators etc ― tier two is primarily related to containers, be they used as portacabin offices, accommodation blocks, mobile laundries, ablution facilities or generators ― both of which have to be dismantled as part of the site restoration process ― and tier three is fixed-frame buildings, which will remain in place.

I visited the scrapyard, which I was informed is running at a profit under the watchful management of a UK Army sergeant and three others. Between July 2013 and February 2014 they have cut

up over a thousand containers which were uneconomic to repair. Once cut up, the containers are sold on a steel tonnage basis. To prevent inadvertent support to the insurgents, all warlike scrap must be demilitarised, and this includes ballistics glass. Between October 2012 and December 2013 this amounted to over 1,800 tonnes of scrap, of which the majority was iron, but it also included 275 tonnes of ballistics glass and 150 tonnes of wood and plastic.

A plan comes together Observing this massive operation first-hand was a fascinating experience and one rather different from the average cross-dock logistics facility, since it is happening at an operating base where there is an ever-present threat of attack from indirect fire, vehicle bombs and gunfire. Fortunately, the plan Wing Cdr Roberts helped design is working: “We are jogging, we expect to have to run, but we can sprint if necessary.”

With a firm political and operational deadline to meet to have all men and equipment out of Camp Bastion, project overrun is not an option. As he notes: “We have 65 million stakeholders and our key customer is the UK Prime Minister.”


LOGISTICS

Air palletised cargo lined up ready for shipment at Camp Bastion. The UK military is making use of commercial

airfreight as well as the RAF’s fleet of C17As.Photo: Ian Aitchison

To prevent inadvertent support to insurgents, all warlike scrap must be demilitarized.Photo: Ian Aitchison

THERE is a veritable blizzard of information, not all of which is useful. There are year-on-year and quarter-on-quarter figures to look at, liftings in feu and teu to be compared, sometimes only group accounts to be looked at ― not the liner activity ― ebit and ebitda and preliminary figures rather than the real thing.

The task to prepare a simple and informative summary showing like-for-like information for all the lines for which data is available renders any comparison of results an elusive and inexact exercise.

However, sifting through the information reveals there are some key pieces of information that tell the story of 2013 for all lines and offer insight into the challenges of the year and the impact on liner shipping as a whole.

Revenues in 2013 fell for all operators for which data has become available; Maersk Lines’ revenue fell by 3.4%, for OOCL the equivalent fall was 4.9%, for CSAV 6.6% and for NOL 9%. In contrast, CMA CGM’s were almost unchanged at $15.9bn.

Liftings for 2013 rose by up to 7% for some but others recorded falls of 2.5%-3% and performance between different trades quite marked, with intra-Asia/Australia rising but most others falling, giving mixed overall results depending on a line’s focus.

Revenue per teu also fell across all carriers, typically by 6%-8%, clear evidence of the continuing effect of rate-cutting despite numerous general rate increases during the year.

Even the hitherto buoyant intra-Asia trade has seen reduced revenues as


Which lines were the winners and losers in 2013, who outperformed and by how much, and what will happen in 2014? Alastair Hill takes a look

SEARCHING FOR THE KEY TO SUCCESS

Maersk’s profits from container

activities went up from $461m to

$1.5bn.

ANALYSIS/RESULTS ROUND-UP 2013

CARRIERS


cascaded vessels have led to over capacity and falling rates. Recent reports of a slowdown in China’s economic activity, and geopolitical uncertainty elsewhere in the world, can only be sources of further financial problems and difficult trading conditions for the container trades as a whole.

The inability to maintain higher rates for sustained periods has been a constant source of discomfort for all operators.

Cost of sales has fallen in relation to the associated revenues, largely as a result of favourable movements in bunkers and supplemented to some extent by carriers’ own cost cutting initiatives in other areas, but surely there can be little scope left for more progress here.

Only the operators of mega-vessels can expect to keep costs falling as the economics of such vessels flow through to the bottom line. Additionally, where a carrier owns its terminals or has a significant logistics activity there may be scope to increase the benefits through more intensive usage, together with

propped up in some cases only by exceptional non-shipping events, such as the sale of offices ($200m for NOL Group) or terminal interests ($242m for CMA CGM) or even the prepayment of debt facilities and merging subsidiaries

further slow-steaming and schedule adjustments and cancellations.

Profits in some cases rose dramatically. Maersk’s profits from container activities went up from $461m to $1.5bn, but for most others they fell or showed losses,


CARRIERS

Table 1: Carrier results 2013Maersk APL OOCL CMA CGM CSAV

Revenues ($m)

2012 $27,117 $8,054 $5,899 $15,900 $3,432

2013 $26,196 $7,329 $5,609 $15,900 $3,206

Change (%) -3.40% -9% -4.92% -0.1% -6.59%

Profit ($m)

2012 $461 -$251 $296 1,034 -$314

2013 $1,510 -$231 $47 756 -$169

Change (%) 227.55% 8% -84.12% -26.9% -46.18%

Liftings (‘000 teu)

2012 17,600 6,040 5,215 10,600 1,933

2013 17,000 5,892 5,294 11,400 1,879

Change (%) 4.10% -2.45% 1.50% 7.55% -2.79%

Average rate ($ per feu)

2012 $2,881 $2,509 - - estimated

2013 $2,674 $2,318 - -

Change (%) -7.38% -7.61% -6.30% - -9%

Source: Company filings

CMA CGM’s profit rise

was helped by the sale of terminal

assets.

($74m in the case of CSAV), rather than the operation of vessels carrying cargo.

It is worth noting that OOCL’s profit represents little more than three days’ revenue and just a handful of delayed sailings could have changed this position.

