The 20 largest container shipping companies lost an aggregate of $1.3 billion between 2008 and 2012 according to the just-published report, Top 25 Container Liner Operators
, from the Netherlands-based publisher Dynamar, which attributes increased volatility in the industry, in part, to the creation of the Shanghai Containerised (Export) Freight Index (SCFI).
Dynamar, points to three events that “caused container liner operators to sail through extremely turbulent waters — the September 2008 collapse of Lehman Bros, leading to worldwide economic disaster; the October 2008 abolition of the Conference system in the European Union; and the October 2009 creation of the SCFI.
“Although the 2009, 10-percent drop in worldwide container trade was repaired by a growth of 11 percent in 2010, by then continuous volatility with respect to freight rates had taken hold of the liner trades. This was, not in the least, due to the SCFI spot rates out of Shanghai to selected destinations."
SCFI rates have been “widely published and commented upon, creating a new transparency and, therewith, a different rate level awareness. Soon, the SCFI had become a benchmark to whose levels shippers/consignees expected their rates to be adjusted every week again. Therewith, indices based on spot rates had developed as a leading indicator for contract rates. The effects were further aggravated by seemingly ever shorter economic cycles.”
Dynamar said, “Cost reduction, in the form of larger, less fuel-consuming and more efficient ships has been the answer of many of the top 25 container liner operators, who followed the example of Maersk Line, which launched the 15,600-TEU Emma Maersk
It said those ships have been particularly attractive to operators on Europe-Far East trade. It noted that 17 of the top 25 carriers serving the trade during 2013 were using those ships, and the final two who had yet to do so also ordered ultra large container ships (ULCS).
At the end of 2013, the eighteen carriers controlled 100 percent of all ULCS capacity operating (196 ships/2.55 million TEU) and 95 percent of the orderbook (130 vessels/1.84 million TEU).
“The question, of course, is whether all this capacity can be filled,” said Dynamar.
It noted that “ships usually stay around for some 25 years, and by definition, they are too large for a trade when ordered.”
Dynamar has created a carrying to capacity (Ca/.Cap) ratio for the new report that shows that “carriers’ indexed containership capacity has, since 2005, grown faster than their indexed full container volumes. The former is now exceeding the latter by 20 percent. The flood of big ships may well have contributed to this situation.
“Boosted by its domestic volumes, China Shipping Container Lines is the only East-West carrier whose liftings increased faster than capacity. This has resulted in a positive Car/Cap ratio of 1.10. The situation is the most severe at Hyundai Merchant Marine whose ratio has fallen to 0.59 — a clear indication that the South Koreans’ liftings have not at all kept pace with the development of their operated space.”
Dynamar said that predictions that Asian carriers would outstrip the capacity of European companies have not come to fruition: 52 percent of capacity from the top 25 carriers is controlled by Europeans, 43 percent by companies in the Far East, and just 4 percent by Chile's CSAV, United Arab Shipping and Iran’s HDS Line.