Overcapacity puts the brakes on Asian air cargo growth
Feb-27-2014 By : agxadmin
Top Asian airlines’ profit margins are being eroded by a struggling air cargo business, even as they capitalize on increasing passenger demand, industry executives said. Weak global economic growth and freight capacity oversupply brought on by new deep-bellied planes is hurting carriers with dedicated cargo businesses, the insiders said ahead of the six-day Singapore Airshow this month. “The biggest worry of the airline industry right now is probably cargo,” Tony Tyler, Director General of the International Air Transport Association (IATA), said. “For the big airlines in this region, it is a very important component of their revenue mix.” IATA said air freight traffic rose 1.4% last year from the previous year, supported by rising activity from Middle Eastern and Latin American carriers. At Asia-Pacific carriers, which have nearly 40% of the global freight market, volumes dropped 1%, while capacity rose 0.8%. Andrew Herdman, Director General of the Association of Asia-Pacific Airlines, said major regional airlines with separate cargo businesses are bearing the brunt of the slump in the industry since the 2008 global financial crisis. “The people who are really suffering in the cargo business are the ones operating big fleets of dedicated freighters, and that includes Singapore Airlines, Cathay Pacific, Korean Air, among others,” Herdman said. Singapore Airlines’ freight arm operates nine Boeing B747-400 freighters. Cathay Pacific has a fleet of 25 freighters, while Korean Air has 26, according to the carriers’ websites.
Cathay continues to idle part of its freight fleet
By : agxadmin
Cathay Pacific Airways plans to keep part of its freighter fleet in the hangar this year amid a protracted slump in the cargo market. The airline’s cargo tonnage fell 1.4% year-on-year last month, following a 5% drop in December. Cathay, the second-largest air-cargo operator behind Emirates SkyCargo, saw growth in shipments in only two of the past 12 months. “Freight rates are under pressure because of overcapacity in the market,” James Woodrow, Cathay’s Cargo Director, said. The freight business of Hong Kong’s biggest airline has been hit by overcapacity in the market, compounded by weak demand in the United States and Europe since last year. Recovery in demand this year would hinge on the strength of the U.S. economy, Woodrow said. Cathay took five of its 26 freighters out of service last year. It also agreed to sell six Boeing 747-400 freighters to Boeing, with the aircraft leaving the fleet between now and 2016. Aside from overcapacity in the industry, the scattering of production lines in China for Apple’s iPhones and iPads has added to Cathay’s woes. “In the past, we could wait here for the products to be trucked down from the production lines in the Pearl River Delta; now we have to fly to new production centers in Chongqing and Zhengzhou,” Woodrow said. Chief Executive John Slosar said about 50% of the carrier’s cargo tonnage was transshipments from the mainland. The airline’s share of the market in carrying technology products is under pressure as the competition in inland cities is much fiercer than that in its home base. Hong Kong airport handled 2.4% more cargo at 4.12 million tons last year while the volume carried by Cathay dropped 1.5%. To improve efficiency in handling transshipments, the carrier built its own cargo terminal in Hong Kong last year. The HKD5.9 billion facility has been in full operation since October. With 1,800 workers, it has handled 600,000 tons of cargo over the past year.
Shipping industry set to emerge from five-year downturn
By : agxadmin
The shipping industry is poised to emerge from its longest downturn in three decades, buoyed by an end to years of overcapacity that have depressed freight rates since the end of the shipping boom of 2008. Dry cargo ships are likely to see the strongest recovery, say owners and analysts, as growth in bulk commodity cargoes such as iron ore and coal outpaces supply of new tonnage for the first time in seven years. But tanker rates will also rise as fleet growth is slowing, while strategic oil reserve projects in China and India should boost already solid Asian demand. The recovery will bring some respite to shipping firms that have endured years of losses as freight rates failed to cover costs. “While there will be potholes, here and there, as always, the worst is over based on the market fundamentals,” said Ong Choo Kiat, President of U-Ming Marine Transport, one of Taiwan’s largest listed shipping companies. Experts warn some shippers will still only break even this year and any recovery may fade after 2016 when overcapacity could again dampen freight rates. Key drivers of the pick-up will be China’s continued urbanization and falling iron ore prices, experts say, which should support import growth even though the commodities super-cycle that drove a 2003-2008 boom in shipping markets is over. The global dry bulk seaborne trade is forecast to grow 5.8% this year to 4.37 billion tons, according to Barclays Research, outpacing a 5.3% rise in the global merchant fleet to 753 million DWT. It promises to be the first time growth in demand for shipping of iron ore, coal, grain and minor bulks such as fertilizer, logs and soya beans exceeded dry bulk fleet growth since 2007, Barclays said. However, ship owners who paid high prices for new tonnage at the peak of the market would still only break even this year, said Jayendu Krishna, Senior Manager at shipping consultancy Drewry Maritime Research. Buyers who paid up to USD100 million for a 180,000 DWT Capesize ore carrier at the top of the market would need a daily charter rate of USD44,000 to USD45,000 to break even, still well above current rates. The price of a similar Capesize ship has since eased to about USD56 million, according to Clarkson Research, as reported by the South China Morning Post.
