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Not much to look forward to this year for oversupplied carriers

Posted to Far East Maritime (by on April 29, 2011

It looks like the long anticipated shipping slowdown has arrived.

The first quarter results have been coming in over the last month and they are a mixed bag of good, bad and ugly.

Good would be China’s Cosco Shipping, a subsidiary of the country’s largest shipping firm China Ocean Shipping (Group) Co, which announced a 150 percent increase in net profit. Okay, so it was only US$52 million, but 150 percent is still 150 percent.

Also in the good category was Orient Overseas Container Line (OOCL), which saw its first quarter cargo volume increase by 12.6 percent in Q1. In a quarterly operational update, the Hong Kong-based carrier said total revenue had grown by 17.2 percent to $1.32 billion. Average revenue per TEU rose 4.2 percent.

Bad would be the other Cosco subsidiary China Cosco Holdings that cruised to a net loss of $77.3 million in the first quarter as the over supply of vessels began to bite.

Most of the loss was attributed to the slumping dry bulk market, but container revenue could only muster a 3.8 percent growth.

Also bad was Hyundai Merchant Marine, Korea’s number two carrier, posted a first quarter operating loss, blaming slowing demand for container shipping services for its slow slide into the red.

Ugly would have to be CSAV, under severe financial pressure, and Horizon Lines that is unable to service its debt. The Containership Company is also a shoo-in to this ugly category.

More first quarter results will be coming in and most of them will probably be reasonably good. But the second quarter is going to be a brutal one.

According to Alphaliner, April will see a record amount of tonnage being delivered to the world’s shipping firms. The market intelligence provider estimates that a total of 32 ships totaling 226,500 TEUs will be delivered during the month.

May is not much better, or worse, with 204,000 TEUs of ships scheduled to join the fleet.

By the end of May, more than 660,000 TEUs will have been added to the global fleet, arriving just in time for slowing trade.

This has seen freight rates dropping with rates at below break even on the Asia-Europe trade.

With tonnage amounting to1.35 million TEU due to be delivered this year, the container shipping industry better hope for a very robust peak season if they are to end the year in any kind of profitable state.

But that may be wishful thinking.

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