17 November 2015

[171115.EN.SEA] South Korea's KMTC Reviews Fleet Structure Ahead Of Hard Times In intra-Asia Trade

SOUTH Korea's third-largest container line and the country's biggest player in the intra-Asia segment, KMTC Line, is reviewing its fleet structure ahead of expected tougher conditions on intra-Asia routes next year due to rising capacity and sinking demand.

Managing director of the KMTC's business strategy division, HY Chung said: "We had no demand peak in the third quarter of this year and this is worrying. In the first half of 2015, capacity on intra-Asia routes grew by 20 per cent and we saw a similar rise in capacity on routes to the Middle East and Indian Subcontinent.

"At the same time, intra-Asia demand grew by just 5 per cent. With China's continuing slowdown, the picture for next year doesn't look good," he added.

Over the past six year, KMTC doubled its annual throughput to 2 million TEU and booked double-digit annual revenue growth. Despite third-quarter demand that was much lower than expected, a strong first half of 2015 means the privately held company expects to be profitable over the full year, according to IHS Media.

The booming intra-Asia market has meant that in 31 years of operation KMTC never failed to deliver an annual profit and has a sound debt-to-equity ratio of 100 per cent. But management at the line sees tougher times on the horizon.

"We expect space utilisation and load factor issues unlike previous years and are moving from an aggressive stance to a more defensive one," said Mr Chung.

The company is now trying to evaluate its costs so that it can offer competitive pricing without going into the red. The company is reviewing the size of both its ships and its fleet, where they are deployed, and how many vessels it owns or charters and for what length of time, Mr Chung said.

KMTC is also concerned over the potential influx of capacity as a result of the expansion of the Panama Canal.

"With the expansion of the Panama Canal we are trying to assess how many cascaded vessels will end up in the intra-Asia business. There is the possibility of a large influx of larger vessels, so it might be the right time for us to buy and deploy some larger vessels ourselves. We are looking at this at the moment and considering if it could be a good time to invest in some 10-year old ships."

KMTC currently owns 23 vessels out of a total fleet of 53, mostly in the 1,000- to 2,800 TEU range, and the vast majority are deployed on intra-Asia trades.

In recent years, the company has been working to expand beyond its core intra-Asia market and currently has two 7,000 TEU vessels deployed on strings from South Korea via China and Southeast Asia to Jebel Ali in the Middle East, and six 5,400 TEU vessels on strings from South Korea via China and Southeast Asia to Colombo and Karachi.

KMTC is looking at new markets in the region, particularly the potential of Iran in a post-sanctions era, and other Middle East markets such as Iraq. "In this business, too, there is also the matter of getting the size of vessel right. We are very sure that within three years we will see a lot of 9,000 and 10,000 TEU vessels running in the Middle East trade."

Source : HKSG.

Tidak ada komentar:

Posting Komentar