Hutchison Port profit sinks on ACT acquisition and strike
By : agxadmin
Hutchison Port Holdings Trust, which operates ports in Hong Kong and Shenzhen under Hutchison Whampoa, saw its earnings drop 25% last year to HKD1.67 billion because of a big dip in its Hong Kong operation and the one-off concession to liners after a damaging strike last summer. The Singapore-listed company said fourth-quarter earnings plunged 47% to HKD334.8 million. Higher depreciation costs due to the acquisition of Asia Container Terminals (ACT) in Hong Kong last year and the one-off compensation for the service disruptions during the strike to liner companies affected earnings. Revenue fell 0.3% to HKD12.4 billion for the year. Gerry Yim, Chief Executive of HPH Trust, said improvement in the economies of the United States and Europe would help shore up cargo demand in Hong Kong. Container throughput at Hongkong International Terminals (HIT), which operates 12 berths at Kwai Tsing, dropped 12.4% last year mainly because of a fall in transshipment cargo for the U.S. and Europe. Up to 70% of cargo in Hong Kong is transshipped to other places. The port of Yantian in east Shenzhen handled 1.2% more cargo last year although cargo handling rose 4.7% in the fourth quarter. “The throughput growth at the ports in southern China is expected to have low single-digit growth for this year as world trade recovers,” said Geoffrey Cheng, Director of transport at Bocom International. “The actual growth rate, however, would depend on how many of the production lines are retained in southern China.” The port operator said it was in discussion on new service arrangements with French liner company CMA CGM and Mediterranean Shipping Co, the two consortium members of the proposed shipping alliance P3, which also includes Maersk. P3, which is scheduled to be running from April, will lead to a consolidation in sailings to Hong Kong as Maersk is served by another port operator, Modern Terminals. Yim said different terminals would serve different kinds of vessels and there should be no price war, the South China Morning Post reports.
Hong Kong port loses out to bigger berths in Shenzhen
By : agxadmin
Hong Kong port could lose further business to Shenzhen because an alliance of three shipping companies would need bigger berths for their large vessels and more space at their docks. The consolidation of Maersk, CMA CGM and Mediterranean Shipping Co (MSC), which has been dubbed P3, would lead to a cut of 10 sailings per week from 18 at the Kwai Tsing container terminal, said Sunny Ho, Executive Director of the Hong Kong Shippers’ Council, quoting a report by shipping consultant Alphaliner. The packed layout of berths and shorter berth lengths at Kwai Tsing, which opened in 1972, means only 15 of the 24 berths in Hong Kong can accommodate large container ships or vessels carrying 11,000 to 18,000 TEU. The port facilities in Shenzhen are newer and can handle large vessels. “The area of hinterland per berth at Hong Kong is just half of the international standard because of the acute shortage of land,” Ho said. “Bunging (congestion) is very serious in Hong Kong even though our throughput was down last year.” A port operator in west Shenzhen said its business would increase after P3 was up and running. “The number of calls to Shekou will increase according to the new rotations deployed by P3,” said David Deng, Vice President of China Merchants Holdings International. “Some ports will face call cuts while others will benefit from the consolidation.” Shenzhen overtook Hong Kong as the third-busiest container terminal in the world last year by handling 23.3 million TEU. Hong Kong, which handled 22.3 million TEU last year, saw shipments diverted to Shenzhen during a dock strike last summer. Gerry Yimi, Chief Executive of Singapore-listed HPH Trust, said it had been talking to CMA CGM and MSC on how to improve productivity. He said the P3 members were all “adequately served” in Hong Kong. The P3 shipping alliance, which has yet to be approved by mainland China, the European Union and the United States, is likely to have a 37% share of Asia-Europe trade and 24% of transpacific trade. The rationalization of the services of P3 members, with 255 vessels on 29 loops, will come through consolidation in vessel rotations and the replacement of small vessels with bigger ships. Maersk operates a Triple-e vessel, which has a capacity of 18,000 TEU, which will require a deeper berth to dock. Dredging will be done in Kwai Tsing in the next two to three years to deepen the berth. The Tonggu channel in Shenzhen is also being dredged to make it deeper and this will be completed in April to allow Triple-e vessels to use the port, the South China Morning Post reports.
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