Despite all these changes in key indicators, global capacity grew substantially, with most lines accepting new and larger tonnage and shuffling the remainder of their fleets, returning or disposing of surplus vessels and redeploying others. Pressure on non-operating owners to accept reduced rates must be making life tough for them too.

The table on page 43 shows figures for the few lines that have issued actual or preliminary 2013 figures.

So what are the prospects for the major lines in 2014?

Commentators and some of the leading lines themselves continue to recommend the benefits of alliances, mergers or acquisitions. Furthermore, there are few suggestions that 2014 or even beyond are likely to make the difficulties in container shipping any better.

Oversupply will dog the market and there can be few opportunities for material cost-savings left if the lines have been as diligent as they say they have for the past year or two.

It is hard to see where any mergers or acquisitions will occur given the quasi-state ownership of many of the top 20 lines. This ownership feature does tend to blunt

the financial disciplines expected in most other sectors and allows weaker lines to survive.

One possibility, however, may be some form of combination between the Japanese carriers: the existence of three independent lines for the country, despite its huge exporting activity, suggests there may be some room there. Historically there is a precedent: Showa, Y-S Line and Japan Line were reorganised with government support over 25 years ago.

The acquisition of smaller niche players by major carriers is equally unlikely. Many smaller lines remain founder-owned, move quickly in response to market changes and cultivate strong customer connections, making their owners unwilling sellers except in the direst of circumstances.

Furthermore, any self-respecting major carrier would be expected to possess adequate in-house resources to deliver its own services without recourse to buying them in at a premium.

There must be further developments within the major alliances in lieu of mergers or acquisitions and there are already moves for outsiders to affiliate to them in selected trades, but this does not address the issue of the chronic overcapacity for which only disposal or lay-up is likely to offer any solutions.

Nonetheless, the development of a less competitive environment may help to mitigate more serious rate erosion but it is at the risk of attracting regulatory scrutiny

and its attendant sanctions in the case of any malpractice.

There must be further emphasis on customer service. The pursuit of excellence in IT and the associated documentation is critical to success in attracting and retaining customers just as much as access to timely and reliable schedules and port rotations.

Many in the industry proclaim the benefits of scrapping or lay-up but no-one seems to actually do so in a meaningful way. It is a bitter pill to swallow to acknowledge past mistakes in such action.

In conclusion, 2013 was, unsurprisingly and even on the basis of just a few results, another poor year with the benefits of rising volumes more than offset by reduced unit revenues on major trade lanes. Many of the changes in these indicators are consistent with what actually happened.

There was modest growth in containerised trade in 2013 leading to the increase in liftings. The well-documented overcapacity and influx of new and larger vessels led to the fall in revenues so any line that was able to prosper significantly in such circumstances would have done very well indeed. Pressure on rates is evidenced by the reduced revenue per teu figures.

It will be interesting to see how the rest of the global carriers, at least those who report such information, have performed in 2013. There will be little known of MSC, for example, as it guards its privacy jealously.

For the remainder, the level of information will be simple at best, and only their shareholders and bankers will see the full story, which will undoubtedly be as grim as for the others.For further 2013 financial results, see pages 46 and 47.

Alastair Hill is a qualified accountant with over 30 years’ experience in the container shipping and wider transport industry having started with Sea Containers in commercial and business development positions . He has worked for K Line UK, UTT (Interbulk) in the Far East and other tank and dry box lessors and managers. He is an independent consultant/interim manager and has also worked in Qatar and Guyana on development projects.



CARRIERS

OOCL’s profit represents little more than three days’ revenue. Photo: Dietmar Hasenpusch

THE leading six European freight forwarders last year handled more than 11m teu of ocean freight, making them some of the shipping lines’ largest customers.

But 2013 also marked a shift in strategy for some of those leading players, with year-on-year percentage growth among the top six players much lower than recorded over the last couple of years.

The leading sea freight forwarder was once again Switzerland-based Kuehne+Nagel, which handled 3.6m teu last year, compared with 3.5m teu in 2012.

While this growth is roughly in line with the overall market increase, estimated at around 3% by the leading players, it is behind the growth levels it has reported in the past.

Last year, for example, its volumes increased by 6.1% year on year against estimated market growth of 2%.

It also indicates that K+N may have given up on its previously-stated ambition of handling 5m teu by 2015, unless it makes acquisitions or adopts an aggressive expansion plan in 2014 and 2015.

The change in growth strategy comes as the company has installed new leadership this year, with Detlef Trefzger taking over from interim boss Karl Gernandt.

Mr Gernandt took up the role of interim chief executive in March, following Reinhard Lange’s decision to step down for health reasons after four years in the top job and 40 years with the company.

When announcing its full-year results, K+N said it was “back on the road to profitable growth”, indicating that it would not take on non-profitable containers for the sake of increasing volumes.

Mr Trefzger said: “Through organisational adjustments, streamlined cost structures and a clear focus on margin improvements we achieved the goals we had set ourselves.

“By concentrating on selective growth in sea freight, we succeeded in keeping margins stable despite high volatility of rates.”

It increased market share on the transatlantic and transpacific trade lanes but did not participate in the intensive competition on the Asia-Europe lane, it said.

Mr Gernandt said this year he expected K+N to outpace industry growth of 2%-4% by a factor of 1.5 times.

Transport Intelligence analyst Thomas Cullen said K+N’s volume figures were unexciting and noted that a decrease in turnover indicated weaker freight rates, which was “no surprise”.

If K+N adopted a more conservative growth strategy in 2013, the opposite can be said for its Swiss rival Panalpina, which also has a new person in charge.

Panalpina increased its ocean volumes by 8% year on year in 2013 to reach 1.5m teu. While this is still well behind that recorded by K+N, it did actually increase volumes by more than K+N last year, with an increase of 107,300 teu, compared with K+N’s 105,000 teu.

