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Global Logistics, Shipping, Maritime, Air, freight Forwarders in California

Some uplifting news in an article by JOC

Global Logistics, Shipping, Maritime, Air, freight Forwarders in California

Cosco’s Ma Says Container Market Will Improve in 2013

SHENZHEN, China — The health of the container shipping market will be better in 2013 and continue to improve in the following years, but growth will still be slow, requiring carriers and shippers to forge “a new type of cooperation,” Cosco Group Director and President Ma Zehua said on Wednesday.

Ma said he is optimistic about the future largely because the International Monetary Fund forecasts trade will expand 4.5 percent year-over-year in 2013, the supply-demand relationship will be more balanced, and European and U.S. markets will stabilize slightly.

Global container volume will grow 4.1 percent next year compared to 3.9 percent expansion this year, while total container capacity will expand 4.3 percent, a 2.4 percentage point decrease from 2012 growth, Ma told an audience of more than 500 at The Journal of Commerce’s TPM Asia Conference in Shenzhen, China.

He cited Organization for Economic Cooperation and Development statistics forecasting European imports will grow 2.2 percent in 2013, compared to a decline of 0.8 percent this year, while U.S. imports will jump 6.3 percent, a 2.5 percentage point improvement from this year.

“Recovery of the European and American markets will help improve the balance of transport for export and import, maintain stable freight rates and support container market recovery,” Ma said.

To best tap this expected global growth, container lines must gain a deeper understanding of their customers’ needs, better match supply to demand and improve overall service.

“The drastic volatility of the industry over the past two decades did not only threaten interests of consignors and shipping companies, but also harmed the stability and sustainability of services in the industry,” Ma told the audience. “We cannot go through history once more; we need a new type of cooperation.”

Container lines need to make more commitments on service to shippers, and Cosco Group plans to do so but also needs it customers’ help, he said. The creation of longer-term partnerships, and even fixed-term agreements, along with increased cooperation with logistics provides, terminal operators, non-vessel-operating common carriers and other supply chain interests, will further this aim.

“To achieve this, I think, shipping companies are supposed to, first, extend their transport network through cooperation and joint operation; second, if we have to introduce larger vessels to improve efficiency, we should do it through cooperation with other partners rather than each company acting on their own,” Ma said.

This also will allow carriers to provide cheaper service without adding too much capacity to a single market and order new vessels with their partners, as to reduce new orders and create a more “self-disciplinary market.” He warned that despite the best efforts, “volatility in the shipping market is inevitable.”

“We must pay more attention to changes in the market, details in the management, value in service and opportunities in cooperation,” Ma said. “Only by doing to can we have orderly, sustained and healthy development.”

Ship Capacity Growth Slows But So Does Demand

The increase in the supply of container ship capacity is slowing, in part because of the dearth of new ship orders. However, there is still too much capacity because demand for cargo space on global trade lanes is also slowing.

“The positive sentiment in global economics and container shipping … turned sour over the summer following a very strong start of the year,” said BIMCO, the Copenhagen-based association of shipowners and operators.

“Leaking demand affects freight rates, as operators hesitate to adjust supply firmly enough to match up,” BIMCO said in its Shipping Market Overview and Outlook for October.

It said the expected growth in vessel capacity is constantly slowing from the high point of 9.7 percent in 2010 to an expected 7 percent in 2013.

Container ship deliveries this year have just surpassed the 1 million-TEU mark, resulting in a fleet growth of only 5.1 percent when the scrapping of older vessels with 216,000 20-foot-equivalent units of capacity is taken into account. For full-year 2012, BIMCO forecasts the container ship fleet will grow 7.2 percent.

“Just like the case of product tankers, the container ship fleet growth is actually under control. It’s the demand side which is causing the headache,” BIMCO said. “The demand-gap in the container shipping market was created mainly in 2009, and it is the loss of that volume growth that still puts pressure on the market balance.”

The big test of how much capacity still hangs over the market will come on Nov. 1 when carriers plan to implement a general rate increase of $500 to $550 per TEU.

“Some operators already see a 25 percent implementation of this as a success, given the recent steep drop in volumes and the subsequent mismatch between deployed capacity and transportation requirements,” BIMCO said.

Alphaliner estimates that operators in the trade from Far East to Europe and the Mediterranean need to make deep cuts in deployed capacity to reach a new market balance.

BIMCO said it subscribes to this view, adding that it remains a difficult task to maintain a market balance when demand suddenly contracts as fast as it did in the Asia-to-Europe trade over the summer, leading to a plunge in freight rates, which had turned profitable in the second quarter.

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