Total shipping line capacity is thought likely to climb more than 13% this year to over 10 million 20-foot standard containers while demand is growing at the slower rate of around 9.7%, says the ministry. Capacity grew at an average of 13.9% in 2006 while demand increased 10.2%.

Sea carriers such as AP Moeller-Maersk A/S and Neptune Orient Lines have reported a drop in profits on the back of falling rates and a record number of vessels being delivered. Rising costs of inland transport, fuel and port fees have also trimmed the earnings of the shipping lines, thereby eroding the gains from expanded global trade. ‘With excessive capacity being added, shipping lines are aggressively competing to increase their market share and that is causing rates to fall as well as hurting their profitability,’ ventures Lim Jin Soo, a researcher at the Korea Marine Institute.

In September last year, Maersk launched the world’s biggest container vessel, which is capable of carrying at least 11 000 containers between Europe and Asia; the company plans to add six more vessels of a similar size to the same route by the end of 2008. Meanwhile, other companies are rushing to add these ultra-size vessels to their fleet; also in September, CMA CGM SA of France ordered eight ships capable of carrying 11 400 containers to be delivered from 2009. South Korea’s largest shipping line Hanjin Shipping Co. ordered five vessels in August last year, each with a capacity of 10 000 boxes.

Some 250 vessels capable of accommodating more than 5000 containers will be delivered in 2008, making up half of the current global fleet, says the South Korean ministry. Shipyards in South Korea, home to the world’s largest shipbuilders, delivered 2.78 million compensated gross tonnes (a measure of building time and human resources used per tonne) in the third quarter of last year - equating to a total value of US$ 4.49 billion and an increase of 20% over 2005, according to the Ministry of Commerce, Industry and Energy. In line with productivity increases, Hyundai Heavy Industries Co. and other shipyards in South Korea delivered more than 2 million compensated gross tonnes every three months from the first quarter of 2006.

Compared to a year earlier, the average shipping rate for goods moved to the USA from Asia fell 5% to US$ 1753 per 20-foot standard container in the second quarter of 2006, according to industry tracker Containerisation International. Fees charged to transport goods to Europe from Asia dropped 22% to an average of US$ 1408 per box. Maersk, Hapag-Lloyd AG and other shipping lines have been reducing capacity by temporarily suspending some of their services in an effort to stem further declines in rates. ‘There is a chance rates may rise should these measures prove to be effective,’ says Mr Lim. ‘Continued economic growth in China is also positive for shipping lines.’

According to the World Bank, the Chinese economy - already the world’s fourth largest -may expand a further 9.6% this year following 10.4% growth in 2006. Some 176 million containers will be handled at ports in northern Asia in 2007, thus accounting for 36% of global volumes, says the South Korean ministry.

Acknowledgement

Part of RecyclingBizz archive of February 2007