APL China chief warns of crisis on Asia-Europe Trades

APL China chief warns of crisis on Asia-Europe Trades

Executive says drastic measures are needed to combat situation

ASIA-Europe trades are in a “precipitous” state following a surprisingly swift downturn coupled with overcapacity issues that have caught the linear shipping industry off-guard, a senior carrier executive has warned.

“The current situation in Asia-Europe is far worse than during the last cyclical downturn”, said APL’s Greater China president Dan Ryan.

The grim assessment coincided with that Israeli line Zim has suspended its recently launched Europe-West Express service between Asia and Europe, and instead will be chartering slots on China Shipping vessels from October.

Ships of around 4,250 teus are deployed in the EWX service, with Zim still planning to go ahead with a new rotation using 8,200 teu -10,000 teu newbuilding int the latter of next year.

The last EWX westbound sailing will be from Shanghai on October 4, after which the ships will be transferred to Zim’s Asia US Gilf Express.

Zim chief Executive Doron Goder is attending the Box Club meeting this week and so wasunable to elaborate on the decison to terminate the service.

But the move follows failure by lines to obtain their usual peak season surcharges this summer, and coincided with calls from APL’s Mr Ryan for drastic measures, including the withdrawal of some tonnage. He suggested that to combat the situation, individual carriers need to take urgent action such as returning excess tonnage to charter market, rationalising or suspending services, reducing grouth forecasts, and recouping a larger portion of bunker costs from customers.

“If we fail to take action, the industry could see a more significant downturn than we have seen in many years” Mr Ryan told the second containerisation and liner shipping China conference in Tianjin.

He pointed out that demand growth and utilisation levels are falling on Asia-Europe trades, while rate levels are softening. Consequently, the market will not be able to absorb the high number of large boxships above 7,500 teu being deployed on these routes.

Citing analysis from shipbroker Howe Robinson, Mr Ryan said the Asia-Europe trade is facing a potential overcapacity of 450,000 teu, equivalent to six or seven services using 8,000 teu – 9,000 teu containerships. Slow streaming is absorbing about 4% of Asia-Europe capacity, according to AXS-Alphaliner.

But Mr. Ryan was more upbeat about prospects in the transpacific and intra-Asian trades.

In the transpacific, supply and demand are likely to be more evenly balanced in the near term. “After five years of continuosu growth in the transacific, capacity is forecast to to contract in 2008 and very likely in 2009”, Mr Ryan said.
“Trade between China and other Asian countries continues to grow robustly. This illustrates the growing wealt in many Asia nations, as well the impact of the dynamic Middle East markets.”

Overall, the container shipping environment has changed significantly this year following the dramatic shift in global economic conditions, which included escalation turmoil in the financial markets, low consumer confidence and rising inflation and commodity prices.

He said this negative picture is compounded by “a materially different” cost environment, so that fuel prices are still nudging historic highs despite recent cuts.

Mr ryan said that fuel now accounts for more than 70% of a ship’s operationg cost on the transpacific trade, up from 40% four years ago.

“While fuel prices have come down recently, they are still at remarkably high levels. Great headway has been made in fuel recovert – particularly in the transpacific – but continued recovery efforts are essential. Fuel will continue to impact the way we serve our customers and the financial returns we achieve.”

Last week, AP Moeller-Maersk executive vice president Tom Beherns-Sorensen said some trades, including intra-Asia and the Indian subcontinent from Asia, were holding up better than others.

This article is cited from LLOYD’S LIST of 25th SEPTEMBER 2008

2018-06-12T16:12:25+02:00
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