Panalpina chief executive Peter Ulber, who has been at the helm of the company since June after taking over from Monika Ribar, said: “We recovered from 2012 and gained market share in a low-growth environment in 2013.

“I am happy to state that we outperformed the market in both air and ocean freight. But there is still a lot of room

Source: companies* second half volumes estimated by CI

The leading sea freight forwarder was once again Switzerland-based Kuehne+Nagel.Photo: © 2014 dapd/AP


Freight forwarder growth for 2013 in line with the overall market, but results mark strategy changes, writes Damian Brett

CHANGING LANES

Table 1: Volumes (teu)2013 2012 2011 2010

Kuehne+Nagel 3,578,000 3,473,000 3,274,000 2,945,000

DHL Global Forwarding 2,807,000 2,840,000 2,724,000 2,728,000

DB Schenker* 1,890,041 1,905,000 1,763,000 1,647,000

Panalpina 1,495,300 1,388,000 1,310,000 1,241,000

DSV Air & Sea 772,142 725,806 727,861 707,194

Damco 791,535 798,200 749,500 651,739

Total 11,334,018 11,130,006 10,548,361 9,919,933

EUROPEAN FORWARDERS/RESULTS ROUND-UP

FORWARDERS

for profitability improvements, especially in logistics and ocean freight.”

Mr Cullen said volume growth was healthy. “Panalpina ascribed this performance to its success in the oil and gas sector with demand growing in ‘strong double-digits’,” he said.

He said that Panalpina expected to grow with the market in 2014. “The ability to grow faster than the market in air but especially sea without driving down profits is a healthy sign, even if it might be harder to continue to reduce costs next year,” said Mr Cullen.

Management expects that once new standardised systems and processes are rolled out, productivity should rise to meet some of Panalpina’s more profitable peers.

Stifel analysts said management expected the roll out of new standardised systems and processes to improve productivity to the level of more profitable peers.

The only other top-six forwarder to post strong growth in ocean freight volumes was DSV Air & Sea. The Danish forwarder saw total ocean freight volumes reach 772,142 teu, up 6.4% year on year, as it closed in on its closest rival Damco.

As much as 3% of the volume increase is attributed to acquisitions, meaning that on a like-for-like basis the forwarder actually grew in line with the market.

In the coming year, DSV said it would target market share and was expecting to increase box volumes by 5% compared with market growth of 3%-5%.

assertions that it would not increase volumes at the expense of profitability.

“The main reason for this development [revenue decrease] was lower demand in the Americas and Europe regions. In contrast, demand rose on intra-Asian and north-south routes,” it said.

“Thanks to a selective market strategy and continued strict cost controls, the division was able to maintain its operating margin despite the decline in revenues and increased investments in the transformation of its IT infrastructure.”

The other freight forwarder to report a decline in ocean freight numbers for 2013 was AP Moller-Maersk-owned Damco, which reported a year-on-year decline of 0.8% to 791,535 teu.

Damco has yet to offer any commentary on its volume performance but it does reflect a change in strategy, from above-market growth in 2012 and 2011.

Last year, however, it did implement a costly company-wide re-organisation with the aim of simplifying and consolidating its operational structure, which tipped it to a loss of $111m.

The re-organisation involves consolidating locations — it also moved its headoffice to The Hague — as well as reviewing and implementing new IT systems.

It was also moved into a new division within AP Moller-Maersk and now reports into the Services & Other Shipping unit, which will be headed up by Morten Engelstoft.

Current chief executive Rolf Habben-Jansen is leaving to take charge of Hapag-Lloyd. He will be replaced at Damco by Hanne Sørensen from Maersk Tankers.

The final company in this forwarder round up, DB Schenker, had not issued its 2013 results when this article was published.

However, Containerisation International estimates were showing a small 0.8% decline in box volumes compared with 2012 to just under 1.9m teu.

Like K+N, this is reflective of a change in approach compared with previous years when it posted above market volume growth figures.

At the half way point, it said volumes had declined 1.6% compared with the same six month period a year before. It blamed the decline on poor performance on the Asia-Europe trade and said freight rates were weak as a result of overcapacity.

However, it saw a decline in profit per unit last year as a result of “fierce competition” and currency effects.

The remaining leading European forwarders appear to be adopting a more selective growth strategy with an eye on profitability.

The second largest sea freight forwarder in the world, DHL Global Forwarding, last year handled 2.8m teu.

This is a 1.2% decline compared with 2012 levels but over the last few years DHL has been prepared to grow by less than the market when profit margins on freight movements have been tight.

In 2011, when freight rates were declining, it saw ocean volumes increase just 0.1%, but in 2012 when rates climbed slightly it recorded a volume increase of 4.3%. Last year, when rates dipped again, its volume growth slipped.

In its full-year results it reiterated past


THE VIEW FROM THE

Panalpina increased its ocean volumes by 8% year on year in 2013.

Source: companies* second half volumes estimated by CI

Table 2: Year-on-year growth (%)

2013 2012 2011

Kuehne+Nagel 3.0% 6.1% 11.2%

DHL Global Forwarding

-1.2% 4.3% 0.1%

DB Schenker* -0.8% 8.0% 7.0%

Panalpina 7.7% 5.9% 5.3%

DSV Air & Sea 6.4% -0.3% 2.9%

Damco -0.8% 6.5% 15.0%

Total growth average 1.8% 5.5% 6.7%

Estimated market growth

4.0% 2.0% 5.0%

EUROPEAN FORWARDERS/RESULTS ROUND-UP

FORWARDERS

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THE Federal Maritime Commission has granted regulatory approval for a huge vessel-sharing agreement between the world’s top three container lines, but with stricter monitoring than is usual for a standard alliance.

