[030614.EN.SEA] High MOL Executive Says Profitability Is In Sight With Today's Rates

HARD as times are, they are not that bad for container shipping and profitability is within reach given current rates, says TK Konishi, senior vice president at Mitsui OSK Lines.

"Most carriers are still suffering from losses in the container sector, including us. But compared to last year, or after the Lehman shock, freight rates now are low, but can recover the cost of voyages. That's a fact," he said.

"We are not so far from the rate level where we can be profitable. That's the reason carriers can hang in there," Mr Konishi said in an interview with London's Containerisation International.

"Since summer last year, exports from Asia to Europe and the US have been stronger than the year ago level and intra-Asian trade has been growing quite well," he said.

There are problems, Mr Konishi said. "The underlying capacity is there. It's fair to say that this year may be better than last year, but perhaps there won't be a big turn around."

Even where carriers can control their lives, such as reducing costs, by building larger and more fuel efficient ships, brings its own problem - overcapacity.

"Because every carrier is trying to do his best to manage costs, carrier's build new ships and then comes another round of overcapacity. That's the kind of circle we've been in for the last two years," said Mr Konishi.

"Its not really the size of ships that matters, but the slot costs. We'll have 48 ships [of 13,000 - 14,000 TEU] by 2016 and only five of them ordered before the Lehman shock at high prices," he said.

"Those 48 ships are very cost competitive when compared to Maersk's 18,000-TEU, 19,000-TEU vessels. There is not much difference in slot costs between them," he said.

Maersk paid US$185 million for its 18,000-TEUers in 2011, higher than the $130 million - 150 million paid today for the same size ship.

"Maersk vessels are awfully expensive. Of course they have some edge in fuel costs but the difference is very small [between the P3 and G6 fleets] when slow steaming," he said.

Source : HKSG.