Chinese Carriers Face Severe Overcapacity, SSE Official Says

Chinese Carriers Face Severe Overcapacity, SSE Official Says

SHANGHAI, China — The global economy is improving and shipping demand is growing gradually, but neither is occurring rapidly enough to ease the overcapacity ocean carriers face, according to a senior executive with the Shanghai Shipping Exchange.

The situation is particularly severe in China, where record-low freight volumes are combining with overcapacity to pressure carrier profitability, Gu Yunfeng, manager of the SSE’s information department, told the Shipping Financing Leasing Summit in Shanghai in late July.

After recovering in 2012, freight rates in the major trades from China declined 3.7 percent in the first half of 2013, according to the SSE’s China Containerized Freight Index. The Shanghai Containerized Freight Index, which tracks markets from the Port of Shanghai, was even worse, falling nearly 13 percent in the period.

Launched in 1998, the CCFI tracks 14 global shipping routes from Chinese ports that include Dalian, Tianjin, Qingdao, Shanghai, Nanjing, Ningbo, Xiamen, Fuzhou, Shenzhen and Guangzhou. The SCFI, launched in 2009, tracks 15 routes from the Port of Shanghai. 

With new capacity coming on line and demand growing slowly, the outlook for carriers likely won’t improve until 2014, at least. Total container capacity increased 5.3 percent in the first half of 2013, after year-over-year growth of 9.6, 7.9 and 5.9 percent over the past three years, according to Clarkson. The London-based shipbroker expects capacity to pick up the rest of this year, to 6.8 percent year-over-year growth, with demand for the year rising 6.1 percent.

The SSE sees an even wider gap, with capacity increasing 6.8 percent for the year and volume increasing 5.2 percent.

Contact Annie Zhu at azhu@joc.com.