If you listen carefully, you can hear the faint sounds of sanity echoing across the shipping corridors of Asia.
Picture the scene: An unshaven container shipping line executive sits hunched over the company’s orderbook, beads of sweat smudging the number-filled columns. He reaches out with a pen in his trembling hand then abruptly shoves the book off the table.
“I won’t do it!” he
yells, leaping up and stumbling from the room, his maniacal laughter drowned
out by the pounding feet of men in white coats who whisk the tortured executive
off to rehab.
The executive in
our imaginary screenplay is Evergreen vice-president Bronson Hsieh, except he
went the opposite of crazy. He went sane.
According to a report this week, Hsieh has decided to put plans to build 60 small-to-medium container ships on hold until after the Panama Canal expansion is completed in 2015.
What the ...! In the market share-chasing world of container shipping, this kind of clear thinking is as refreshing as it is rare.
The Evergreen exec said the global container ship fleet would expand by 10 percent next year and ship owners should exercise stricter controls over their vessel capacity. This is all according to press reports, but if true it is a welcome return to reality by one of the world’s largest shipping lines and a path other lines should look to follow.
There is too much capacity in service, being delivered and on order, and with demand expected to be weak for the foreseeable future, the lines need to put the brakes on newbuildings.
In all fairness,
Evergreen has been one of the more conservative lines when it comes to ordering
capacity. The Taiwan carrier held off ordering while all around it lines were
frantically adding new ships. This allowed Evergreen to better weather the
market downturn, and the line only unleashed its credit card in 2010 with the
announcement of plans to build 100 vessels.
So far Evergreen
has ordered only thirty 8,000 TEU ships and its decision to put 60 newbuildings
on the backburner shows Taiwan’s largest shipping line has not abandoned its
cautious approach.
Meanwhile, over at NOL, boss Ng Yat Chung felt the need to raise capacity issues. At the TPM Asia shipping conference in Shenzhen this week he said there was an encouraging pattern of capacity reductions among the major lines.
"It's a sign of optimism that carriers are behaving well,” he told the WSJ. But with 34 ships worth $4 billion on order, NOL’s good behaviour badge may have to be placed on hold until we see what the market is up to in early 2014 when the ships are to be delivered. Of course, ships take a couple of years to build and capacity planning needs to be done well in advance using crystal balls and throwing bones, with the thumb clamped firmly between the gums. But with such severe consequences inherent in getting it wrong, and if profitability is so important, we can’t help wondering why carriers don’t just routinely err on the side of caution rather than fighting a never ending and destructive battle with volatile capacity levels.