The Washington agency concluded that the proposed alliance between Maersk, Mediterranean Shipping Co and CMA CGM would not be anti-competitive.

The five commissioners voted four to one in support of the P3 Network, with only former chairman Richard Lidinsky dissenting.

Maersk Line spokesman Michael Storgaard said the three lines “strongly believed” that they could continue to serve the North American markets with competitive and reliable container shipping services through the P3 partnership.

The decision by the FMC “is a very important step towards overall approval of P3, which is still subject to regulatory review in jurisdictions in Europe and Asia”, he said shortly after the news from Washington.

Mr Lidinsky said he opposed the alliance because, in reality, it was effectively a merger.

“This agreement will allow the controlling carrier the ability, when coupled with existing discussion agreements, to deploy its assets along with those of the other two carriers, to dominate vessel competition

Federal Maritime Commission clears P3 alliance agreement

REGULATION

and narrow shipper options at US ports,” he claimed.

The FMC went on to say that it had directed staff to issue alternative reporting requirements to the P3 agreement parties to assist in future monitoring of the agreement, given that there could be a point in the future when service levels were unreasonably reduced, or rates raised to unreasonable levels.

The FMC monitoring activities include:

• Regular communication between commission staff and the [P3] network centre to discuss operations, schedules, processes, and business rules.

• Submission of certain actions by P3 members ensuring independence of individual lines and autonomy of the network centre.

• Ensuring adherence to the agreement and autonomy of the network centre irrespective of individual carrier interests.

• Advance notification of cancelled sailings and any service modification resulting in changes in average weekly capacity.

• Monitoring of rates in connection with actions altering capacity.

• Monitoring of activities in connection with third parties that might demonstrate prohibited acts or other behaviour that might threaten competition.

The FMC said that if it determined that the agreement was likely, by a

reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost, it would bring a civil action in the US District Court for the District of Columbia.

The clearance applies only to the US trades covered by the proposed P3 Network. The trio aims to operate a joint fleet covering all the major east-west trades, and approval is still needed by the Chinese authorities. In Europe, the lines have to self-assess to ensure there is no abuse of their dominant position.

The P3 lines hope to start their alliance in the early part of the third quarter of the year in time for this year’s peak season.

Shipper organisations welcomed the news that the FMC would set up a

monitoring programme for the P3 Network.

The US National Industrial Transportation League, the Global Shippers Forum and the European Shippers’ Council all backed the plan.

The GSF and ESC both said they were particularly pleased that the FMC would monitor the connection between freight rates and capacity deployment.

It was also revealed that the three carriers had made changes to their initial submission to the FMC in order to help ease its progress through the approval process.

Meanwhile, as Containerisation International went to press, it was revealed that the FMC had also given approval to the G6 Alliance to expand to the Far East and US West Coast and transatlantic trade lanes.

Janet Porter

Lidinsky: opposed the alliance beacuse, in reality, it was effectiely a merger.


BOX WORLD BRIEFING

CARRIERS

CMA CGM cuts debt by 20% as terminals sale boosts net profi t

CMA CGM cut its net debt by 20% to $3.7bn last year and ended 2013 with a strong cash position despite difficult trading conditions that reduced core earnings by almost 27% to $756m.

This was one of the stronger performances in the container shipping sector that saw many carriers posting red figures as the results of the biggest lines diverged considerably from mid-size and smaller carriers.

The coming year is expected to be much the same as 2013, with volumes growing but freight rates

remaining very volatile. The French line, for long regarded as vulnerable because of its high debt levels that topped $5bn before a financial restructuring, reported net profits of $408m, against $332m in 2012. That partly reflected the sale of a 49% stake in its ports business, Terminal Link.

Excluding one-off gains, CMA CGM’s net profit would have been around $200m. No further major disposals are planned.

The Saadé-owned group, one of the last of the big containership operators to

report 2013 results, achieved a return on invested capital of 10.4%, slightly down from 10.6% in 2012.

Earnings before interest, tax, depreciation and amortisation were broadly unchanged at just under $1.4bn, while the line made an operating margin on 4.8%.

Volumes carried rose by 7.5% to 11.4m teu, compared with global market growth of around 3%.

In addition to reducing debt, CMA CGM also ended the year in a strong liquidity position, with available cash of $1.5bn.

CMA CGM confirmed that six ships on order have been upgraded from 16,000 teu to 17,700 teu, in line with the largest vessels in the fleets of its two P3 partners, Maersk Line and Mediterranean Shipping Co.

Janet Porter

EVERGREEN Marine has reported an annual loss of $T1.5bn ($49m) for 2013, reversing its previous annual profit of $T312.5m, dragged into the red by the rates collapse on longhaul trades.

Revenues declined to $T139.2bn, down only about 1% on-year, the company reported in a filing to the

Taiwan Stock Exchange. Its gross profits from operations shrank to $T388m for the year, from $T4.2bn in 2012. Its annual operating expenses climbed to $T5.5bn from $T5.3bn.

The company also reported $T4.4bn of unspecific non-operating gains, although a December sale of $75.7m of

containers via a subsidiary to Elevation Development and TG Global accounts for part of this figure.

Evergreen has had an eventful year so far, officially joining the CKYH Alliance and leasing large ships; it sealed deals for 10 ships of 14,000 teu in January.

Tom Leander

Evergreen Marine posts $49m loss

CMA CGM cut its debt to $3.7bn last year.

Hapag-Lloyd posts a net loss

HAPAG-Lloyd posted an operating profit of €67.2m ($92.8m) for 2013, an improvement of €41m on 2012, as cargo volumes increased and despite weak freight rates.

