Oversupply to remain even as Asia shipping demand grows

The global shipping industry is looking to Asia for future growths but oversupply continue to be a top challenge for container vessel and oil tanker operators, industry players said Tuesday.

Industry leaders speaking at the ongoing Sea Asia 2011 in Singapore said they expected Asia to the key driver of growth in the coming years. Asia is projected to grow 7.9 percent this year in terms of economy, compared with 3.9 percent for the global economy, and China has become the largest trader in Asia, said Yang Shaopeng, chairman of SITC International Holdings, the largest non-state-owned Chinese mainland-based shipping logistics firm.

Yang also said intra-Asia trade is growing fast thanks to freer trade flows within the region. The Intra-Asia container shipping volume grew by 9.7 percent from 2006 to 2009 and hit 27 million TEU (twenty-foot equivalent unit) in 2010.

The network of trades within Asia had not been hit as hard in the global financial crisis as the mainline trades had also recovered faster when the market started to bounce back.

"What we see is more of an increase in the short sea area," compared with the focus on long-haul trades such as East Asia to Middle East, though the Asia-Europe and Asia-United States lines will continue to be important, said Eng Aik Meng, president of APL, the container shipping arm of Singapore's Neptune Orient Lines.

The three-day exhibition and convention event Sea Asia 2011 also made "the Asian Voice in World Shipping" its theme this year. The show of 13,600 square meters attracted over 350 exhibitors from 40 countries and regions, with more than 40 exhibitors from China taking up more than 600 square meters, second only to host Singapore.

But it does not mean there is no challenges.

Industry players said they were already faced with significant possibility of shipping capacity oversupply before the downturn in 2009, and now they are almost back where they were.

The volume of intra-Asia container shipping demand is estimated at 27 million TEU this year, compared with a supply of 34 million TEU, Yang said.

Kenichi Kuroya, president and chief executive officer of Kawasaki Kisen Kaisha, Ltd. ( "K" Line), said his company can only fill up less than 90 percent, or only 85 percent, of its container vessels.

For a container operator to be on equal footing in negotiations with its clients, it needs to be able to fill up 90 percent of its container vessels.

"This year will be the toughest," Kenichi said, adding that he expected his company to be able to fill up close to 90 percent its container vessels this year as a whole, and above 90 percent next year.

Kenichi said his company was laying up several its container businesses.

"Can we behave this year? This is a severe challenge for the CEOs of each container operator," he said.

Some are even seeing an opportunity to capitalize on the rising lay-ups of bulkers and tankers. Industry magazine Seatrade said that the ship services arm of BP was recently acquired by a group of former executives to make it a vessel lay-up and marine services firm and renamed International Shipcare.

"It will be a weak market over the next two to three years because of an oversupply. The number of ships coming into lay-up will rise exponentially," said Andrew Lockie, director of International Shipcare.
(Source:http://news.xinhuanet.com)