Page 14: of Maritime Reporter Magazine (November 2010)

14 Maritime Reporter & Engineering News

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Third quarter financial results are coming in and they make some very happy reading for container line execu- tives.

The biggest smiles will be reserved for the strongly im- proving revenue per container over the past nine months.

Hong Kong-based Orient Overseas Container Line (OOCL) reported a very satisfying 31 percent increase in average revenue per container for the year. In the last quar- ter along the revenue per box was almost 43 percent higher than in the same period last year.

Year-to-date revenue was up 50 percent, with the last quar- ter revenue topping 65 percent. At Singapore-based APL the results were equally impressive. Third quarter revenue was up 60 percent and the first nine months’ revenue was up 50 percent. Both carriers expect to end the year in fine shape. Most of the worlds other top carriers are in exactly the same position. Of course, the comparisons with last year are favourable because business was so bad in 2009, but the rapid improvement shows how utterly reliant the asset-heavy industry is on good freight rates.

That sounds obvious, because it is, but it also explains why the carriers are so ruthless when it comes to slapping on surcharges at the drop of a problem. The margins are so thin and the operational costs are so high that the lines are not interested in shouldering even the slightest increase in costs. And when it comes to a container shipping line with revenue protection on its mind you have to get up pretty early to beat them.

Consider this release by Maersk a couple of days ago. “The water level on the Amazon river has depleted con- siderably in recent weeks. As a result of this, vessels have been forced to reduce their capacity intake by almost 50 percent, a move which has led to immense cargo build up in Panama and disrupted normal trade flows,” the state- ment said. “In response to this situation, Maersk Line will introduce an Emergency Draft Surcharge effective of

US$500 per TEU, valid from 18 October 2010 on all ship- ments to Manaus, Brazil.” It is maybe a bit much to ex- pect a line manager to keep an eye on the water levels up the Amazon River, but this emergency draft surcharge is likely to raise even the most botoxed of eyebrows.

Posted by Greg Knowler on

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BLOGS Posted on MaritimeProfessional.com

Rising Rates & Ruthless Revenue Protection

How to Make 2010 a Good Year

Omega

First global radio- nagivation system

The Omega radio-navigation sys- tem was originally designed by the

US Navy for use in military avia- tion. Its value to maritime naviga- tion soon became apparent and that eventually became its pre- dominate use. The system con- sisted of eight transmitting stations, located in Bratland, Nor- way; Paynesville, Liberia; Ka- neohe, Hawaii; La Moure, North

Dakota; Chabrier, Reunion Island;

Trelew, Argentina; Woodside, Vic- toria, Australia; and Shushi-Wan,

Tsushima Island, Japan. A devel- opmental station was built in

Trinidad, but eventually was re- placed by the station in Liberia.

Transmissions commenced in 1968. Omega was officially ter- minated on September 30, 1997.

The system operated in the very low frequency (VLF) range, re- quiring extremely high transmis- sion towers. Some to the towers were the tallest ever constructed on the continents where they were located. In this frequency range, though, the signal could circle the earth. This meant that ships and aircraft in remote parts of the world could, for the first time, uti- lize radio-navigation to assist in determining position. Omega was not particularly precise, having an advertized accuracy of four nauti- cal miles, but that was sufficient for many uses, particularly when the only alternative was celestial navigation. By the 1990’s, Omega fell out of favor as GPS receivers became widely available. Several

Omega sites remain operational, now used to transmit signals to submerged submarines.

Posted by Dennis Bryant on

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Research outfit Compair Data raised an interesting point in its latest report, titled Taming Cyclical Rates.

It asked whether carriers would continue to use capacity management tools they adopted in 2009 to cope with the vanishing trade, or retreat to familiar patterns of over-de- ploying allocated capacity. Back then, the limiting of ca- pacity to keep rates from disappearing through the floor by sending surplus vessels to lay-up and slow steaming on the two major trade routes was the key move by the carri- ers. It is now pretty much standard operating practice on the transpacific and Asia-Europe trades. However, if pre- dictions of weak demand in 2011 are wrong – it has be- come difficult to predict demand with any accuracy over the last year – and business improves sharply, the container lines may have to start pulling ships out of slow steaming strings. Some of these slow-moving services use an addi- tional two vessels. Those ships taken out of the slow steaming strings could be deployed on other trade lanes, or on new services added to the major east-west trades they were pulled off, and happiness would return to the king- dom. Speeding up ships and ending slow steaming would probably be a welcome relief to most shippers. “Proba- bly”, because many shippers will have already reconfig- ured supply chains to accommodate longer voyage times.

But shorter transits make the managing of inventory a lot easier. But it is highly unlikely slow steaming will be scrapped. Enormous amounts of capacity have been allo- cated to the two major trades – transpacific and Asia-Eu- rope. Demand will have to increase substantially before slow steam- ing could come to an end be- cause it would free up scores of vessels that would then cascade into the other trades. It would be like chaining freight rates to an anvil and dropping it off the poop deck. A growing unwill- ingness to lay up ships will add to the problem. Carriers are not prepared to store their ships in barnacle bay while their competitors help themselves to the market, and anyway, exports out of Asia may drop but never to the crazy levels of late 2008/early 2009. Just look at Maersk. The Danish carrier is temporarily withdrawing an Asia-North Europe service – 10 percent of its capacity on the route – but insists that no vessels will be laid up. So expect freight rates to continue falling as we approach the end of the year. A rush to get orders out before the main- land shuts down for Year of the Rabbit celebrations in the first week of February means we will probably see a spike in demand early in the year, and that will be good for liner business. But it won’t last. Rising labor costs and a stronger yuan will continue to eat into exports with US consumer demand expected to remain weak into next year.

Posted by Greg Knowler on Maritimeprofessional.com

Capacity Management to Stay

A growing unwillingness to lay up ships will add to the problem