But the group posted a net loss of €97.4m after a deficit €128.3m in 2012.

The German line, which is in merger talks with Chile’s CSAV, said the outlook for the container shipping industry was much better, with the supply and demand position improving as older ships are scrapped.

Earnings before interest, tax, depreciation and amortisation were up by €54.6m to €389.1m

“Both factors, the improvement in results and the higher transport volume, are clear evidence of the strength of Hapag-Lloyd in the global market,” said executive board chairman Michael Behrendt.

However, the average freight rates continued to disappoint, remaining $99 per teu below the previous year’s level at $1,482 per teu, he noted.

Revenue declined to €6.57bn from €6.84bn in 2012, due largely to a weaker US dollar, the main currency in the shipping sector.

The group posted a net loss of €97.4m after losing €128.3m in 2012.

Janet Porter

THE NEWS THIS MONTHMORE ONLINE AT CONTAINERSHIPPING.COM BOX WORLD BRIEFING


CARRIERS

PORTS

Hapag-Lloyd merger with CSAV edges closerCSAV shareholders opposed to a merger of the company’s container activities with Hapag-Lloyd have until April 20 to decide whether to take action that could block the deal from going through after the vast majority voted in favour.

The proposal to create the world’s fourth largest container line received the backing of 84.5% of shareholders at a meeting in Valparaiso last month.

Dissidents may exercise the appraisal rights, but the merger will go ahead if the final number of shareholder votes against the transaction is fewer than 5%.

Shareholders also supported a capital increase of $200m to complete the purchase of seven 9,300 teu

newbuildings that are due for delivery from the end of this year.

The Chilean company and Hapag-Lloyd have been going through the due diligence process since January after opening merger talks late last year and signing a non-binding memorandum of understanding two months ago.

Speaking after the shareholder vote, CSAV chief executive Oscar Hasbun

expressed confidence that a tie-up with Hapag-Lloyd would succeed.

The combined company would have annual sales of around $12bn and freight volumes of some 7.5m teu a year.

CSAV has also provided extra details on the $300m per year savings it expects to generate through the merger.

CSAV chief financial officer Nicolas Burr said the $300m per year savings the merger

should generate were not “wishful-thinking synergies” but relate to the cost structures of the companies and their service overlaps.

Where service overlaps existed, one will be shut down and the other maintained to generate cost savings and improve vessel-utilisation levels.

Mr Burr said: “The networks basically overlap in the middle, such as the Caribbean, and that will create the possibility to save some money in destinations where we had to previously transport empty containers to where the cargo originated.”

Other savings relate to the procurement of port, terminal and intermodal operations and having one agency network.

Janet Porter

DP WORLD has revealed a 1.5% year-on-year decline in 2013 revenues on the back of tough market conditions and asset disposals, but on a like-for-like basis the company saw revenues increase by more than 3%.

The Dubai-based terminal operator saw revenues slip to $3bn from $3.1bn a year earlier while profits increased 24% compared with a year earlier to $674m.

On a like-for-like basis, excluding acquisitions,

disposals and monetisations, new capacity and currency fluctuations, the terminal operator reported a 3.6% increase in revenues and a 23.9% increase in profits.

Consolidated volumes for the year declined by 3.8% year on year to 26m teu but on a like-for-like basis they slid by the smaller amount of 0.5%.

DP World said its results reflected a “very strong performance” from those terminals which were

operational for the duration of the year.

It said the like-for-like increases in revenues and profits were driven by a 4.6% increase in container revenue per teu.

The Dubai-based group’s like-for-like figures adjust for a mix of divestment or monetisation of assets at Tilbury, Adelaide, Aden, Vostochny and ACT (Hong Kong) and the addition of terminals in Embraport in Brazil and London Gateway in the UK.

DP World chairman Sultan

Ahmed Bin Sulayem said the performance was achieved despite the group facing some challenging market conditions, particularly in the first half of the year, and being capacity constrained at a number of key locations.

Chief executive Mohammed Sharaf said the company would use the cash generated by the sale of assets in Hong Kong to invest in projects that offered higher rates of return.

Damian Brett

DP World 2013 revenue slips

The vast majority of CSAV shareholders backed the merger with Hapag-Lloyd.

Photo: Dietmar Hasenpusch

THE VIEW FROM THE


RUSSIA is the world’s largest country in terms of area, ahead of Canada and China. As a result, container volume growth can vary drastically from region to region and 2013 was no different.

The country’s leading container terminal operator, Global Ports Investment, which last year purchased major rival NCC in a deal worth $1.6bn, estimated that overall Russian container volume growth stood at 5.3% in 2013.

This translates to an overall market of 5.2m teu, excluding transit volumes via Finland and Baltic countries.

Growth slowdown But growth levels slowed again last year. In 2012, volumes increased by 9.4% year on year, in 2011 the figure stood at 29% and in 2010 growth was pinned at 44%, although these two years followed a dramatic global financial crisis-related drop off in volumes of 34% in 2009.

GPI chief commercial officer Roy Cummins also makes the point that while growth is slowing, the Russian market is still increasing ahead of global container volumes, which Container Trades Statistics figures show jumped by 2.4% last year.

GPI chairman Nikita Mishin says the slowdown in Russian growth levels is linked to lower consumption and imports.

Logistics company Global Container Service’s director liner and business development, Andrey Naraevskiy, admits that growth isn’t as strong as it has been in the past.

Mr Naraevskiy says: “The main factor

influencing container transport volumes in Russia is GDP, the volume of local production and the price of oil.

“Since 2002-2003 we saw the almost incessant growth of oil prices until about the end of 2008 and then there was a quick rebound of oil prices in 2010 and 2011. 2013 was the year of oil price stabilisation ― perhaps even some reduction ― and it had an impact on the Russian economy.”

