Far East rates tumble further as new consortia set sail

Alan Peat THE NEW consortium on the Far East sea trade - K-Line, MISC and PIL - has brought a lot of extra capacity on-line. This new ASA (Asia-SA) service is no small player in terms of its capacity. Whereas before the three contenders were only shipping relatively small volumes, other shipowners point out that they are now looking to fill six 1 200 TEU (twenty foot equivalent unit) ships - a total of 7 200 TEUs extra capacity. This is added to a large number of groupings already tussling for market share on the SA-Far East run. There will be the new Safari structure (MSC, Maersk Sealand and Safmarine) starting next month; the multi-line Good Hope Express (GEX); Evergreen (with Hamburg Sud and Cosco co-loading); NYK as part of GEX but also slot chartering on Evergreen; Fuhai Line; Kien Hung Line; and P&O Nedlloyd (with MOL slot chartering). The initial reaction from others in the trade is that this will see the trade further overtonnaged with supply well exceeding the market demand. "Volumes are not where they could be although it's still early in the year," said one shipping line executive. "But there's no doubt that it will put the rates under even more pressure with these new mouths nibbling at the same piece of meat." The problem is exacerbated with the resurrected Safari service having seven ships of 2 500 TEU capacity dedicated to the trade from April 3, a much larger capacity than before. "The gloves are now coming off," said another line executive, "and there's definitely going to be somebody with a bloody nose after it's all settled." And, from what FTW was told, there have probably already been a few injuries to lines' revenue in what has been a bit of a cut-price trade in recent times. From the Far East to SA, import rates this year are already about US$250 per TEU lower than last year. That's way below where the lines would like the rates to be, FTW was told. "We'd be happy with import rates of US$1500/TEU and export rates of US$1000/TEU," the source said. "But, we're way below these rate levels already. "With newcomers coming in we're likely to see another price war starting as they try to establish a position in the marketplace, and the others try to fight off their challenge for a share of the already limited traffic."