• ITVI.USA
    15,861.160
    -7.510
    0%
  • OTLT.USA
    2.793
    0.019
    0.7%
  • OTRI.USA
    21.460
    -0.010
    0%
  • OTVI.USA
    15,867.600
    -6.080
    0%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,861.160
    -7.510
    0%
  • OTLT.USA
    2.793
    0.019
    0.7%
  • OTRI.USA
    21.460
    -0.010
    0%
  • OTVI.USA
    15,867.600
    -6.080
    0%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American Shipper

UASC commits to vessel order, East Coast trade

UASC commits to vessel order, East Coast trade

   United Arab Shipping Co., going against the industry grain, this month reconfirmed orders with its Korean ship builder for nine 13,000-TEU container vessels as the company remains optimistic about future trade trends, Benjamin M. Massa, general manager for its North American operation, said Thursday.

   The Dubai-based company is scheduled to take delivery of the first vessel in early 2011, a delay of only three months from the original plan, he said at the Virginia Conference on World Trade, sponsored by Port of Virginia and the state's economic development authority.

   Ocean freight carriers, facing billions of dollars in losses this year, are canceling, postponing or changing contracts with shipyards to build massive new container vessels to preserve cash. The global recession also means that the extra ship capacity is not needed, particularly since liners have already parked hundreds of existing container vessels to reduce operating costs.

Massa

   In the past two years, UASC has added nine 7,000-TEU and nine 4,000-TEU vessels to its fleet. By the time the new mega-ships are delivered the shipping line's fleet will comprise more than 56 vessels with more than 300,000 TEUs of capacity.

   UASC ordered the 13,000-TEU vessels from Samsung Heavy Industries in June 2008. The estimated value of the contract is $1.5 billion.

   The company's ambitious shipbuilding program is based on the fact 'that we're a bit more bullish' on the market in the next four or five years than other carriers, even though it may not reach the recent peak during the middle of the decade, Massa said.

   'So we think that we will be playing a much more active role in the Asia/U.S. market and that the East Coast will play a predominant role,' he added. The United States represents about 15 percent to 20 percent of UASC's global business.

Brennan

   But the only way for carriers to make any money on East Coast container business is if there is a significant increase in trade or rationalization within the industry, said James Brennan, a partner with management consulting firm Norbridge. To fully utilize new capacity when the average size of ships doubles and trade volume stays flat means carriers should halve the number of ships in use, he said.

   In 2008, East Coast ports handled 5 million loaded TEUs of Asia traffic. The trade was carried by 15 liner companies operating 16 to 17 services spread out over multiple ports. Asia/U.S. East Coast container volumes are still modest compared to other trade lanes and not enough to fill up new vessels scheduled to come on line. Maintaining existing service levels would leave vessels at 40 percent utilization.

   Brennan said if the existing capacity was transferred to larger 10,000-TEU ships there would only be need for six strings. Even a best-case scenario of 5 percent annual growth in volume through 2015 only requires 12 strings of such vessels, 25 percent less capacity than needed in June 2008.

   Carriers this year have begun to enter more vessel sharing arrangements to better utilize capacity, but Brennan said they still don't seem ready to make drastic cuts in U.S. routes.

   UASC likes the trend of cargo migrating from West Coast to East Coast ports because ocean carriers can internalize more revenue that previously had to be shared with railroads for a transcontinental move, Massa said. Other benefits of using East Coast ports are that carriers have better opportunities to find backhaul cargo rather than quickly turning them back empty to Asia, need to put fewer containers in circulation and experience better labor productivity.

   East Coast dock gangs typically average about 35 to 40 lifts per hour compared to the mid-to-high 20s for West Coast dockworkers.

   The savings are offset in part by higher operating costs such as Panama Canal fees and the need to operate three extra vessels in a string to maintain weekly schedules.

   Ports on the East and Gulf coasts also face challenges with adequate water depth for next generation vessels and railroad and road infrastructure.

   East Coast ports gained about 2 percent market share in 2007 and 2008 and now represent about 28 percent of all import trade. They handle about 25 percent of all U.S. exports.

   UASC is jointly owned by six Gulf Arab states. ' Eric Kulisch

We are glad you’re enjoying the content

Sign up for a free FreightWaves account today for unlimited access to all of our latest content

By signing in for the first time, I give consent for FreightWaves to send me event updates and news. I can unsubscribe from these emails at any time. For more information please see our Privacy Policy.