News and Views From JOC Shipping Conference

Below are a few tweets from the JOC Container Shipping Conference last week sent out via Linked In (Twitter is blocked in China), including some expanded commentary.

4 Jun @PeterTirschwell

Jeffries: GRI plans in Asia-Europe “would be all in vain, in our view, if the liners do not cut capacity to reverse the negative sentiment.”

Jeffries analyst Johnson Leung’s latest shipping research note was issued in the midst of the Shanghai conference and was noteworthy, as it introduced an element of caution to what has been an upbeat view on container carriers from this analyst over the past few months. He seems alarmed at the recent dip in Asia-Europe rates, the biggest dip since January, as it suggests the momentum that allowed carriers to double rates in this market since early in the year has been lost amid recent capacity additions and continuing economic negativity out of Europe.

5 Jun @PeterTirschwell

Eastbound transpac peak season will be “fairly muted” this year, but US looking better than Europe — Simon Heaney of Drewry at #JOCShanghai.

After seeing April U.S. containerized imports come in at negative 2 percent, it’s hard to disagree. Upcoming indicator of the market will be the success of TSA carriers’ plans to implement a $600 per-FEU peak-season surcharge this week.

4 Jun @PeterTirschwell

Lars Jensen of @SeaIntel at #JOCShanghai forecasts global container growth in 2012 of 7-8%, higher than Maersk Line estimate of 4-6% growth.

If he’s right, that is nice growth, but even though it’s roughly in line with new capacity coming on stream this year, there still may be overcapacity in the market. The next tweet gets into why.

4 Jun @PeterTirschwell

Disconnect between Asia-Europe deployment of mega-ships and fact that most growth is now in developing world, Lars Jensen tells #JOCShanghai.

What SeaIntel’s Jensen is pointing out is that most container tonnage on order is in the mega-ship category, which can only be deployed optimally in Asia-Europe. The trouble is the Asia-Europe market will grow much slower than the global average, reflecting Europe’s economic woes, while developing market trade routes, such as China to Latin America or China to Africa, are growing at double-digit rates but can’t accommodate tonnage in the mega-vessel category. Thus, when assessing global supply and demand in trying to assess market conditions, it isn’t simple enough to look at the numbers on global basis.

4 Jun @PeterTirschwell

“Very little containerized rail thus far,” in China, says Mark Miller of M Power Associates at #JOCShanghai.

One issue with China’s continuing lack of development of intermodal rail, which stands in stark contrast to its extraordinary buildup of port, road and river capacity, is that it may be inhibiting the flow of goods from interior locations, where manufacturing is migrating in search of lower costs, to the coast. One speaker in Shanghai last week said the Chongqing-Shanghai barge recently took 22 days because of a seven-day delay in transiting the Three Gorges Dam.

3 Jun @PeterTirschwell

Samsung has designed a 13,200-TEU ship that will “fit nicely” into expanded Panama Canal, incoming administrator Quijano tells #JOCShanghai.

4 Jun @PeterTirschwell

The expanded Panama Canal will be able to handle ships of over 14,000 TEUs, incoming administrator Jorge Quijano says at #JOCShanghai.

It has been widely understood that the capacity of ships able to transit the expanded Panama Canal in 2014 would be nearly triple the size of current Panamax-size vessels — 12,000 TEUs versus roughly 4,500 TEUs today. The 2006 Proposal for the Expansion of the Panama Canal, posted on the canal’s Web site, speaks only of a 12,000-TEU ship as the new Panamax class. But Quijano, whose current job is managing the expansion project as executive vice president of the canal authority’s engineering department, is in a position to know the real size, and it’s bigger than what’s been reported. The implications of even larger ships being able to transit the canal are potentially huge. The economics improve as the ship gets larger, meaning that all else being equal, the competitiveness of the canal route will improve as ships get larger. Ultimately, supply and demand will determine freight rate levels at any given time, of course, but the ability to handle larger ships will benefit the canal and those ports on the other side able to handle them.

Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him on Twitter at twitter.com/PeterTirschwell.
 

For the full story: Log In, Register for Free or Subscribe