Maersk's intra-Asia unit MCC says its running a charity it wants to end
AS far as sailing ships goes the intra-Asia trade is a "charity", despite its three per cent annual growth, saysTom Wickmann, chief executive of MCC, Maersk's Singapore-based intra-Asia specialist.
Speaking at the TPM Asia conference in Shenzhen this week, he said the freight rate only "barely covers costs of moving the container onto the ship and off the ship again".
That means "we are sailing the ships for free on many corridors. It's a charity. There is no contribution left after paying for the variable costs to also pay for the ships," he said.
"One of the scary parts about this is that the cost picture is as low as it has ever been. Chartering costs have never been lower and although the oil price has jumped a little, it is still very low from what we saw three, four years ago.
"So there is not much more we can do to sail our ship cheaper than what we are doing already.
"If we are not making money at present freight rates then what is going to happen if the oil price increases or the THC [terminal handling charges] increase." he said.
Taking one of the many intra-Asia submarkets, this one, composed Korea, north China and east China, Russia, Cambodia and Thailand, Mr Wickman said the competition is fierce.
"There are 97 weekly services in this market and 29 carriers. So the competitive scenario landscape is also very different from the long-haul trades.
There are not many alliances but there are a lot of slot swaps and VSAs [vessel sharing agreements] going on in intra-Asia," Mr Wickmann said.
"We are faced with infrastructure challenges, but the problem is not so much the ports in themselves, but with the lack or poor quality of the infrastructure behind them, he said.
"It is not that the ports have to be ready for 18,0000-TEU ships - the issue is that we are dealing with smaller ports and these smaller ports are growing - some quite fast.
"Those dealing with the Philippines know of the disaster 18 month ago when our ships were waiting two weeks just to get a berth.
But this was not because of mis-performing terminals it was because of the infrastructure behind these ports that didn't work.
"Myanmar had 11-day holiday and Myanmar is growing. So what happens when you stop working for 11 days? If you have ever been to the Port of Rangoon it is in the middle of the city and there is no decent infrastructure behind," Mr Wickmann said.
"So very quickly, the ports were totally full and there we ended up waiting two weeks trying to get a berth.
"The worse place for us is Bangladesh where the ports are also swimming in containers which are still coming in and it is impossible to get a berth."
Mr Wickmann said he had been frequently asked if he were going to take old panamax ships since the canal had been widened, to which he gave a flat No.
Much as they might seem to fit, conventional panamaxes are not suited to the intra-Asia trade there only benefit being their larger size, which only pays off if they are full, a doubtful prospects today. There were also few ports which can handle them, he said.
AS far as sailing ships goes the intra-Asia trade is a "charity", despite its three per cent annual growth, saysTom Wickmann, chief executive of MCC, Maersk's Singapore-based intra-Asia specialist.
Speaking at the TPM Asia conference in Shenzhen this week, he said the freight rate only "barely covers costs of moving the container onto the ship and off the ship again".
That means "we are sailing the ships for free on many corridors. It's a charity. There is no contribution left after paying for the variable costs to also pay for the ships," he said.
"One of the scary parts about this is that the cost picture is as low as it has ever been. Chartering costs have never been lower and although the oil price has jumped a little, it is still very low from what we saw three, four years ago.
"So there is not much more we can do to sail our ship cheaper than what we are doing already.
"If we are not making money at present freight rates then what is going to happen if the oil price increases or the THC [terminal handling charges] increase." he said.
Taking one of the many intra-Asia submarkets, this one, composed Korea, north China and east China, Russia, Cambodia and Thailand, Mr Wickman said the competition is fierce.
"There are 97 weekly services in this market and 29 carriers. So the competitive scenario landscape is also very different from the long-haul trades.
There are not many alliances but there are a lot of slot swaps and VSAs [vessel sharing agreements] going on in intra-Asia," Mr Wickmann said.
"We are faced with infrastructure challenges, but the problem is not so much the ports in themselves, but with the lack or poor quality of the infrastructure behind them, he said.
"It is not that the ports have to be ready for 18,0000-TEU ships - the issue is that we are dealing with smaller ports and these smaller ports are growing - some quite fast.
"Those dealing with the Philippines know of the disaster 18 month ago when our ships were waiting two weeks just to get a berth.
But this was not because of mis-performing terminals it was because of the infrastructure behind these ports that didn't work.
"Myanmar had 11-day holiday and Myanmar is growing. So what happens when you stop working for 11 days? If you have ever been to the Port of Rangoon it is in the middle of the city and there is no decent infrastructure behind," Mr Wickmann said.
"So very quickly, the ports were totally full and there we ended up waiting two weeks trying to get a berth.
"The worse place for us is Bangladesh where the ports are also swimming in containers which are still coming in and it is impossible to get a berth."
Mr Wickmann said he had been frequently asked if he were going to take old panamax ships since the canal had been widened, to which he gave a flat No.
Much as they might seem to fit, conventional panamaxes are not suited to the intra-Asia trade there only benefit being their larger size, which only pays off if they are full, a doubtful prospects today. There were also few ports which can handle them, he said.