Shippers warn of bottleneck and US regulatory threat

PUBLISHED : Wednesday, 13 April, 2011, 12:00am
UPDATED : Wednesday, 13 April, 2011, 12:00am


Mainland and Asian exporters could face equipment shortages this year similar to those that disrupted cargo shipments and affected imports into Europe and the United States in the early part of last year.

The problems, which saw container shipping lines delay the loading of cargo and raising freight rates between January and April last year, prompted an investigation by US federal regulators.

One shipping company agreed that the US Federal Maritime Commission (FMC) could reopen its probe if there was another shortage of containers this year.

Kenichi Kuroya, president and chief executive of Japanese container line Kawasaki Kisen Kaisha, said 'it was very much a concern' among shipping lines that US regulators could act again this year.

Shipping lines on the transpacific trade, such as Orient Overseas Container Line and Cosco Container Lines, are already facing tougher regulatory oversight following last year's difficulties.

These include filing monthly reports to the FMC about any changes in capacity, introduced from January 24, to prevent box carriers abusing their power in relation to exporters and importers.

FMC chairman Richard Lidinsky has vowed to closely watch the 'three C's' - containers, contracting practices, and capacity.

The warning over capacity came as shipping lines were expecting a revival in trade in the second half of this year. They also indicated there had not been sufficient investment in new containers because box prices were seen as too high, while box makers were also likely to reduce container output during the summer.

Pointing to the forecast recovery in container volumes, John Lines, managing director of ANL Container Line, said he was optimistic about the second half. Kuroya said the firm's container ships were slightly below 90 per cent full in the first three months of this year. But there had been a slight increase this month.

Thomas Riber Knudsen, chief executive of Maersk Line Asia Pacific, said: 'We fundamentally believe that at the end of the second quarter into the third quarter we'll see an improved market. We are confident the third quarter will look better.'

They were speaking on the opening day of the Sea Asia maritime conference in Singapore yesterday and after freight rates between Asia and Europe had dropped to below US$1,000 per teu (20-foot equivalent unit) in the past few weeks.

Eng Aik Meng, president of Singapore box line APL, thought the drop in freight rates was because shipping lines had continued to operate their fleets during slack winter months rather than temporarily parking ships.

When cargo volumes dropped because of the seasonal lull in consumer and manufacturing demand 'there was a sense of panic among carriers' and rates crashed, he said.

Teo Siong Seng, managing director of Pacific International Lines, said that while the Lunar New Year was early, 'the factory orders were there but there were no workers'.

Factory output had only recently started to return to normal.

Pointing to the possible shortage of containers, shipping experts said 3.5 million teus of new boxes would be produced this year, but demand would be nearer 4.5 million teus.

Box shortage

Shipping experts said 3.5 million teus of new boxes would be produced this year, but demand would be nearer: 4.5m