APL to Expand Capacity by 7 Percent

Neptune Orient Lines plans to expand the capacity of APL, its container line, by about 7 percent this year to meet rising trade demand.

The company will charter as many as 10 vessels this year, each with a capacity of as much as 6,000 20-foot equivalent containers, CEO Ron Widdows said in an interview with Business Week.

The company also plans to return its last 10 idled ships to service by about June, he said.

APL, which has displaced Evergreen Line as the world’s fourth-largest container line according to Alphaliner, has been more cautious than other carriers about ordering new ships.

It recorded its biggest monthly gain in volume in at least six years in January as U.S. and European retailers restocked amid easing job concerns. Container volume on the trans-Pacific will likely rise as much as 5 percent this year, with Asia-Europe demand growing even faster, Widdows said.

Many lines are “no longer burning cash,” he said. “That’s a wonderful thing compared to last year.”

Container lines lost an estimated $20 billion in 2009 because of slumping trade, overcapacity and price wars, according to Drewry Shipping Consultants in London.

Neptune Orient will deploy five of the idled ships on Asia- Europe routes, Widdows said. He didn’t say where the chartered ships would be used. Rates on Asia-Europe routes have now risen to a point where it “begins to make more sense” to add capacity, Widdows said. Transpacific rates are still below break-even, he said.

Widdows said shipping lines may be “reasonably successful” in securing higher transpacific rates in annual contracts due to start around May. The carriers that belong to the Transpacific Stabilization Agreement are seeking to raise rates by $800 per 40-foot container on U.S. west coast routes in the new agreements.

The shipping line has 144 vessels in its fleet of which about 70 percent are chartered, according to Alphaliner.

The company has already returned 15 idled vessels to service after slowing ships to cut fuel costs and capacity. APL is running 75 percent of its fleet at reduced speeds, also known as slow steaming, and this will likely rise to almost 90 percent by the middle of this year, Widdows said.

“Slow-steaming is going to be with us for a very long time,” he said.

New ships “will come in during the course of this year even though the economics have some way to go,” Widdows said.

Contact Peter T. Leach at pleach@joc.com.