Bangalore: State-run Shipping Corp. of India Ltd, or SCI, has joined a trade body representing ocean container carriers in Europe, seeking to protect its interests against the backdrop of declining freight rates amid a global economic downturn.
SCI has become a member of the European Liner Affairs Association (ELAA), said J.N. Das, a director looking after liner and passenger services, days after Europe abolished regimes that set freight rates and surcharges.
SCI, India’s only mainline ocean container carrier, had been a member of the India, Pakistan, Bangladesh, Ceylon (IPBC) Conference, a group of container shipping firms that operated between Europe and the Indian subcontinent. The IPBC Conference members set freight rates and surcharge irrespective of market conditions.
Shipping conferences such as IPBC were abolished from 18 October after the European Commission, or EC, removed the antitrust immunity given to such groups operating from Europe.
Cargo collaboration: A Hapag-Lloyd container ship in a handout image. Brussels-based ELAA represents liner shipping companies’ interests and counts among its members most of the world’s major liner firms. Bloomberg
Brussels-based ELAA represents the world’s liner shipping industry’s interests vis-a-vis EC and other institutions. But, unlike the conference system, ELAA member lines cannot discuss and agree on rates, surcharges and schedules or exchange information on market share, volumes or prices.
ELAA can meet in the presence of lawyers to ensure compliance with EC competition law and the minutes of the meeting have to be made available to the public.
The Association counts among its members most of the world’s main liner shipping companies, including AP Moller-Maersk Group, China Shipping (Group) Company, CMA-CGM Group, China Ocean Shipping (Group) Company, CSAV (Compañia Sud-Americana de Vapores S.A.), Evergreen Marine Corp. (Taiwan) Ltd, Hamburg Sud KG, Hapag-Lloyd AG, Hanjin Shipping Co. Ltd and Hyundai Merchant Marine Co. Ltd.
Other members include Independent Container Line Ltd, Kawasaki Kisen Kaisha Ltd, Malaysia International Shipping Corp. (MISC), Mediterranean Shipping Co. SA (MSC), Mitsui OSK Lines, APL Co. Pte Ltd, NYK Line (Nippon Yusen Kaisha Line), Orient Overseas Container Line Ltd, Pacific International Lines (Pte) Ltd, United Arab Shipping Co. (SAG), Wan Hai Lines Ltd., Yang Ming Marine Transport Corp., and Zim Israel Navigation Co. Ltd.
SCI currently owns three container ships while another five have been hired to run services to Europe, East Asia and West Asia.
Two new container ships, each with a capacity to load 4,400 standard containers, will join the fleet by the end of November.
SCI will deploy the two new ships on the India Subcontinent Europe Service (ISES) that it runs in partnership with K Line, Zim Integrated Shipping Services Ltd, Yang Ming Line and MISC Bhd. The two ships currently servicing this sector will be pulled out and deployed on another route, which is yet to be decided, Das said.
“We need partners to run a service. But, everybody is waiting and watching because of the troubles in the financial sector and the slowdown in western economies,” he said.
The two new ships are coming into the company’s fleet at a time when the rates for shipping cargo containers have fallen sharply on routes to Europe, the US and even China as over capacity and lack of demand for goods drive down rates.
The cost of shipping a cargo container from India to Europe has dropped to about $700 (Rs34,160) per container from about $1,100 in August. Even rates to China have declined to $600 per container from about $1,200 a few months earlier as China pauses for breath after hosting the Olympic Games.
Das said SCI was making losses on the China route as the freight rates did not increase in tandem with the rise in fuel prices that jumped 90% between March and August this year. “We were not even recovering the fuel costs on this route. Now that the fuel prices have reached 2007 levels, there is a little let-up,” he said.
Experts say the rates will go down further as some 65 new ships, each with a capacity to carry in excess of 8,000 standard containers, will be launched in the next two years.
“With the supply-demand balance weakening, the management of capacity will become crucial for carriers over the short and medium terms,” the London-based maritime advisory firm Drewry Shipping Consultants Ltd said in a statement accompanying the release of its Annual Container Market Review and Forecast for 2008-09.
“The situation will only deteriorate further in 2009 since fleet growth in the big ships sector is set to continue to grow much faster than demand. It is supply which will be the largest headache for the industry in 2009,” it said.