The impact of decreases in the price of oil can be seen in the International Monetary Fund’s GDP figures. In 2013, Russian Federation GDP growth stood at 1.5%, compared with 3.4% in 2012 and 4.3% in 2011.

Mr Naraevskiy points out that performance varied from region to region, with double-digit growth for the south of Russia and Russian Pacific and flat growth in the country’s north west.

The weaker economic conditions are cited by both Mr Cummins and Mr Naraevskiy for a lack of growth through St Petersburg, which caters for the main population centres.

Mr Cummins adds that Baltic terminals are the most affected by macroeconomic factors and consumer confidence.

GPI figures show that just over 55% of total Russian volumes enter the country through the Baltic Basin. But both agree that this area will remain the main gateway for Russian imports for the foreseeable future.

Black Sea rises Contacts identified a number of reasons for the double-digit growth figures

reported through Black Sea ports, such as Novorossiysk.

GPI figures show that Black Sea basin volumes jumped by 10.4% compared with 2012 to 761,000 teu.

“The major reason for importers using Novorossiysk over the last couple of years was the development of the captive areas around southern Russian ports,” says Mr Naraevskiy.

“The Olympic Games in Sochi was the biggest construction site in Russia for the last couple of years and there was also a lot of investment because of that.

“The second reason is that there are still a lot of infrastructure projects outside of the Olympic Games, a lot of pipeline construction and government investment in the region,” he explains.

He says that Novorossiysk has over the past five years also developed itself as a major gateway for reefer container imports into Russia, especially from Turkey and the eastern Mediterranean. Turkey is also improving its political and business relationships with Russia, which has helped boost volumes further.

Container volume growth slowed last year, but still outpaces the global average, writes Damian Brett

RUSSIA’S GROWTH DIVERGENCE

PORT GROWTH/RUSSIA

PORTS


The deeper draught and all-year-round access offered by Novorossiysk has also helped attract shipping lines, as they are able to utilise larger vessels, offering improved economies of scale, when compared with St Petersburg.

Maersk Line has begun running 5,000 teu vessels to Novorossiysk, he says, whereas St Petersburg is limited to vessels of around 3,000 teu.

Mr Cummins says that the Sochi Winter Olympics acted as a “sweetener” to boost volumes through Black Sea ports last year.

The 10.4% growth of last year compares with 2.1% year-on-year growth in 2012.

GPI does not at present have a terminal on the Black Sea coast, but Mr Cummins says it is still interested in entering the market and continues to explore options.

Pacific coast pick-up The fastest growing of the regions is the Russian Pacific coast. Last year, ports on this coast benefitted from a

rail transportation, not just from Pacific coast ports, but other locations as well.

He explains that this is the result of international shippers entering the market and creating more sustainable flows of cargo.

The entry of more international shippers is also expected to result in extra volumes for Russian logistics players, as global players like to outsource the operation from ports to final destination.

Elephant in the room One development that may have an impact of Russian container volumes over the next year is the fast-developing situation in Ukraine and Crimea.

Contacts were understandably cautious when speaking about the possible impact on container shipping because of the changing landscape.

However, it could be argued that in terms of container volumes, the Russian market could be the most affected, simply because of the sheer numbers involved.

For instance, a 5% change in Russian container volumes, based on 2013 figures, would translate to a 32% change for Ukraine.

At the time of publication, the value of the Russian rouble had declined rapidly, which is likely to impact on Russian consumer spending power for imported goods.

The decline in the rouble comes on the back of market jitters over European Union and US sanctions in relation to developments in Ukraine.

The first wave of sanctions, which the EU and US agreed would be applied in a staged approach, mainly centred on the suspension of economic co-operation talks and freezing the assets of certain politicians and officials.

However, commentators have suggested the sanctions could be expanded to Russian businessmen, severing diplomatic ties, the attempted removal of Russia from international bodies such as the World Trade Organization and World Bank, and possibly import/export bans.

But no firm confirmation of the full extent of sanctions had been outlined as Containerisation International was sent to the printers.

year-on-year volume increase of 18% to 1.4m teu.

Mr Cummins says growth is thanks to intra-Asia demand, growth in exports from the central and Siberian regions, improved container processing times at ports making them a more viable option, increased import volumes to central Russia and CIS, and the continued development of rail services.

Mr Naraevskiy agrees that improved rail services, partly thanks to government investment, from eastern Russia to central areas has helped boost box numbers through ports.

He adds that there has also been a change in supply chain strategy, with a shift from central distribution to the whole country from Moscow to regional distribution directly from seaport gateways to growing areas with high consumption.

This has benefitted the Black Sea and Pacific coast ports the most, he says.

Another major development identified by Mr Naraevskiy is the increased use of

Novorossiysk has developed itself as a major gateway for reefer

container imports into Russia.Photo: Svetlana Yudina/

Shutterstock. com

PORT GROWTH/RUSSIA

PORTS

FREIGHT forwarders, like many others providing transport and logistics services, are increasingly being called upon to expand the scope of their activity, and particularly to supply additional services to cargo owners.

These demands can include not only traditional tasks, such as customs clearance and documentation (which is not always straightforward in some regions) and on-carriage from the port of entry, but also secure staging, warehousing, sub-assembly and co-ordination of multimodal transport.

Such operators are finding themselves open to the increasing liabilities of these various activities and feeling the pressure from their multinational clients to bear greater financial responsibility, often for extremely valuable cargoes.

It is vital that forwarders recognise how their role is changing and the consequences of these changes. Importantly, from a risk management perspective, companies must understand how this can result in newly acquired exposure to liability and consequent expense.

