Image courtesy OOCL

HONG KONG -(Dow Jones)- Orient Overseas (International) Ltd. (0316.HK) plans to raise rates again for container shipments for the north-Europe-to-Asia route beginning June 15, the Hong Kong shipper said Wednesday, as part of plans to boost profitability after its net profit plunged last year.

The shipper’s container-freight unit Orient Overseas Container Line, or OOCL, said it plans to increase freight rates by US$200 per 20-foot-equivalent unit (TEU) or 40-foot-equivalent unit (FEU) for all shipments through the trade route.

The latest rate increase comes after OOCL raised its freight rate for the same route by US$200 per TEU or per FEU, starting Tuesday.

The container shipper didn’t disclose its existing freight rate on its north-Europe-to-Asia route, but it noted the current freight rate is below the required level to cover its operating and transportation costs.

The company–controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa–in March posted a 90% decline in 2011 net profit, as high fuel costs and capacity oversupply continued to weigh on its bottom line.

-By Joanne Chiu, Dow Jones Newswires

MAIN FACTS:

• Insufficient demand of global dry seaborne activity in recent months has translated into underutilization of the global shipping capacity, as a persistent supply of new vessels enter the market.
• This is particularly severe with the larger size tonnages.
• As one of the market participants in dry bulk market, the company is exposed to the current low freight rate environment mainly due to an oversupply of tonnages, and therefore had to enter into some loss-making charter contracts in early 2012 as part of its fleet is due for contract renewal in the prevailing market conditions.
• Further details of the financial information of the company will be disclosed in its first quarter results announcement in late May 2012.
• At 0920 GMT shares traded 12% lower at NOK9.01.

-By Dominic Chopping; Dow Jones Newswires

As we all know, the current situation in the shipping world is that there is a large lack of demand against the current overall supply of container space. Today, the current fleet capacity is around 15.5 million TEUs. Since 2005, the total capacity has roughly doubled – literally.

Because of the imbalance of supply/demand, carriers are losing blood and even declaring a negative balance sheet for end of 2012 (we are in May’12). This situation pushes them to the dilemma of getting bigger or getting smaller. Getting bigger means buying new, larger ships. These ships allow carriers to improve their cost effectiveness, work with smaller crews and lower their capital costs. On the other hand, some carriers are getting smaller; serving more niche markets where larger vessels will not call since that will reduce the efficiency of the vessel. You can imagine that a 15,000 TEU ship will not make 3 ports in the same country – if that country is not China.

These are the things we see and hear everyday. However a more important game is being played behind the scenes which have a crucial effect on the industry as whole.

According to Bloomberg; DNB ASA, the world’s largest arranger of shipping loans, expects the shipping industry to have a funding gap of $100 billion by 2015, as European banks are reducing their support to maritime transport. Even if US and Asian banks have an increased interest on maritime loans; EU banks account for 90% of the global ship lending. Considering net shipping loan losses at Nordea Bank AB (NDA), the world’s No. 4 shipping lender, tripled to 135 million euros ($179 million) last year because of “weak market conditions” and “a general decline in vessel values,”; everyone will be thinking twice before granting a loan. In addition to that, since there will be less vessel orders with reduced prices, it will be forcing some yards to close in the following 12 to 18 months.

How is this going to affect exporters/importers?

That’s our major question of course. Considering several factors; the EU Crisis, US getting out of recession, Arab spring is over; it will take another couple of years to get on track for sure. According to HSBC Global Connections, despite the current climate, the overall trend for international trade is positive with growth acceleration sooner than expected from 2014, than 2015. Over the next 5 years an annualized growth rate of %3.78 is forecasted for international trade. The main countries that will be carrying the growth are China and India, and China is expected to have an annualized growth of 6.60% in imports and 6.61% on exports; while India is expected to have 6.81% growth in imports and 7.60% in their exports from 2012 to 2016.

Now, according to 2010 stats, worldwide container traffic reached 560 million TEUs – an all-time high. China & Hong Kong Ports handle close to 169 milllion TEUs, 18% of this traffic. We need to keep in mind though, this is not only China exports/imports but also transshipped cargo that goes via those ports to other Asian nations.

With that in mind, if we take the growth rate with an average 6% for that region and multiply this with 169 million, we come up with a possible increase of 30 million TEUs annually and 500,000 TEUs weekly basis increase only in the region that handles 18% of global trade.

