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The announcement by the Far Eastern Freight Conference which met in Kuala
Lumpur two week ago that it will implement a four-phase restoration of its
freight rates next year underscores the fact the global liner trade is on
the rebound.
For now, the tide seemed to have changed for liner operators who only a year
ago saw colossal losses staring at them and presented a very grim outlook
never quite faced by the industry for many years.
The huge losses from liner trade suffered recently sent by many global
shipping lines unexpectedly into the red. Major shipping lines like Neptune
Orient Lines that faced unprecedented losses close to RM1 billion last year
(and cost its CEO, Flemming Jacobs his job), Malaysia International Shipping
Corporation (that lost about RM280 million) as well as others including
Evergreen, Hapay Lloyd, Overseas Orient Container Lines, P&O Nedlloyd,
Maersk and CGM-CMA were not spared.
It had been estimated that in the Transpacific trade alone, shipping
lines could have lost more than US$1 billion. Similar losses were evident in
other major trade lanes such as Europe-Asia, Intra-Asia and the
Transatlantic contributed both by weakened market conditions and surge in
capacity due to over-building of new and bigger ships.
But with half year results in for most of the shipping companies, there
is no doubt that most of these lines have all recovered, some very
dramatically due to vastly improved market conditions that is expected to
hold strong for at least the next 18 months.
Riding on the crest of this strong market recovery in global liner trade
freight rates in all major trades are expected to move up.
Based on on a forecast utilisation rate of 98 per cent on the Asia-Europe,
the FEFC expects the trade volumes next year to grow at 11 per cent.
The Conference will implement its increase of US$150 per TEU on the
westbound Asia-Europe effective on January 1 2004 and a further increase of
US$ $150 per TEU on April 1 while the largest increase will come in July 1,
2004 before a fourth increase in October.
Similar increases are expected on the Transpacific trade which is recording
significant increase in trade volume, notably driven by a bullish China
trade.
Other major liner trades in the Mediterranean, Australia and India are also
pushing for increases in the freight rates.
With the expanding trade volumes and increasing freight rates, liner
operators are all set to record impressive results.
Malaysia International Shipping Corporation Bhd may have plugged the leak in
the huge losses in the liner trade it had been recording for years.
The corporation reported a loss of only RM3.8 million for the first quarter
(ended June 2003) in the liner trade operation compared with RM88.5 million
losses it suffered for the same period last year. Given the current optimism
in the liner freight market, the shipping corporation, which grossed about
RM580 million for its integrated liner activities is well poised to
report a healthy profit in liner operation that had eluded it for several
years.
Other major Asian container shipping operators like Neptune Orient Lines of
Singapore, the Taiwan-based Evergreen Marine Corporation and Yang Ming
Marine Transport Corporation, Singapore-owned Neptune Orient Lines (NOL) and
Hong Kong-based Orient Overseas Lines (OOCL) have reported spectacular
results.
Most remarkably improved line was perhaps NOL which swung back into the
black with a first half profit of US$64.2m. With strong gains made by the
Singapore line in Intra-Asia short-sea and Transpacific westbound trade and
its emphasis on high-yield cargo, the line could deliver a full year profit
of about US$326 million.
For Evergreen, net profit showed a swing of more than half a billion Taiwan
dollars, clocking in at NT$228m compared to a NT$377m loss in the same
period last year. Revenues more than doubled to NT16.29 billion,.
contrasting favourably with 2002's NT6.87 billion.
Evergreen's rival, Yang Ming, is reported to be heading for a bumper record
year. The Taiwanese liner saw net profit improve more than seven fold over
the same period last year to NT$2.322bn. Revenues were up from NT$21.55
billion to NT$28.02 billion and has reported to be on course to quadruple
net profits for the year to NT$3.96 billion.
Yang Ming, which recently placed orders for four 8,000 TEUs capacity
container ships, has 32 owned ships and 23 chartered in. Asia - Europe
and transpacific mainline trades make up 80% of Yang Ming's business, with
officials reporting in excess of 95 per cent load factors this year.
Buoyed by the dramatic improvement in their fortunes, not unexpectedly,
there has been a rush to place newbuildings by shipping lines. Records were
comprehensively smashed with containership newbuilding orders almost double
the previous all-time high.
Analysts said the unprecedented investment spree has guaranteed that 2003
will go down in the history books. The boom time has encouraged speculative
ordering and fears have been raised this could trigger off a bust.
Scores of containerships have been ordered, both in the standard 5,500 TEUs
range and just as many on order of the post-panamax range vessels of 8,000
TEUs capacity.
According to Clarkson, London-based shipbrokers and analyst over six times
as much containership capacity was ordered in the first half of 2003 as in
the first half of 2002.
New figures from Clarksons show that 240 containerships of 1,056,300 TEUs
capacity were ordered in the first seven months of the year, more than
double the 2002 full year total of 426,900 TEUs and 2002's 982,200 TEUs.
"Sixty seven containerships were ordered in July in all, more than in
any other month on record, and 240 have been ordered in this year up to the
start of August, but projections show that with the demand side continuing
to grow impressively, further containership tonnage will likely be needed in
the future to meet the growth in trade," said the broker.
It is anybody's guess whether the lemming-like industry has once again acted
without much discretion. |
