Grim times call for new measures

Grim times call for new measures       There was CSAV's rescue deal, then APL's offering of a rights issue. Evergreen and China Shipping ignored decades of ill-will between Taipei and Beijing to partner on four major trade loops. That all followed the unprecedented cooperative deal on the transpacific between erstwhile rivals Maersk Line and CMA CGM.
      The common thread of all these recent events is this: unusual times have prompted new ways of thinking.
      Let's take these one by one. The growing partnership between Maersk Line and CMA CGM is oh-so-interesting. The lines already had ties on the transatlantic and North America/Oceania trades, but since the turn of 2009 have ramped up their cooperation to new levels.
The headline-grabbing news was their joint transpacific loops ' Columbus and Hudson ' that started in May. But according to ComPair Data, it runs much deeper. There are two other transpacific services that Maersk and CMA CGM partner on where Mediterranean Shipping Co. is also involved (meaning the three biggest lines in the world working together) as well as three Asia/Europe loops. That's a lot of collaboration on the world's two biggest trades.
      A move that made less noise but is incredibly significant from a political standpoint is the tie-up in early June between Evergreen in Taiwan and Shanghai-based China Shipping. Though Taiwan's Yang Ming has long been a partner in the CKYH Alliance with China's COSCO Container Lines, this is the first bilateral China-Taiwan big carrier tie-up since relations between Taipei and Beijing warmed last year.
      From an operational standpoint, it also links together two of Asia's four biggest carriers, ones that have largely run standalone services or partnered with European lines.
      'They'll be more consortiums, more consortiums, more consortiums,' said Ed Zaninelli, vice president of transpacific westbound trade for OOCL, at the Agriculture Transportation Coalition annual meeting in San Francisco in early June. 'We're all going to be sleeping with some strange people.'
      Not long after that partnership was announced came a double dose of financial news. The beleaguered Chilean line CSAV said it had secured as much as $360 million in capital infusions from German ship owners that charter most of the carrier's capacity.
      That deal will set in motion two separate cash infusions from CSAV shareholders as the line makes a desperate bid to stave off bankruptcy and avoid becoming the first truly large casualty of 2009. That the ship owners agreed to the deal, which including lowering charter rates in exchange for CSAV shares, spoke to the desperation in the market. Charterers were loathe to see their deals with CSAV go belly-up as there would be no new takers for their ships.
      A week after that, APL said it would be offering its shareholders a rights issue (essentially an in-house initial public offering) in the hopes of raising nearly $1 billion.
      That the CSAV and APL deals came so close to each other underscores another point ' no one is immune in this crisis, not a struggling line with little presence outside of South America, nor one of the strongest, most famous names in global shipping.

Suez gets its groove back
      Well that sure didn't last long. As soon as oil prices started picking up in spring, a few of those services that were being redirected around the tip of Africa instead of through the Suez Canal went back to Suez transits, at least temporarily.
      Both ComPair Data and AXS-Alphaliner report that two major Asia/Europe services have or will permanently sail via the Suez ' Mediterranean Shipping Co.'s Lion has already done so and CMA CGM's FAL2 loop will do so in July or early August.
      Another service, Maersk's AE-6, had scheduled sailings via the Suez in June though the long-term schedule indicates they'll return to a Cape of Good Hope routing. And the cape will have lost another service when Evergreen suspends its CEM Asia/Europe loop, which had been sailing around Africa ' as it combines with China Shipping on a similar service that transits the Suez in both directions.
      The reasons for the gradual return to the Suez may be varied, though lower canal tolls don't appear to be one of them. As oil prices rise (bunker prices have doubled since January to nearly $400 per ton), the cost of sailing via the Cape of Good Hope goes up to levels that some carriers see as unviable, even with the canal tolls factored in.
      As demand perks up ever so slightly in advance of the Christmas season, and some idled capacity is re-introduced into Asia/Europe services, transit times start to matter a little bit more.
      These measures were only ever going to be temporary, unless oil prices and demand stayed at depressed levels. Nice as it was to get a break on fuel, running one-third empty ships with at-cost (or below-cost) rates was never going to balance out the savings on bunker.
      Carriers would much rather have a steady flow of business and pay higher fuel rates than the other way around. That way, revenue is generated and can be diverted back to the business in ways to improve efficiency. Quick-thinking as the Cape of Good Hope diversions were, they also were counter-intuitive to the mindset ingrained in carriers this decade ' to deploy new, large, clean ships with fast transit times.
      If oil prices rise and stay up, then that may be a positive sign that demand will soon follow, because the global economy already showed in the closing months of 2008 that it won't sustain high oil prices with no business being done. And if oil prices continue to rise, the Cape of Good Hope routings may be but an interesting tale from 2009. And that's not necessarily a bad thing for carriers.

www.carrier.com
      The ocean carrier industry's Internet-ization is well and truly underway.
      In the last few weeks, I've noticed a couple interesting ways carriers are attempting to reach out to customers via the ol' World Wide Web.
      Maersk Line has a flashing graphic on its home page offering rates on specific Asia/Oceania routes. The destinations aren't as interesting as the way they're presented. If you looked quickly, you might think you had logged on to Expedia or Travelocity, where they might be offering cheap airline deals to Las Vegas.
      On another twirl around the Internet, I found out that the French carrier CMA CGM has a Facebook page. For those not in the know, Facebook is the new Myspace, which was the new texting, which was the new e-mail … you get the picture.
      That CMA CGM is on Facebook, a tool primarily used by teens through 30-somethings, speaks volumes about the way carriers are trying to adapt to a new audience.