China Shipping treads water despite stagnant transpacific trade
With transpacific trade flat and fuel prices on a limitless climb, carriers are finding themselves in a precarious situation these days.
But of the top five carriers in the transpacific, only APL has lost less volume over the first quarter of 2008 than China Shipping — the Singapore carrier’s volume actually grew.
Gong Qing, general manager of marketing for China Shipping Container Lines, said the next six months to a year will be difficult in terms of volume growth, but that things should perk up in a year or two.
“A lot can happen in two years,” he said in an interview Tuesday with American Shipper in China’s Shipping’s Shanghai global headquarters.
Gong said China Shipping has held steady in terms of market share on the trade, rising from No. 6 last year to No. 5 this year. But aside from the downturn in the U.S. economy affecting volume, there’s also the fuel issue constantly in the background.
Fuel costs for carriers have almost doubled in the last year, Gong said, and even though carriers were able to secure rate increases in contract negotiations this past spring, it won’t completely offset that drastic rise in fuel price.
“We got some increases of $300 to $400 (per TEU), and even higher on inland cargo, but you cannot catch up with just higher rates,” he said. “We still have to feed our vessels with $135 per barrel fuel. And we have to pay the railroads and their floating bunker surcharge. High fuel prices will add a cost on products.”
Gong said that, in the short term, carriers cannot expect shippers to completely cover the additional cost of fuel. But he said shippers must be willing to share in the burden in the near future, as they consign themselves to the realization that long-haul transportation is just getting more expensive.
“We have a clear table and our customers can get access to our tariff Web site,” Gong said, answering a question about whether bunker costs for carriers were clearly delineated for shippers. “They have a very clear idea of the fuel costs we have to pay and the surcharges they have to pay and I think they understand.”
But Gong also said China Shipping has looked at other operational issues to carve out costs, like better utilizing its fleet.
“There are still things to be done to minimize costs,” he said. “We can get our service loops and our port rotations right and better reposition equipment. There are other ways to improve revenue.”
For example, China Shipping this year pulled some vessels from the transpacific to reduce capacity there, and those ships are now serving the domestic coastal trade in China, which is growing quite fast.
It helps that China Shipping is not only the country’s top dog in domestic services, but that it also has two wholly owned feeder subsidiaries — Universal Shipping, which handles barging in the Pearl River Delta; and Puhai Shipping, which provides barging and feeder vessel services on the Yangtze River, the Chinese coast and also in Southeast Asia. For instance, Puhai operates 600- to 700-TEU feeder services to Vietnam’s major ports.
Gong said that in a time where costs are rising, it’s an advantage to control operations.
“With our feeder operation, you can manage costs,” he said. “It’s difficult to manage when using common feeders.”
When asked about whether Puhai was experiencing any significant delays in Vietnam’s ports, he said it hasn’t been a major issue, but that common feeders might be feeling the problem a bit more. ' Eric Johnson