‘Seafreight price war must end!’

There is a desperate need for SA shippers to realise the calamity the shipping lines are currently facing, according to a line executive who wished to remain anonymous. “The market needs to accept that the price-war in seafreight rates is just going to have to stop,” he told FTW, “as carriers are facing an unsustainable situation. And, if something isn’t done, a number of them are going to go bust.” This same thinking was loudly expressed at the recent Marine Money Asia conference in Singapore. More vessels are expected to go into lay-up, said industry specialists, and it is imperative for the liner industry to abandon the price war. Journalist Vincent Wee of the Straits Business Times wrote that the demand and supply imbalance in the global container shipping fleet was so severe that at least another 5% of ships needed to be laid up in the next six months before equilibrium is achieved. Monika Krogulska, Asian representative of shipping industry consultancy Marsoft, told the conference: “It is likely that more liner vessels and charter vessels are going to find their way into lay-up in the second half of this year.” Current lay-ups have taken off about 10% of capacity, scrapping of vessels another 1.5%, slow steaming has been reducing capacity by around 2% and slippage in deliveries another 4%. But with freight rates having dropped a third year-on-year and fleet utilisation standing at barely over 70%, even more capacity needs to be taken out of the system, she said. The situation is dire, according to the Paris-based shipping consultancy, AXSAlphaliner, whose figures show that the major lines lost an estimated US$6-billion in the first six months of this year alone. Krogulska added that revenue would have to rise by 20% on average for them to break-even. She said the only solution for now was to keep capacity under control, and hope that rate hikes – as seen in the Asia-Europe route – manage to hold. The same applies in SA, according to our shipping source. “The market just needs to realise that lines on the SA trade, like any other, can’t afford to just go on offering rates at below cost levels,” he said. “The sunny times for shippers of cut-throat pricing just have to go, and they’ll have to accept that lines are going to need to push up rates if they are going to survive.”