Container shippers unfazed by debt crisis

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 May 2010

The demand momentum for container shipping lines in Asia is expected to remain strong despite the looming sovereign debt crisis in Europe. Generally, container shipping lines that had severely suffered from plunging demand and rock-bottom freight rates during the recent global financial crisis, have started to bounce back since the third quarter of last year.
Credit Suisse expects strong global economic recovery to drive demand where the momentum remains strong outside Europe.
 “We expect an 8% trade demand growth in 2010 and 2011. Demand momentum remains strong outside of Europe where robust US retail sales and continued re-stocking should drive US imports,” it said in a recent report on Asia container shipping.
The research house said leading indicators, such as the US ISM manufacturing and China PMI new export data, pointed toward robust Asian exports in the coming peak season.
Although Asian carriers were expected to have about 5% to 35% revenue exposure to the Asia-Europe trade, the economically troubled European economies (Portugal, Ireland, Italy, Greece and Spain) might account for only about 1% to 6% of Asian carriers’ revenue.
On the supply side, Credit Suisse said the actual supply growth has slowed on new order delays, cancellations and pick-up in scrapping of old vessels.
 “We estimate that 48% of scheduled deliveries did not arrive in the market last year, and shipping consultant AXS-Alphaliner estimated that one-third of order books were cancelled or deferred. The actual supply will be growing at 6.1%, 7.3% and 5.9% in 2010 to 2012,” it said.
It added that although the idle fleet (as a result of weak demand during the global economic crisis) number had halved since early 2010, high load factors and rebounded vessel charter rate would act as counter balance of the return of the supply.
Half of idle fleet was successfully soaked up by the system in response to a genuine demand recovery, it said adding: “We thus expect a further rate improvement in second half of this year, driven by the implementation of peak season surcharges on various routes. With a further earnings improvement outlook, carriers are expected to return to profitability in this current financial year.”
Among the prominent Asian players in the sector Neptune Orient Lines, Orient Overseas (International), Evergreen, China Shipping Container Lines, Wan Hai and Yang Ming.
Meanwhile, in line with the sector’s recovery, Danish container shipping and oil group, A.P. Moller-Maersk A/S has returned to a profit in the first quarter this year, mainly due to higher oil prices and increasing freight rates.
The group reported a net profit of US$587mil, against a loss of US$2.13bil in the first three months of 2009.
Revenue jumped 13% to US$12.12bil from US$63bil for the period under review.
Maersk Line, the container shipping division of the AP Moller – Maersk Group had recently announced a general rate increase in the West Central Asia – Europe trade. French liner company, the CMA CGM Group has also decided to implement a revenue restoration programme on the Asia North Europe trade.
 “The adjustments will apply to all cargo and commodities moving Westbound from all Asian ports (including Japan, South East Asia, Sri Lanka and Bangladesh) to all Northern European ports (from Portugal to Russia),” it said in a statement.
On the drybulk side, UOB KayHian in a recent report said the Baltic Dry Index (BDI) to-date has jumped 24.9% since the beginning of May, driven by strong coal exports from Australia boosted Panamax rates.
 “In Capesize market we have been seeing diversified cargos such as coal and grains more than iron ore on narrowing gap between Panamax and Capesize.
 “The average daily earnings for Capesize (180,000 dwt) and Panamax (70,000 dwt) for Western Australia-Japan route are US$37,954 and US$32,659 respectively for the week ending May 21 and the gap was below the normal level historically.
 “Meanwhile the handysize and handymax markets have been strong, driven by demand from the Atlantic,” it said.

Source: The Star