RLL Container Report - 09 November 2016
From: John Keir, Ross Learmont Ltd. Email: john.keir@telia.com Date: 09 November 2016
Another one bites the dust
The demise of Hanjin line had the immediate effect of pushing freight rates up from a very low point, as the market went from oversupply to undersupply in a matter of days. Short term rates for a 40’ HC slot out of Far East ports to the US climbed by 47% during the third quarter, starting at US$1,240 and ending up at US$1,826. However, the critical question, which the liner industry is asking itself is: will these higher rates hold?
Japan’s largest shipping firms saw the writing on the wall and immediately sought safety in numbers, as Nippon Yusen K.K., Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. agreed to form a joint venture. It should be noted that NYK has made a pre-tax loss for the past three quarters, according to a breakdown from the shipping company. MOL containership operations have reported a pre-tax loss for the past 20 quarters, while K-Line has posted pre-tax losses for five quarters.
The Japanese joint venture will create the world’s sixth-largest box ship operator with 110 ships and 1.7 million teu capacity, which equates to around 7% of global capacity. The three Japanese carriers expect that the new venture will be established by 1 July 2017. The new holding will incorporate the companies’ container shipping and global terminal operations but it will exclude terminal operations in Japan. NYK will take a 38% stake in the new venture, while MOL and K Line will each hold a 31% share.
As a result of the Japanese merger, the number of global carriers will fall from twenty, six years ago, to just thirteen. There are also unsubstantiated rumours surrounding a possible merger between Evergreen and Yang Ming. At the same time, Zim Integrated Shipping Services, Israel’s biggest shipping company, plans to sell off its worldwide container network in order to relaunch itself as a regional Mediterranean operator.
It seems we are now in the peak shopping season within the container sector, as lines go in search of a bargain. Hyundai Merchant Marine Co. and four other shipping groups submitted preliminary bids for the assets of Hanjin’s Shipping Company’s Asia-U.S. route, as Hanjin is broken up as part of a restructuring plan. Lloyd's List reports that Mediterranean Shipping is in negotiations to buy up Hanjin's stake in Total Terminals, which operates two box facilities in US West Coast ports of Long Beach and Seattle.
Coincidentally, this rush to consolidate within the container liner industry comes just as new and substantial markets start to open up in East and West Africa, as well as in the Persian Gulf. The boxship owners will “pick themselves up, dust themselves down and start all over again”, by redeploying their container assets away from the traditional East-West trade routes on to the new opportunities opening up in the North-South corridors.
John Keir, Ross Learmont Ltd.
09 November 2016
Copyright ©, 2016, John Keir