Widdows: Surge in big ship use "amazing"

Widdows

   The rebound in demand for container transport this year has been surprisingly strong, said Ron Widdows, chief executive officer of Neptune Orient Lines.
   “You couldn’t go out and charter a 6,000-TEU ship or bigger if your life depended on it. They don’t exist. They are all employed and they are all full. It’s amazing what has happened,” he said in an interview last week. Widdows spoke in a telephone interview from Leipzig Germany where he addressed the International Transport Forum 2010.
   “The bounce in demand, the strength of the market has continued beyond anything that you can subscribe to inventory restocking, the ships are employed. Everything that has been delivered has been employed. The ships that are idle are all smaller,” he added.
   Widdows said he thinks most carriers are satisfied with the level of freight rate increases they achieved during contract renewals with shippers in the transpacific trade. “I think you will find that talking to just about anyone that they were satisfied with the outcome of contracting.”
   But he said further increases are likely.
   Increases in rates have taken carriers “back to the point where they are not losing money,” he said. But “not losing money is not a future. You have to generate enough of a return so you can invest in the assets to handle more business.” He said rates are still below 2008 levels and that in 2008 rates were lower than they were two or three years earlier.
   The NOL chief said he believes “slow steaming is here to stay. That’s my view. I know that there are people that think as business starts to pick up, rates start to move up, the foot goes down on the pedal and ships speed up. I don’t think so. The economics associated with slowing down are really compelling.
   “There is, at least for the next few years, some excess capacity that is going to take some time to work through. Asset values are depressed and will be for some time. While there is temporarily a blip down in the fuel cost, the longer term trend of energy cost and bunker cost for us specifically is probably going to increase over time. So the economic pressures cause one to do this today will be even more considerable as you look further out in time.”
   Will shippers accept the longer transit times? “To make sure I am still around to serve those shippers who have transportation needs, I have to have economics that make sense,” Widdows said.
   He said he did not believe carriers that slow steam are losing shippers to carriers who are not. “The feedback from customers is … what they need most is reliability, it’s more about reliable than fast,” he said.
   Similarly, he said he believes shippers are less interested in rock-bottom prices than less volatility in pricing, freight rates "that move in a narrower band.” — Chris Dupin