Tuesday, March 30, 2010

When They say "Economic Recovery" Is Just Around The Corner? Ask Them What This Means>

Asian Ocean Carriers Slashed Fleets
Peter T. Leach Mar 30, 2010 6:33PM GMT The Journal of Commerce Online - News Story

Operators reduced exposure to fragile liner shipping markets, says Alphaliner
A number of Asian carriers significantly trimmed the number of containerships they own over the last 15 months as they sought to reduce exposure to the fragile liner shipping markets, according to Alphaliner.
The seven major Asian operators surveyed by Alphaliner disposed of ships with capacity of 282,000 20-foot equivalent units during the period, representing 16 percent of their combined fleet. This includes 155,000 TEUs capacity that these carriers sold for scrap and another 127,000 TEUs capacity that was sold in the second-hand market and in financial engineering deals.
The Asian carriers were not the only carriers that trimmed their fleets. Among other major lines, CMA CGM, Mediterranean Shipping Company and Maersk Line have also taken steps to dispose of parts of their fleets, Alphaliner said. But the disposal of ships by CMA CGM and MSC were offset by the delivery of new ships and new charter hires.
For most of the Asian carriers, however, the disposals were not offset by the delivery of new ships or through charters, which resulted in a loss of market share. Also as a percentage of the total owned fleet, the Asian carriers’ disposals are significantly higher.
In particular, the moves by the three Japanese carriers, NYK Line, MOL and “K” Line, to reduce their exposure to the liner trade, mark a longer-term shift in these carriers’ corporate strategies to downgrade the container shipping business segments. Within the last few months, NYK and “K” Line (as well as Japanese owners related to “K” Line) sold nine over-Panamax containerships built between 1997 and 2002 of between 5,500 and 6,150 TEUs. The sales were conducted privately, at prices that were largely regarded as very attractive to the buyers.
The ships obtained strong charter backing immediately upon their sale.
In addition, MOL has been active in disposing a large part of its fleet including sending a quarter of its owned vessels for scrap over the last 15 months. The 15 MOL ships demolished, a total of 44,500 TEUs removed, were among some of the youngest ships sent for scrap last year, at an average age of 21 years. These moves have seen all three of the Japanese carriers drop in the carrier rankings, with no Japanese carrier currently represented in the top 10, a situation that is unprecedented since the Japanese carriers entered the container shipping markets in the ‘70s.
Another Asian carrier that has seen a drop in market share is Evergreen, which fell out of the top 4 rankings this month, the first time it is not in the top 4 carrier rank since the 1980s. Evergreen has shed 34,000 TEUs of its owned capacity during the last year, including nine of its G/GX class ships (excluding seven more that were sold on leaseback deals earlier) built between 1983 and 1988. Evergreen remains the sole major carrier with no new ships on order on its books and has so far refrained from making moves to rebuild its fleet.
Hanjin Shipping was the carrier that had the largest shift in its owned fleet. It sold 13 container ships of between 4,000 and 5,300 TEUs in June of last year. This was part of a 16-vessel deal (including 3 bulk carriers) concluded with Korea Asset Management Corp., which paid around $383 million for 17 vessels, including one bulk carrier from Hyundai Merchant Marine, which were chartered back to the sellers for five to 10 years. Hanjin’s sale represented 39 percent of its owned containerships as the company struggles with a strained balance sheet with a debt-to-equity ratio of over 220 percent at the end of 2009.

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