Liner shipping is walking a tightrope

Of all the major sectors in shipping containerships have been the most interesting to observe over the last 18 months. From the moment South Korea’s Hanjin Shipping went into court receivership in August 2016, to the China Cosco Shipping Holdings bid for Orient Overseas Container Line a year later, the sector has undergone its largest upheaval since marine containers were carried for the first time in the 1960s.

In 2016, record scrapping of containerships took place. There were mergers on a grand scale including CMA CGM’s takeover of APL and UASC’s acquisition of Hapag Lloyd. Two massively powerful alliances were inaugurated in the shape of Ocean Alliance and THE Alliance. And then there has been the growing dominance of mega-containerships. Add to this an unexpected growth in demand and you would expect that for the first time in 10 years container shipping would be sitting pretty.

And there would be some justification in thinking that now. To take OOCL’s third quarter 2017 update as an example: in the three-month period up to September 30, OOCL carried 5% more containers and saw revenues grow 26.5%. On the all- important Asia-Europe trade lane revenues surged 57.6%.

Meanwhile, the world’s largest liner operator Maersk returned to the black in the first half of the year and will still make a profit at the end of the year despite a cyber attack that is expected to cost the company as much as US$300m.

But the above is just one side of the picture. What about the supply side?

What is immediately obvious is that the big hitters in the sector are slugging it out for mega-ship dominance.

Earlier this year MSC ordered 11 22,000 teu vessels in South Korea, CMA CGM placed orders for nine 22,000 teu vessels in China, and, most recently, Cosco Shipping Holdings’ announced it is raising US$1.94bn for 20 new containerships including 11 vessels over 20,000 teu. Add to these vessels the 35% of containerships that were scheduled for delivery in 1997 but have been deferred to 2018, and it is easy to come to the same conclusion reached by Paresh Jain at this year’s TPM Conference.

“Going into the next 12 months, what you will see is less slippages, less scrapping, which will mean higher than expected supply growth will coincide with lower than expected demand when we compare it with the previous 12 months,” said HSBC Asia-Pacific’s head of transport research.

Little wonder that the Maritime Forum at this year’s Asia Logistics and Maritime Conference 2017 (Hong Kong Convention & Exhibition Centre 23-24 November) has entitled the Liner Shipping session: Liner Shipping Market Outlook: Light at the End of the Tunnel? Note the question mark.

Moderating the session will managing director of Tiger Ventures Limited, Julian Proctor. Panelists are chief executive and partner of SeaIntel Maritime Analysis. Alan Murphy, chief executive of Ocean Network Express, Jeremy Nixon and group managing director of Hutchison Port Holdings, Eric Ip.

All experts in their respective fields of finance, analysis and ship and port operations this will be a vital session for all delegates who wish to have a greater insight into whether in 2018 liner shipping can avoid grabbing disaster from the mouth of victory.

Book your place at ALMC 2017 now to avoid disappointment: http://www.hktdc.com/ncs/almc2017/en/s/part-details.html

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