In International Shipping News 01/07/2016
Source: Taipei Times
Financial strains caused by an oversupply-induced slump in ocean freight rates on Taiwanese shippers might ease in the second half of the year, due to anticipated price hikes and operational reshuffling following the inauguration of the Panama Canal expansion project, Capital Securities Corp said this week.
“Freight rates have likely bottomed out in the first quarter of this year, and shippers’ willingness to raise prices may be relatively strong in the remainder of this year,” the brokerage said in a note issued on Monday.
However, Wan Hai Lines Ltd. honorary chairman Chen Chao-heng said in an interview with the Chinese-language United Evenings News yesterday that the prospects for the ocean freight sector remain grim this year, in particular for long-haul routes, while several shippers have taken more defensive measures against the tumbling rates.
“We are still assessing the effects of larger ships passing through the Panama Canal to supply and demand forces in the sector following its expansion,” the newspaper quoted Chen as saying.
“As most of our routes are not long-haul, we are not expecting operating losses, but profits this year will likely be less than last year in light of current challenges,” Chen said.
The mainstream vessel in the long-haul shipping market has a capacity of less than 5,000 twenty-foot equivalent units (TEU), and shippers are anticipated to implement changes in route planning to benefit from lower per-unit operating costs of larger-capacity vessels, Capital said in the note.
As the Panama Canal’s expansion project allows larger container vessels with capacities between 13,000 TEU and 14,000 TEU to pass through, it might lead to the retirement of the 5,000 TEU-sized “Panamax” vessels, the brokerage said.
Therefore, about 250,000 TEU, or 1 percent of the global freight capacity from Panamax vessels, are expected to exit the market, as shippers are likely to retire or idle ships of this class that are more than 10 years old, leading to eased downward pressure on shipping rates, the brokerage said.
“Changes in market competitiveness of various vessel types might be more disadvantageous to Yang Ming Marine Transport Corp, as Panamax accounts for a higher proportion of the company’s fleet deployment,” Capital said in the note.
In terms of long-haul fleet composition, Yang Ming has a higher proportion of Panamax ships, with 40 vessels between 4,000 and 6,000 TEU, compared with Evergreen’s eight vessels in the 4,000 to 5,000 TEU range.
In addition, the canal expansion might lead to a rise in overall freight demand as clients begin switching to less time-consuming purely seagoing routes on the US east coast from the mixed ocean and rail US west coast routes, the report said.
Source: Taipei Times
