Over-supply hits SA-Far East route

Contrary to the general trend in all global trades, vessel oversupply has hit the SA-Far East trades – but not Europe and the US. Alex de Bruyn, Safmarine’s SA trades director, told FTW: “We see no visible sign or trends of volume slowdown on these three specific routes. Thus, barring extraordinary increase of capacity on these three specific routes, we expect utilisation and rates to remain firm.” According to the Maersk Line response from Mark Cairns, national sales director, and Matt Conroy, Southern Africa cluster trade and marketing manager, the SA market remains stable, while at the same time there has been no significant change in capacity within this market. “The Transnet National Ports Authority (TNPA) statistics,” their statement added, “show that the 2011 export volumes are slightly ahead for the first seven months of the year compared to 2010 and imports are showing double-digit growth for the same period. “We have seen Europe and the Far East trades continue to perform well in both directions – however, the congestion in Durban has contributed to overall delays in cargo.” They agreed that the overtonnaged/soft rates statement at a global level was correct. “Simply put,” they told FTW, “liner shipping today, and for some years, is governed by supply and demand, where vessel deliveries over the last two to three years in particular and into the future, are such that the supply side is constantly ahead of the demand curve and therefore weakens the market constantly.” FTW interviewed two executives, each the local management of Far East-based lines, and asked them to give their opinions of the trade. Both agreed, but asked for strict anonymity if they were to tell us the unvarnished truth. “The Asia–SA trade (the dominant leg on the Asia-SAEast Coast South America trade),” said one, “has been plagued by oversupply since mid 2010, where around 30% additional capacity was put in place, leading to significant rate reductions on the trade. This extra capacity started to ease a little by the second quarter of this year and, coupled with some demand growth in 2011, has improved the supply/demand picture.” He also noted that, whilst CMA-CGM and CSAV had removed their products from the berth late in the second quarter/early in the third by slot chartering on MSC, both the the MSC Cheetah Service and Saf/Maersk Safari 1 services had been marginally upsized – and in effect the capacity provision on the berth has remained unchanged, if not slightly higher. Import volume into SA (Jan-Aug 2011) has shown approximately 11.8% growth over the same period in 2010, and this has helped vessel utilisation, he added. He feels that any statement that the berth is “seriously over-tonnaged” is incorrect. “If it was,” he added, “rates would decline – which they are not doing. But it is not satisfactory enough to enable real rate recovery or a return to reasonable returns.” This executive told FTW that there had been some upward trend on rates and the real cargo peak starting to flow in now should hopefully tighten utilisations further. The second executive was somewhat more abrupt. He considered the Far East trade to be “very overtonnaged”. He said that big shipowners – in this time of plunging fortunes on the East-West trades between the Far East and Europe and the US – were cascading bigger ships into the Far East-SA trade. This, he noted, was leading to more serious over-tonnaging in the SA market, and threatened an even stiffer battle for full ships in the pre-Christmas import trade.