In addition they should understand what steps they can take to mitigate the exposure through a disciplined and organised approach to

the contractual terms agreed with their customers, and well-advised insurance cover.

These considerations are particularly relevant in emerging markets. The single biggest potential mistake is to assume reliance purely on standard trading conditions ― which in the UAE for example has been set at Dirham 30 ($8.00) per kilo ― or similar monetary limitations on loss or damage to cargo during international movements, such as conventions covering sea and air modes. These accepted international limitations are now being eroded because more and more contracts, drafted by non-transport lawyers, are being imposed on logistics operators.

We are seeing contracts where forwarders are being asked to take much greater liability than in the past. The biggest area of risk forwarders now face is that they are effectively being asked to take responsibility for the full value of shippers’ cargo.

Individuals negotiating contracts on behalf of forwarders therefore have many things to consider. It would be wise for them to consult their insurer about the liability implications of the contract before it is agreed. In all probability, contractual obligations in relation to risk

exposure ― and whether or not insurance cover can be reasonably obtained ― are scarcely of concern at the outset of negotiations. The TT Club, however, advises project bidders and contract negotiators to apply their minds to such issues at the earliest opportunity.

One of the most notable challenges is that contracts being promoted by cargo owners are usually faits accomplis, offering little if any leeway to the unsuspecting freight forwarder. These non-negotiable contracts are frequently generic service terms, covering all types of supplier. They tend to be non-specific and sometimes considerable imagination is needed to relate them to logistics and supply chain risks.

Another concern is that the contracts that forwarders and logistics operators are asked to sign may be based on no-fault liability and lack typical carriage liability limitations or defences. This may be inconsistent with, or may derogate from, international conventions or locally applied law. Consequently, while international law ― such as the Hague-Visby rules ― may cut in for the ocean carriage, this may only benefit subcontractors.

The forwarder or logistics operator may be exposed to

substantial liability exposure from broad and onerous contractual terms. The combination of such terms, including penalty provisions for performance breaches, and the high value of many project loads means that if problems do occur they may result in a huge claim.

The priority is to transform the contract’s theoretical provisions into practical implications so that the underwriters can make a judgment as to the risk’s insurability, which will depend on a full risk assessment covering what is known about the companies involved ― including subcontractors ― and the scope of the project.

Non-negotiable contracts mean exactly what they say and there is usually little point in attempting to change them to fit a forwarder’s insurance cover. Instead, the cover ― if the risk is deemed acceptable ― has to be fashioned around the contract.

Today every forwarder is under pressure to agree to deliver services within tight operational and financial margins, and will typically face harsh financial penalties for delays. As a consequence of providing these services, whether sub-contracted out or provided within their own operation, forwarders are clearly taking on ever-growing exposure to risk.


GUEST COLUMNIST

THE CHANGING FACE OF LIABILITY RISKTT Club’s general manager EMEA Andrew Kemp outlines the additional liabilities being undertaken by freight forwarders as a result of value-added services off ered to shippers

SHOW ME THE MONEY!


THE 2013 reporting season has been a case of business as usual for the majority of container lines, with most reporting losses for the year.

Exceptions are few, but include Maersk Line, which has been the stand-out performer with profits for 2013 of $1.5bn, widening the gap to its peers.

As a result, the industry continues to face a period of consolidation. The ongoing merger talks between Hapag-Lloyd and CSAV, as well as the P3 and CKYHE alliances, reflect the necessity to lower unit costs on the major east-west trades.

Increasing vessel size will place further pressure on rates. Maersk Line’s annual report noted that the “container shipping market is most likely expected to see continued downward pressure on freight rates in 2014”.

Broken down by segment the picture is even less favourable, with vessel capacity over 10,000 teu set to grow by 76% over the next three years.

Even with careful fleet management, vessels of such scale

FUTURE FREIGHT RATES: THE LINES’ BIGGEST GAMBLECutting costs is only half the battle for profi tability, says Richard Ward of Freight Investor Services

Figure A: SCFI NWE spot rate v APL Asia-Europe avg revenue per feu

make capacity control increasingly difficult. One or two cancelled sailings have a disproportionately large effect on supply and therefore rates, even before the use of general rate increases.

The volatility this creates will continue to be reflected in carrier earnings, as they cannot individually determine future freight rates on the major deepsea routes.

The challenge for carriers is considerable. The inability to control future rates ensures they are fully exposed to the spot market and must gamble or merely hope that rates will move in their favour.

But this strategy ensures that carrier income moves in line with the volatile underlying market. The accompanying graph of revenues reported by APL since 2011 shows the direct correlation to the Shanghai Containerised Freight Index. This trend can be seen throughout the industry and goes some way to explaining the unstable earnings that carriers continue to report.

Such risks do not go unrecognised by the carriers,

which are required to outline such dangers to their shareholders. Consider the following statements taken from carrier financial reports which highlight their preference for removing volatility, thereby reducing the impact it has on their bottom line.

“The group’s revenue will increase/decrease by $56.3m for 1% increase/reduction of the average container freight rates with all other variables held constant.”

“Its corporate strategy is to limit the market price risks resulting from ordinary business operations by using hedging transactions.”

In other shipping sectors, owners and operators adopt ways to mitigate against risks of ordinary business. This is achieved via hedging strategies that enable these companies to focus on their core business.

Typical tools include fuel price, foreign exchange and dry freight rate hedging; risks that are recognised and mitigated using standardised derivative instruments. These are tools that some of the container lines use too, as their annual reports make clear: “The derivative transactions are executed…to hedge the group’s exposure to interest rate increases, fuel oil increases, freight decreases, and foreign currency exchange rate risk.”

“If applicable, up to 80% of the anticipated annual fuel requirements are hedged against price increases.”

