SITC International Holdings, a mainland private shipping logistics company, has bought seven more ships, brushing aside concerns over excess capacity in the sector. The ships will be delivered over the next three years. The container shipping industry seemed to be on the recovery path in the first half of this year, but since late July, growth has been facing choppy waters with a decline in freight rates. 'The short-haul container shipping segment is facing oversupply,' said Zhou Xiang, the research head at the Shanghai Shipping Exchange. But according to SITC chief executive Yang Xianxiang, buying new ships at this point makes perfect sense. 'Asia is growing faster than the pace at which we are buying ships. Plus, our company has maintained a growth rate of more than 20 per cent a year,' said Yang. SITC, which focuses on short-distance container shipping in Asia, is betting on the region's economic expansion and wants to take advantage of the relatively low vessel prices to prepare for competition when the larger shipping companies and new players hit the market, said Jay Ryu Je-hyun, an analyst with Mirae Asset. With the shipping market down last year, SITC was able to buy ships at a bargain price of about US$18 million each, more than 30 per cent below the peak price, said Yang. The ships it is buying are about the size of 1,000 20-foot equivalent units (teu). Four were contracted to Yangfan, a ship manufacturer based in Shanghai, and three to South Korean shipyard Dae Sun Shipbuilding & Engineering, totalling US$129.7 million. Apart from these seven ships, SITC also has the right to buy four more vessels at the same low price range from Yangfan in the third quarter of next year. Of the 47 vessels that SITC now runs, 15 are self-owned. With more than 40 trade lanes in Asia, SITC is the top carrier between China and Japan, Vietnam and the Philippines. The company also provides freight forwarding, agency, trucking, depot and warehousing services. SITC's average freight rate increased 13.7 per cent to US$501.5 per teu for the first nine months of the year, compared with the same period last year. But Yang admitted that increasing competition among Asia's short-haul shipping companies has slowed the company's growth. The idling capacity ratio was about 10 per cent in the first half. It is now around 2 per cent as a result of an increase in ship usage, said Mirae Asset's Ryu. Oversupply has triggered a decline in shipping fees. The China Containerised Freight Index, which reflects the industry's average shipping fees, dropped 9.7 per cent to 117.37 points in the past three months, according to the Shanghai Shipping Exchange. Investors feel that despite SITC's improving performance in the past years, there is a need to be cautious about its sustainability as competition may intensify, said Ryu.