[121215.EN.BIZ] Overcapacity Inescapable Problem Dominating Container Shipping: DP World

OVERCAPACITY is the biggest problem facing container shipping in the world today, says DP World vice president Mohammed Al Muallem, who in charge of the global terminal business in the UAE.

"There is huge overcapacity within the shipping lines. In 2015, it is expected to grow 9.1 per cent. It is estimated that in 2016, it will be 5.5 per cent," he said at TOC Middle East, reported Seatrade Maritime News of Colchester, England.

Mr Al Muallem said global ports were under pressure, with port handling growth expected to decline to 2.2 per cent this year from 5.3 per cent in 2014, before rising to 3.3 per cent next year.

He said the dramatic increase in 10,000-plus TEU capacity vessels being delivered to market, which would see units double from 265 ships today to 529 by 2018, made shipping-line profitability difficult. "It is a huge challenge for both sides, the liners, and also the ports," he said.

Load factors on these ships had declined. "Competition becomes really stiff between the liners in order to fill up their ships. Everybody is trying to catch up with the cargo."

Alliances continued to drive down cost per TEU. "They are trying to get together to utilise the assets, capacity, and the freight rate. There has been a 52 per cent decline in rates compared to November 2014. It's a big drop," he said.

While the effect of mergers remained to be seen, he said, low bunker costs were one of few pluses. "The advantages of first two quarters of 2015 have been wiped out. It's a very difficult time.

"Demand is getting weaker. In our region, the oil price is the one big economic development, alongside weak global commodity prices, and pressure on currencies in emerging markets," he said.

Mr Al Muallem said there had been great hopes that Africa or South America would be the next emerging markets and help the world economy to move out of problems. "This hasn't happened. The dollar is very strong, making their currencies weaker, and imports difficult," he said.

Another impact has been the slowdown in China, where double-digit growth has fallen to around seven per cent, a sizeable drop even though rates in Europe, the US and emerging markets are a lot lower.

Alliances were moving ships out of service, and cancelling some trades, citing Alphaliner data showing that one million TEU of idle capacity existed in the line.

Source : HKSG.