|Hamburg Süd: Another challenging year in global shipping|
|Friday, 20 April 2012 12:23|
Hamburg Süd’s 2011 performance at a glance
Following the powerful recovery of the world economy in 2010, the reporting year saw global growth continuing with slightly lower dynamics. Shipping reaped the benefit in the shape of rising volumes. However, the downward pressure on revenue as a result of increasing overcapacity and a significant rise in costs - especially of fuel - posed problems for ship operators.
Hamburg Süd, which together with the Brazilian shipping company Aliança as well as the tramp activities operating under Rudolf A. Oetker and Furness Withy Chartering, forms the Shipping Division of the Oetker Group, was unable to escape this development entirely.
At some 3.1 million TEU, roughly 9% more containers were transported in 2011 than in the previous year (2010: + 23%).
Freight rates held stable compared with 2010. Due to the somewhat weaker US dollar on the average for the year, the turnover from Hamburg Süd’s liner operations added roughly 6% to approximately €4.2B, a gain slightly out of proportion to shipment volume. With the inclusion of break-bulk and product tanker activities, the shipping group’s total turnover increased to €4.8B, roughly 7% up on the previous year.
2011 was marked by the debt crisis in Europe, the weakness of the US economy, various natural disasters in the Pacific region and political upheavals in North Africa. Nonetheless, global economic output (GDP) grew by some 4 per cent (2010: + 5 per cent).
Against this backdrop, container shipments worldwide rose by approximately 8% to around 150 million TEU. While the major East-West trade lanes, especially from Asia, showed below-average development, shipments on Intra-Asia and a number of North-South routes posted double-digit growth rates.
Driven by an influx of newbuildings and minimal scrappings, global slot capacity increased by roughly 8%. Making themselves felt here were the adjustments with which many ship owners had attempted to reduce the inflow of capacity during the global economic and financial crisis of 2008/09.
The overcapacity building up since mid-2008 (and only slackening for a brief period in the first half of 2010) exerted strong downward pressure on freight rates in the past year. Between Asia and Northern Europe, spot rates at times plummeted by more than 60% compared with the highs of 2010. Most carriers were unable to push through peak season charges, or did so for only an unusually short time. The trade lanes from Asia to South America and Australia/New Zealand were also seriously impacted, with freight rates here falling by up to 50% compared with the peak values of 2010.
Particularly high influxes of large ships with a slot capacity of more than 10,000 TEU were recorded. These vessels are deployed almost exclusively on the routes between Asia and Europe, displacing mid-sized tonnage, which then migrates to the North-South trade lanes – such as from and to South America – and there contributes to overcapacity and downward pressure on revenue.
At the same time, shipping had to contend with significant increases in fuel costs in 2011. The price of a ton of heavy diesel in Rotterdam, the world’s largest bunker market, was still below USD500 at the start of the year. By the end of the first quarter it climbed to and remained at a very high level, ranging between 600 and 675 USD per ton, until the end of 2011. In view of the high pressure on revenue, the additional costs could effectively not be passed on to customers by way of bunker surcharges. But other cost categories, too, especially for cargo handling in the ports as well as for container transport inland, experienced a broad-based increase on the previous year. Further strain was imposed by the appreciation of the currencies of Brazil, Australian and New Zealand against the euro.
These developments ensured that many carriers were back to posting losses following the recovery in 2010. Industry experts estimate that the liner operators overall had to accept a loss of some 5-6 billion USD in 2011 after profits of around 14 billion in the previous year.
Like container liner shipping, the bulk shipping sector also suffered from overcapacity last year. While spot rates for a Panamax bulker in 2010 stood at between 20,000 and 35,000 USD/day, this value fell to just about 10,000 USD/day in part at the beginning of 2011 and has remained flat at a low level ever since. At the present level of spot rates, cost-covering employment of bulkers as well as of product tankers is hardly possible.
With the significant increase in global container shipment volume and the stabilisation of the economic situation of many carriers, 2010 turned out to be but a brief recovery phase. In the face of a flagging global economic dynamic, Hamburg Süd managed nonetheless to increase its cargo volume by 9% to approximately 3.1 million TEU in 2011. Exhibiting particular strength yet again were the trade lanes from Asia. Pleasing performance was seen, too, in the Inter-America and Pacific services. Mediterranean operations, by contrast, fell below expectations as much as did Brazil’s exports, which were dampened by the strong national currency.
Hamburg Süd succeeded in holding freight rates overall on a par with the previous year. Nonetheless, revenues in many trades were not sufficient to achieve surpluses against the background of a sharp rise in operational costs. The average bunker price alone (basis Rotterdam), at approximately 620 USD/ton, was some 37% higher on average than the previous year. Additionally, there were significant increases in variable costs, especially for cargo handling in the ports and for pre- and post-carriage transportation on land. Service providers who had made price concessions during the 2008/09 crisis were able to push through better terms given growing transport volumes.
Given the equally substantial overcapacity in the marketplace, bulk shipping was unable to build on the good previous years and managed to generate only a slight surplus. The result from product tanker operations, which saw a significant decline in volumes, must be regarded as quite pleasing in the light of challenging market conditions.
Ships and containers
The fleet operated by the Hamburg Süd Group as at 31 December 2011 totalled 160 vessels, 43 of them Group-owned. The liner services employed 107 ships and the tramp sector 53. While the number of container ships declined by six units compared with the previous year, the slot capacity deployed in the liner services increased by some 6% to around 395,000 TEU. With the fleet’s rising average capacity, costs per slot were continuously reduced.
A total of five ships of the Santa series entered service in the reporting year. The largest container ships of the Hamburg Süd Group to date, they have a capacity of 7,100 TEU and are capable of taking up to 1,600 reefer containers on board. In terms of their reefer capacity, these vessels rank among the world’s largest. At the end of 2011 the Hamburg Süd Group owned seven Santa ships in total and they are deployed on the trade lanes between Asia or Northern Europe and South America East Coast.
Only very isolated positive signals can be detected for 2012. Whether a sustainable turnaround in the fortunes of container liner shipping will come about in the current year, however, cannot yet be said with any certainty.
At present, the carriers’ global order book amounts to only about 26% of the tonnage in operation; at the end of 2008 it was more than 60%. Additionally, it can be observed that carriers are proceeding to abandon uneconomic routes and idling capacity. The share of laid-up tonnage has therefore been rising constantly for months. Industry watchers consider it possible that 6-7% of the global container ship fleet will be laid up towards the end of the year. Given continued high fuel costs, expectations in the medium term are for high-consumption older tonnage to be scrapped earlier than has hitherto been customary. Should liner shipping companies generally have their ships sail even more slowly (“super-slow steaming”), this would likewise contribute to a reduction in overcapacity.
Latest Book Reviews
- Ferries 2011: British Isles and Northern Europe
- Admiral Nimitz: The Commander of the Pacific Ocean Theater
- A Plain Sailorman In China: The Life and Time of Cdr. I.V. Gillis, USN 1875-1948
- Double Cross: The True Story of the D-Day Spies
- What’s In It For You?
- The Naval Institute Guide To The Ships And Aircraft Of The U.S. Fleet
- Two Roads To War: The French and British Air Arms from Versailles to Dunkirk
Latest CommentsChaithra: A recent Boat/US Magazine atclrie reported that 70% of boat sales were sales of used boats. It's no ...
Dermot bremner: Every system has its day, they have their day and cease to be .
Alfred Lord Tennyson
aryastark: I have been having a whole discussion with my friend's husband (who is an engineer) aboutnatural gas...
Nazery Khalid: Hi Ross
Greetings from Malaysia. Thanks for your comment and for sharing your invention...