'Boxlines have got the message at last'

Super-slow-steaming strategies and idle vessels are evidence that boxship operators are finally learning how to manage capacity, claimed Jorn Hinge, president and CEO of United Arab Shipping Company (UASC) last week.

With some 1.44m teu of capacity at anchorage, according to the latest figures from Alphaliner, he told IFW that container lines deserved credit for cutting back global capacity and saving the industry from financial meltdown.

"Worldwide volumes declined sharply throughout 2009, which affected freight rates negatively, so container liners had to do something to improve revenue per box," he said.

"Capacity has to fit the volumes and it’s encouraging that all lines are now realising this. It’s allowing us to maintain and improve revenue in what is normally a quiet period."

But he lamented that it had taken so long for his peers to see that the collapse of volumes and rates required unprecedented corrective action.

"This is the first time we’ve all behaved sensibly," he said. "It’s just a shame we didn’t do it 12 months earlier. We could have saved a fortune."

UASC, based in Kuwait but managed commercially from Dubai, saw carryings decline on its 47-strong fleet of boxships by "about 20% on some trades" year-on-year in 2009, while the collapse of the construction industry in Dubai also had an impact on Middle East imports.

The Asia-Europe trades started to pick up towards the end of 2009, although Asia-Middle East was poor throughout the year as larger ships were introduced.

"The financial position of the company is, like that of most container lines, not that good," said Hinge, but he wouldn’t rule out further investments by UASC in shipping assets.

"There are more diners than dinners at the moment, but it could be an option," he said.

Hinge said some UASC strings had been temporarily suspended last year, with vessels laid-up, while three smaller container ships had been sold and nine chartered vessels were let go.

"In some trades it wasn’t worth sailing, the freight rates weren’t even covering the cost of bunkers, port and the Suez Canal," he explained.

"Obviously we didn’t stop, because we had commitments to customers and needed to maintain our market position - although we renegotiated some contracts."

UASC has introduced super-slow-steaming on its Asia-Europe services, which, instead of eight vessels, now operate 10 eastbound at 14-15 knots.

"By slowing down we save a lot, because as bunker costs increase disproportionately with speed, the last few knots cost a lot more.

"Shippers have accepted that they can live with slower transit times."

After taking delivery of eight A7 (6,921teu) ships in 2008, another joined the fleet last year along with 10 A4s, each with 4,200teu capacity.

UASC’s order for nine 13,100teu vessels has been delayed, following talks with yards, and the series is now slated for delivery from the second half of 2011 through to the first half of 2012.

Hinge was dismissive of most analyses of the container supply and demand balance, claiming the paper orderbook - which shows a massive overhang - was misleading.

"It’s hard to look at the market, because there are so many negotiations for [newbuilding] delays and cancellations; there are some conversions and the figures show an older orderbook.

"It will be a few years before the market is back in balance.

"The orderbook doesn’t show all the changes that delay delivery and will somewhat reduce the oversupply."