But for the container lines, their greatest recognised risk ―

freight rate volatility ― remains unmanaged despite its impact on earnings. This is unique in the shipping industry and perhaps in wider business too.

Any company that is exposed to investment or revenue risk should have an appropriate hedging policy in place to secure the returns on the newly purchased assets, thereby satisfying lenders and reducing the cost of capital.

As Michael Rainsford, commodity trader at Morgan Stanley, illustrates: “There are few other industries that invest so heavily into assets without the ability to lock in future margins. Power plants, for example, only invest in new assets when hedging secures favourable margins between electricity prices and the feedstock required to run the asset.”

By continuing to focus on reducing costs, container lines are only tackling half of the issue at hand as volatile earnings will remain a challenge even with a reduced cost base.

Carriers that are able to lock in their future margins and deliver stable earnings will be the ones with the sustainable investment proposition for their shareholders and a competitive advantage that is attractive to their customers.Q

1 20

11

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

SCFI NWE

APL avg revenue per feu (Asia-Europe)

2,800

2,700

2,600

2,500

2,400

2,300

2,200

2,000

2,100

$/fe

u

$/te

u

1,900,000

1,700,000

1,500,000

1,300,000

1,100,000

900,000

700,000

500,000

Source: SSE, NOL



IT IS often debated whether it is better to be a jack of all trades or an ace of one. Rotterdam’s Waalhaven Group certainly seems to believe that it’s better to be able to offer a wide range of services.

The company offers empty container storage, barge services, intermodal services, full-container services, an inland terminal, vessel supplies (such as parts and food), barge and rail terminals, customs services and container repair services.

Managing director Jan Overdevest says that at present its short-distance barge activities are performing well because shippers are increasingly looking for a greener transport option.

Using barges also avoids road congestion, while rail transport over short distance is too expensive.

Mr Overdevest says longer distance barge services are also experiencing increased demand because of the rising cost of fuel.

Barge demand But this increased demand does create problems at the deepsea terminals where operators tend to favour larger barges that can load more containers in a single call, Mr Overdevest says.

“We do have some concerns whether the deepsea terminals are ready to handle future demands,” he says.

“Something like 80% of all moves from deepsea terminals are on the waterside, if you add up all the barge, feeder, shortsea and deepsea moves.

“I still don’t have the feeling they think about it ― they have some 2.5 km of deepsea quay and they plan about 300 m of barge quay.

“Also, if they need a gang, they get it from the barges and put it on the deepsea vessel. But in fact barging is a 24/7 activity so you can plan it very efficiently.

“The deepsea terminals’ emphasis is

on call size and my opinion is that you have to serve the market and the market also wants smaller barges transporting traffic over shorter distances.

“So you have to adjust to different call sizes and say ‘how can we optimise our process with the knowledge that we have barges from 400 teu to two teu?’”

He says the problem of workers being moved from the barge quay to deepsea quay during busy times will be solved to an extent in Rotterdam when the automated Rotterdam World Gateway and APM Terminals Maasvlakte II facilities open for business later this year because, being automated, they reduce their reliance on quay workers.

Running on empty Waalhaven’s empty container business is also performing well. He explains that flexibility is the key as demand from shipping lines can vary greatly from one day to the next.

One of the advantages it has is the location of its 300,000 sq m empty depot, close to Rotterdam’s deepsea container terminals. This means it can quickly respond to customer demand.

In the future, Mr Overdevest expects demand for empty container storage to increase in Rotterdam because of the consolidation of shipping lines and the use of larger of vessels calling at fewer ports.

Having its warehouse activity, United Container Freight station, located close to the empty depot and Rotterdam’s container terminals also has its advantages.

“We see it as a nice value-add activity where you can you use the strength of the different activities. If you can avoid bringing back an empty container to a depot, which normally costs between €70 [$97] and €100, you have an advantage.

“Also, if you have cargo which has to be stuffed in a container we can do that

for you, we pick the container directly next to the warehouse, stuff it and move it by barge to the deepsea terminal ― that’s a very nice concept as well.”

Haulage trends Another trend noted by Mr Overdevest is the increasing use of carrier-controlled haulage to inland container yards as opposed to merchant haulage from the terminal to final destination.

He explains that the shipping lines are transporting containers to inland terminals in the region of the final destination and the inland terminal organises the last mile delivery from there.

He explains this is hassle free for the carriers as it is easier for them to organise delivery to a single inland terminal rather than delivering directly to a variety of warehouse locations.

He estimated that the use of carrier haulage had increased from a historical level of about 20% to 45% last year as a result of the continued development of this hybrid system.

So is the jack of all trades approach working for the Waalhaven group?

Mr Overdevest says that it benefits when demand in Rotterdam is weaker, it has fuller empty container depots, but when demand increases, container moves in and out of the depot increase as does the number of barge moves and the use of its other services.

Waalhaven Group’s various services means it faces a range of challenges, writes Damian Brett

BARGING IN

SERVICES/WAALHAVEN GROUP

LOGISTICS

Overdevest: short-distance barge activities are performing well because shippers are increasingly looking for a greener transport option.

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Gulftainer operates in Khorfakkan, Sharjah and Ruwais in the UAE, Iraq, Russia, Brazil, Lebanon and Saudi Arabia, with logistics offices in Turkey, Pakistan and throughout the region.

As world trade moves full steam ahead, a smooth supply chain is critical. With over 35 years of managing the world’s most productive ports, Gulftainer has the expertise you need. Our constant innovation and award-winning performance are always on call to partner your global ambitions.

Gulftainer operates in Khorfakkan, Sharjah and Ruwais in the UAE, Iraq, Russia, Brazil, Lebanon and Saudi Arabia, with logistics offices in Turkey, Pakistan and throughout the region.

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