Mike King, Special Correspondent | Jun 01, 2012 8:20AM EDT
Volume growth of up to 8 percent is expected on intra-Asia trades this year, helping rates recover during this quarter on many lanes, says one liner executive. But growth projections could be shattered if European demand collapses as some analysts have predicted.
“Intra-Asia is quite strong now,” said Tim Wickmann, CEO of AP Møller-Maersk’s intra-Asia container shipping subsidiary MCC Transport, which operates some 60 ships. “We’re talking about more than 3,500 port pairs. That’s a lot of markets and some will grow at 20 percent, others not so much.”
Wickmann said one of the prime demand drivers of the trade was the movement of raw materials and semi-processed products between Asia countries before the final product is shipped to the U.S. or Europe.
“The worry is this triangulation trade,” he said. “People say that problems in Europe won’t affect intra-Asia services but they will.
“Triangulation movements could soften if European or U.S. consumption decreases, but our outlook for this year is 6-8 percent for the trade overall so that’s about 18m TEU excluding Taiwan-China, India and Chinese cabotage movements.”
Intra-Asia operators suffered last year through excess supply, but this year lines have exercised more caution and refused to add extra tonnage on trades when rates have shown signs of recovering.
He said growth into Indonesia is currently proving strong, and Thailand has bounced back after last year’s floods. Chinese and Vietnamese exports to other parts of Asia are also buoyant.
“Rates have gone up since Chinese New Year in almost all trades where volumes have been strong, so finally in April carriers had a profitable month,” said Wickmann.
“The second quarter will be quite good, but anyone can start a line with three ships and enter the trade, so history tells me that if we have 3-4 months of profit, then people forget about 15 months of losses and open new services. Then we all lose money again, so I have worries for the second half of the year.”
MCC will not be one of the companies adding capacity unnecessarily, he said. The emphasis at the group’s Denmark head office is now firmly on profit, not market share. “We are tough now, we have completely dropped our growth projects,” he explained. “We won’t be adding any capacity unless we can do it profitably.
“If a trade goes negative, I will take services out and merge services and let cargo go — we cannot be a charity.”
Contact Mike King at michael@borderline.eu.com.