[100411.EN.SEA] CMA CGM & Clarkson : About Overcapacity ...

EUROPE's 2008 ban on shipping conferences has brought less market intelligence and greater volatility to container shipping, prompting poor decision making on rates by carriers, CMA CGM vice president Nicolas Sartini told the 13th Annual Global Liner Shipping conference in London.  Mr Sartini said that unless volumes pick up, overcapacity will drive rates down while bunker costs soar and profitability plunges. "Each line acts completely independently not aware of the latest market developments," he said. "The Asia-Europe market is suffering from uncertainty on the demand side due to budgeting restrictions and the increase in oil prices is impacting consumption at destination," he told the gathering sponsored by Containerisation International. "At the same time, new tonnage is injected at regular intervals, like a poison into the veins of operators," he said, according to London's International Freighting Weekly. "This can be understood as it is inertia, it is extremely painful for a carrier to abandon a new project which has been carefully planned." He said loops operated by smaller vessels will be closed. "In the best case, the vessel will be reallocated somewhere else; in the worst case, it will be idled. Weaker players will either leave the trade or find refuge on board larger tonnage operated by bigger carriers," he said. But Mr Sartini believed that a combination carriers' independent actions would eventually result in stability.  "And then a season of rate increases and surcharges will start again, driven by the carriers that need to recover losses. One of the few good things about the demise of conferences is that carriers are forced to go deeper into market intelligence," he said.

THE threat of overcapacity has receded to much less than imagined because of contract slippages, order cancellations, lay-ups and slow-steaming, Clarkson Research Service director Trevor Crowe told the 13th Global Liner Shipping Conference, sponsored by London's Containerisation International. "There will not be the double-digit growth that many people had assumed when they first looked at the orderbook and delivery schedule," he told the London gathering. "We have compared scheduled deliveries against actual deliveries," Mr Crowe said, "and in 2009 and 2010 our research showed that non-deliveries on an annualised basis accounted for 45 per cent and 39 per cent, respectively of the orderbook. "This activity has had a huge impact on the supply side, as without it twice as many slots would have come into service," he said. Mr Crowe also reminded listeners of countervailing improvements such as better fleet management and a "big change in scrappage", which he said acts as a safety valve for the global container fleet. "In 2009, 370,000 TEU of capacity was broken up, a dramatic change compared with the previous high levels of just over 100,000 TEU in 1998 and 2008. Last year was also in excess of 100,000 TEU and we saw fairly modern 3,000 TEU vessels being scrapped for the first time," he said. All of which, he said, only resulted in a six per cent increase in capacity in 2009 and a 10 per cent hike in 2010, and that not meeting the robust demand generated in what turned out to be a year of recovery. "It's a substantial book - equivalent to 28.5 per cent of the operating fleet, but grown considerably on the 60 per cent share in 2005 - but not as substantial as it could have been," said Mr Crowe. He sees only 1.4 million TEU being delivered, and only 1.04 million TEU being brought into service this year with 1.35 million TEU coming on stream in 2012. Slow steaming also had an important impact. "Trade lane running capacity has been cut significantly," said Mr Crowe, adding that 80 per cent of Asia-Europe services now deploy as many as three extra ships per loop from eight vessels in years gone by. In the transpacific trades, slow steaming has meant 50 - 60 per cent of all services deploy one or two more ships than they did, absorbing 110 - 115 vessels, or 730,000 TEU. This alone represents a 3.5 per cent capacity cut, he said.

Source : HKSG, 09.04.11