Now, lets go back to the supply side. The major banks will be reducing loans, there will be less ship orders and there will be less ship yards to build new ships. How is this going to affect the years 2014-15 and later?

I believe very tough years will come for exporters/importers in the sense of shipping costs and finding available space. We will see more of the complaints from US Exporters for not being able to find space and getting asked to pay very high freight charges like we were seeing in 2010. However, this time the difference will be, there won’t be any idle vessels sitting in Singapore or any new ordered vessels to come in and let everyone breath.

Considering today, this sounds improbable… Well, I believe the facts are out there and they show that the roller coaster ride we are on will just get crazier.

Can Fidan is originally from Turkey, where he got a Bachelors Degree in Economics at Koc University in Istanbul. After working 5 years at MTS Turkey he moved to Hong Kong as an MTS Representative where he stayed 2 years working on Asia Development of the group. After Hong Kong he came to MTS New York. He is currently the Vice President of Business Development and Export Manager at MTS Logistics, Inc.

Ship Photo of the Day by Hapag Lloyd: Chicago Express, click for Larger Image

FRANKFURT (Dow Jones)–German shipping group Hapag-Lloyd said Friday it has increased freight rates for all cargo and container types between Europe and North America with effect from July 1.

The company attributed the price rise to unsustainable revenue and continuous cost increases.

Hapag Lloyd, partly owned by tourism and travel group TUI AG (TUI1.XE), has been suffering from high marine diesel prices for months.

-By Kirsten Bienk, Dow Jones Newswires

Image via Wikipedia by Naquib Hossain

SINGAPORE (Dow Jones)–The Baltic Dry Index, the bellwether gauge of rates for ship dry commodities including grains, iron ore and coal, will likely find support for the rest of the year from Chinese demand and an expected increase in ship scrapping, a senior shipping executive said Wednesday.

The index plunged to a 26-year low of 647 points in February as new ships were put into operation. Bad weather in Brazil and Australia as well as the Chinese New Year also hurt global trade, Precious Shipping PCL (PSL.TH) Managing Director Khalid Moinuddin Hashim said.

The gauge has rebounded since then, closing at 1,152 points Tuesday on the London-based Baltic Exchange, reflecting increased confidence in demand from China, he said, tipping the metric to stay in the 800-1,200 range through the end of the year.

China’s iron ore imports in the first quarter of this year totaled 187 million metric tons, up 6% compared with a year earlier, while coal imports totaled 50.3 million tons , up 58%.

This growth has taken place against the backdrop of a slowing Chinese economy, a very low BDI average and an official forecast of an annual GDP growth of just 7.5% for 2012, well below the 9.2% growth seen in 2011, Hashim noted.

Things could be looking up datawise, Hashim added, referring to HSBC‘s monthly manufacturing Purchasing Managers’ Index, which rose to 49.3 in April compared with 48.3 in March. While the reading, issued Wednesday, is in contractionary territory, the uptick may signal a soft landing and continuing demand for raw materials in the world’s second-largest economy.

Khalid Moinuddin Hashim, Managing Director, Precious Shipping

The slippage rate–the number of new ships delayed at shipyards or deferred by owners–is likely to reach 50% this year compared with 28% in 2011, supporting freight rates, Hashim said. An increase in ship tonnage slated to be scrapped, to about 50 million deadweight tons in 2012, will also help freight rates, as it will partially offset new builds, meaning that the dry bulk fleet may grow by just 3.3% this year compared with earlier expectations of 10% growth, he added.

Precious Shipping, Thailand’s leading dry-bulk shipper, owns 30 vessels and aims to double its fleet by 2014, Hashim said.

-By Surabhi Sahu, Dow Jones Newswires

Image courtesy OOCL

HONG KONG -(Dow Jones)- Orient Overseas (International) Ltd. (0316.HK) plans to raise rates for container shipments between Asia and Australia from April 15, the Hong Kong-based shipper said Tuesday, as part of plans to boost profitability after its net profit plunged last year.

The shipper’s container freight unit Orient Overseas Container Line said in a statement intends to increase freight rates by US$300 per 20-foot-equivalent unit, or TEU, for all shipments between northern and eastern Asia and Australia.

Orient Overseas (International) didn’t disclose its existing freight rates.

The company–controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa–said Monday its 2011 net profit plunged 90% as high fuel costs and capacity oversupply continued to weigh on its bottom line.

