Lines pull out of ailing West Africa trade

Plummeting freight rates

and associated lower profits

are converting the once

promising West African

sea trade into a pull-out

situation.

According to reports,

such is the unprofitably

that three major shipping

lines have withdrawn their

vessels and diverted them to

other routes in the past four

months.

Ships & Ports, for

example, reported that the

“crashing freight rates” had

forced Nippon Yusen Kaisha

(NYK) to pull out in the

face of a double-jeopardy

scenario – low freight rates

and declining volumes. One

of the top Japanese shipping

lines, it operated the Asia-

West Africa (WAX) service

together with Hapag-Lloyd

and Gold Star Line (GSL).

Taiwan’s Evergreen Line

followed suit. Its West

African shipping agency,

Hull Blyth, talked about

a “disparity between rate

levels and costs” as being

behind its three-yearold

WA1 service on the

trade pulling out. “Rate

levels, especially from

Asia, have fallen over

50% in the period with

the cost levels remaining

disproportionate,” the

agency added.

Another top Japanese

shipping line, Mitsui OSK

Line (MOL),

has also

withdrawn

from the

West Africa

trade and

restricted

its Africa

schedules to

Asia-East

Africa and

Asia-SA.

Trade

on the

westbound

route from Asia to West

Africa is definitely on

a decline, according to

UK-based maritime

analyst, Drewry Shipping

Consultants. “More lines

will quit the route as

container volumes continue

to fall,” it said, predicting

reduced vessel load factors

and declining freight rates

as carriers fight to hold

market share. Drewry also

noted that capacity growth

had been curbed, with the

monthly count of available

westbound slots “generally

static”.

Things started to go

wrong last year, according to

Container Trades Statistics.

It showed, for

example, that

westbound

volumes

from Asia

decreased

in nine of

the first

ten months

of 2015

compared

with the

previous year

– with the

latter months

recording declines of about

10%.

But it’s not an overall

West African problem,

according to Jose Jardim

of Hamburg Süd, with a

recently introduced service

faring well. He did admit

that volumes were not as

bustling as they had been,

with the global slowdown a

main driver. But, he added,

the real crash has been

more confined to the oildependent

states of Nigeria

and Angola.

“With about 90% of their

foreign exchange coming

from oil exports, the slump

in oil prices has obviously

left them with little money

to pay for imports,” Jardim

told FTW.

Indeed, electronic sister

publication, FTWOnline,

reported that growth in

Nigeria for the fourth

quarter slowed to 2.1% due

to crude oil revenue falling

and the manufacturing

sector struggling.

Cargo volumes have

dropped by more than

30% in a year, according to

Drewry, and the Nigerian

naira has lost more than

100% of its value in less

than two years – which has

exacerbated pressures on

shipping lines and terminal

operators.

Jardim also pointed to

similar problems in Angola,

with figures showing that

imports from the East Coast

of South America (ECSA) to

Luanda had dropped about

40% because of a lack of US

dollars to pay for them.

“It’s got to the stage where

some South American

shippers are stopping

shipments because even

letters of credit (LOCs)

are not being honoured,”

he said. “But I expect oil

prices to steadily climb over

time, which would improve

things.”

Glen Delve, marketing

director of MSC in SA,

agreed that the low oil prices

had affected Nigeria and

Angola, “But,” he told FTW,

“Nigeria is not too bad, not

as much as Angola.”

And he saw good signs in

other parts of West Africa.

“The MSC West African

hub, the Lome Container

Terminal (LCT) in Togo, for

example, is booming and

volumes from Asia are very

satisfactory.” This terminal

has an annual capacity of

2.2 million TEUs), and is the

gateway to the landlocked

countries of Mali, Niger and

Burkina Faso and to the

northern areas of Nigeria.

“In West Africa in general

volumes have dropped off

somewhat, but we’re more than

holding our own,” Delve added.

INSERT & CAPTION

The real crash has

been more confined

to the oil-dependent

states of Nigeria and

Angola.

– Jose Jardim