Global shipping industry sees calmer waters ahead as freight rates increase

Shippers listed on the mainland lose 5 billion yuan in first quarter of year

The global shipping industry has seen its woes continue to worsen after experiencing a painful year in 2011.

It reported widespread industry losses in the first quarter of this year, the result largely of surging oil prices and a glut in the supply of shipping vessels.

But as freight rates gradually move upwards, industry analysts say they think a mild recovery for the industry is just around the corner.

In the first quarter of the year, Chinese shippers listed on the mainland lost 5.06 billion yuan ($791 million), industry reports showed.

China Ocean Shipping (Group) Co, the country's largest State-owned shipping conglomerate, reported a loss of 2.7 billion yuan for the first three months of this year after seeing a historic loss of 10.5 billion yuan last year.

China Shipping (Group) Co, another large shipping company, registered a loss of 320 million yuan in the first quarter after losing 2.7 billion yuan in 2011.

In the meantime, Maersk Line, the world's largest container carrier by capacity, reported losing $599 million during the first quarter of the year. In the same period last year, it had a profit of $424 million.

That result was even worse than what the Danish company had reported for the same period of 2009, when the shipping industry was reeling from the global financial crisis.

But since the first quarter of the year is usually a slow period for the shipping industry, and since freight rates are gradually increasing, analysts believe the second quarter might bring some hope.

The Baltic Dry Index, which tracks shipping rates for bulk goods such as coal, iron ore and grain, drifted upward to about 1,100 this month after plunging to 647 in February, its lowest point since 2009.

In the meantime, container shippers worked harder to push their freight rates back to a point that will alleviate their woes. According to industry data, the cost of shipping a container on the Asia-Europe route recently went up to about $1,700, increasing from $500 at the end of last year.

"We will continue our initiatives to improve rates throughout the year," said Nils Andersen, group CEO of the Copenhagen-based AP Moller-Maersk Group.

Wan Min, managing director of China Ocean Shipping's container arm, told media outlets that the company's work to increase freight rates "has paid off". The company plans to further raise its container rates in the coming two months, a change that, if accepted by the market, will improve the company's performance, Wan said.

But there are still reasons to proceed with caution. Despite the current oversupply of shipping vessels, new ones are still expected to be launched into the market, which might snuff out the feeble recovery, analysts said.

China's weak increases in trade are also giving rise to worries that the trade volume on the Asia-Europe route may not be enough to shore up the shipping companies' recovery. Toward the end of last year, the country's trade began increasing at a slower pace than before and its future prospects remain dim.

In April, China's exports increased by 4.9 percent year-on-year, down from 8.9 percent the month before.

Meanwhile, imports last month increased by just 0.3 percent from a year earlier, slowing from a 5.3 percent rise in March.

zhousiyu@chinadaily.com.cn

(China Daily 05/24/2012 page15)