CMA CGM tells smaller ships to withdraw from Asia-Europe to halt decline

NEW capacity coming on Asia-Europe trade lanes threatens to outpace demand while freight rates on east-west deteriorate unless smaller containerships withdraw, said Rodolphe Saade, executive of mega ship owner CMA CGM.

Trading conditions in the first half of the year have been difficult for many lines including Maersk which the French shipping giant shares joint services, suffering a profit decline of US$120 million between April and June, reported London`s Lloyd`s List. Germany`s Hapag-Lloyd and Singapore`s APL also suffered second quarter losses despite growth elsewhere, said Mr Saade.


The current order book is bulging with the most of the 1.6 million TEU on order in the 7,000 TEU range bound for Asia/Europe rather than the transpacific.


Spot rates are dampening with the new World Container Index reporting spot rate shrinkage on Shanghai-Rotterdam trade of $22 in less than a week to $1,512 per cent FEU with the Shanghai Containerised Freight Index decreasing by almost half from February to $1,092 per TEU.


Of those 60 services between Asia and Europe, 13 use ships of between 2,500 TEU and 4,999 TEU and 26 are of 5,000 TEU to 7,499-TEU and "must be in trouble", said Mr Saade.


The New World Alliance and the Grand Alliance will feel the pressure to protect its Asia-Europe trades by ordering more in the 13,000-TEU range rather than its current average capacity of 8,000 TEU or less. CMA CGM has upped its tonnage to 16,000-TEU capacity on joint services with Maersk to keep in line with its 18,000 vessels.


Maersk group CEO Nils Andersen also has been critical of smaller players who weaken the overall picture and "get carried away and order new ships" investing in a trade where you can`t gain market share or make money.


APL, Hyundai Merchant Marine (HMM) have vessels of 10,000-TEU capacity on order with Japanese NKK and MOL chartering these vessels from partner lines.


Although the trade lane is depressed, growth is returning Mr Saade said, forecasting a classic year for 2011 after record profits for carriers in 2010.