Forecast Container Shipping

Sometimes I amaze myself. I am just now catching up on what is going on
in the world of container shipping, and in particular, the forecast
for this year.

This is what I wrote in my blog post of July 23, 2010

Ocean container space is tight coming out of Asia, as the carriers had been smart enough to not add too much capacity. This will last another year, then all the carriers will have short term memory loss, and add too much capacity.

Some things never change.

Like the weather. It's summertime in the U.S., and yet some people are shocked to see the temps in the triple digits

.

And now, this article from the Journal of Commerce today, one year later

Alphaliner says growth through 2012 will become “more alarming” with 2013 orders

Four hundred and forty-eight container ships with a combined capacity of 2.78 million 20-foot equivalent units are scheduled for delivery in 2011 and 2012, adding enormous capacity well ahead of growth in demand, according to market analysts Alphaliner.

“The market fundamentals are looking less favorable compared to last year, as an overhang of surplus capacity will continue to plague the industry,” the container industry analysts said.

Deliveries will total 213 ships of 1.34 million TEUs in 2011, and 235 vessels of 1.44 million TEUs in 2012, equating to annual fleet growth of 8.7 percent in each year, Alphaliner said in a report on ship orders.

“More alarming,” the firm said, is the large capacity scheduled for delivery in 2013, which so far has reached a record high of 1.73 million TEUs compared with the previous record of 1.57 million TEUs delivered in 2008.

The figure could rise even higher in the new few months as some yards continue to offer container building slots for 2013 deliveries.

“Most carriers continue to pile up new vessel orders and the order wave does not appear to be coming to an end any time soon,” according to Alphaliner.

Carriers already are bracing for a weak peak season this year as demand growth has slowed since the third quarter of 2010 while the supply of ships has surged over the same period due to the delivery of new-built vessels and the re-activation of idle tonnage.

Yes, and people are surprised it is 105 degrees today in Kansas.

Celsius is cooler

This is not really about international shipping, but those of us involved in international shipping must always contend with temperatures if both Celsius and Fahrenheit.

In Kansas we are experiencing a heat wave which may rival the dust bowl era of the 1930's, reaching 111 degrees Fahrenheit the other day.

This quote in today's local paper (The Wichita Eagle) made me smile.

From John Pilla of Spirit AeroSystems at a Tuesday news conference

"We decided to change to Celsius reading here because 40 degrees sounds a lot better than 104."

Charging for no-show bookings

Maersk announced last month their intention to start charging for containers which are booked but are not delivered in time for the sailing.

From The Journal of Commerce

Carrier also plans to pay for rolled boxes

Maersk Line is planning to charge its customers a fee for booked containers that fail to appear at the port of departure, and plans to compensate customers for booked containers that it fails to load on departing ships, the carrier said.

Maersk Line CEO Eivind Kolding addressed the issue of fees for no-show and rolled containers in a speech he gave at the time he presented his manifesto on June 7 calling for radical changes in the way the container industry conducts business.

“Right now we know that 30 percent of the containers that are booked with us do not turn up. That’s 30 percent no-shows,” he said in an interview with the Journal of Commerce on June 13. “That’s the average. So there is something for us to do in the industry to take the waste out.”

Kolding said Maersk will start to try to alter no-show behavior by charging what it calls a “load protection fee.”
“If we do not get the container on board, we will pay the customer. If the customer does not show up with the container, they will pay us, so we can get a behavioral discipline in the industry,” Kolding said.

We all know forwarders (mostly) make bookings based on what space they "think" they might need. Often this is because they are moving consolidated loads, and they don't know how much cargo they will received to consolidate.

Or, they might have customers who don't know if they will have a container to ship in the next week. Most companies are still unorganized enough to not plan ahead to make space for their cargo. There were never penalties, they probably always managed to get space (thanks to their forwarder making phantom bookings).

It appears this will be changing. It will take some time, because of the culture of doing business, because of they way companies are organized,, or more correctly, not organized.

I recall hearing back in the 60's when exports were booming, that export clerks in some steamship lines were taking bribes to ensure cargo got loaded. Of course, this was back in the era of legal price fixing.

Now carriers will start putting requirements in their contracts and tariffs. And, there is nothing wrong with this. It took the airlines at least 10 years after they were deregulated to start imposing penalties for changes.

The good news is Maersk says they will also pay if they do not load containers which are booked.

I have a feeling the era of "wait listing" will also return.

Catching Up

These last few months I noticed companies are FINALLY putting armed guards on the vessels to combat piracy.

I suggested this be done 2 years ago, but it's only now companies have decided to do so. Wallenius was the most recent carrier.

From The Journal of Commerce

"Swedish shipowner Wallenius Wilhelmsen Lines is placing armed guards to protect its vessels from attack by Somalia-based pirates in the Gulf of Aden.

The decision following an investigation by Sweden’s government puts Wallenius, which transports cars and trucks on worldwide routes, firmly if reluctantly on one side of an issue that has divided the shipping world as pirate attacks on international ships off the East Africa coast have grown increasingly frequent, bold and deadly.

Wallenius said the guards are equipped with sniper rifles and assault rifles."


And, on the financial side of container shipping, I noticed carriers backed off on their huge "peak season" surcharges. The carriers are going to be once again in tough times, with supply exceeding demand.

China's economy has started to slow. News reports here in the U.S. claim many companies have started to move production from China to the U.S., which will mean less goods for carriers to haul.

Of course, the U.S. is becoming a smaller player in the world, and the growing middle classes of India, China, and other countries will outstrip the demand of the U.S. for consumer goods.

I'm Back

Dear Readers,

I apologize for not posting these last many months.

I am taking care of loved ones who are ill, which has consumed my time.

Hope to start writing again about international shipping in the coming days and weeks.