-By Joanne Chiu, Dow Jones Newswires

Maersk Kwangyang, Image courtesy Maersk

COPENHAGEN (Dow Jones)–Danish oil and shipping company A.P. Moller-Maersk A/S (MAERSK-B.KO) confirmed Friday that its container shipping arm Maersk Line will hike rates on its westbound Asia-Europe routes by $400 a standard 20-foot container as of April 1.

The general rate increase, received by customers early Friday, will apply to all dry and reefer cargo moving from all Asian ports to all destinations in Europe, the company said.

The rate move comes only days after Maersk Line announced it will cut its vessel capacity on the Asia-Europe trade lane by 9% due to oversupply, which has dragged down freight rates to “unsustainably low levels.”

“The Asia-Europe trade remains the world’s busiest trade route, however the supply of vessels currently operating on this trade simply outweighs the demand. We are therefore rationalizing our service by taking out vessel capacity and thereby reducing costs,” said Vincent Clerc, chief product and yield officer for Maersk Line at the announcement of the capacity reduction on Feb. 17.

According to a report published by the Journal of Commerce Thursday, spot rates on the Asia-Europe routes rose 3%, after Maersk Line announced the capacity reduction.

Maersk Line reports fourth-quarter 2011 results along with its parent company on Feb. 27. The weak rate level is expected by analysts to have driven Maersk Line’s fourth-quarter bottom line to a net loss of about 2.8 billion Danish kroner ($505.2 million), said Sydbank analyst Jacob Pedersen.

-Flemming Emil Hansen, Copenhagen Bureau, Dow Jones Newswires

VLCC Ovatella, managed by Shell, owned by Frontline Tankers, image courtesy Frontline

SINGAPORE (Dow Jones)–Asia’s crude-tanker markets may stay supported on the back of healthy demand in the coming week, though upside is limited, as supply is also healthy.

The spot rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Monday at Worldscale 57.74, down from the week-earlier level of W58.91, according to the Baltic Exchange. Cash earnings for owners were assessed at $14,457 a day.

Although fixture enquiries were brisk, with a steady flow of cargoes for the last third of December hitting the market, “tonnage in the region was sufficient to absorb the increased activity,” broker Simpson Spence & Young said in a note.

Meiwa International, another broker, said 129 cargoes have been fixed to be lifted this month, up from 110 lots a year ago.

Fixing of January-lifting cargoes will begin next week, but freight rates likely won’t change much due to balanced fundamentals, a Japanese broker said.

The spot rate for a VLCC from West Africa to China softened to W57.50 from W59.77, around its lowest in a month.

Also, the rate for an 80,000-ton Aframax from Southeast Asia to the east coast of Australia inched up to W103.83 from W103.11.

Freight rates for vessels carrying clean petroleum products have slipped over the past week, as fixing activities are slowing ahead of the holiday season.

“This is a typical December market…everyone is just going on holiday,” said a Singapore-based broker.

The rate for a 30,000-ton tanker from Singapore to Japan fell to W152.79, a two-week low, from W157.57 last Monday.

The rate for a 55,000-ton Long-Range-1 cargo from the Middle East to Japan eased to W120.54 from W123.77, while a 75,000-ton LR-2 cargo for the same route edged upward to W102.68 from W102.63.

-By Max Lin, Dow Jones Newswires

Excess shipbuilding capacity has grown each year since 2009 by 25%, and is a painful process to reverse, Cutler said.

Panamax vessels traditionally haul dry bulk cargo–such as coal, grains and iron ore–and are mostly 70,000-75,000 deadweight tonnes.

Dry bulk freight rates have fallen in recent months as slower demand triggered by economic concerns and vessel oversupply took their toll on shipping rates.

“Long-term recovery in freight is only possible if ship owners exercise restraint with new buildings,” Cutler said.

-By Neena Rai, Dow Jones Newswires

The VLCC Front Shanghai, owned by Frontline Tankers, image courtesy Frontline

LONDON (Dow Jones)–The shipping costs for Very Large Crude Carriers, or VLCCs, traveling from the Arabian Gulf soared this week, supported by a tight market and strong seasonal demand from Asia, ship brokers told Dow Jones Newswires Thursday.

Freight rates for tankers traveling from the region rose 10%-14% from Wednesday to Thursday, depending on their destination, according to data from Riverlake Research & Consulting.

“There are very few ships for end November positions,” said one shipbroker. World Scale 60 is in sight, compared to rates in the mid to high 40s last week, he added.

World Scale is an index against which freight rates are based.

By Sarah Kent and Neena Rai, Dow Jones Newswires