Overcapacity could spark new rates war among liners, warns Evergreen chief.

Evergreen chairman Chang Yen-i has warned that, with the large number of newbuild mega-box ship deliveries beginning this year, liner operators could see a return of pre-pandemic rates wars, if consumption fails to keep up with the capacity growth.

Mr Chang was speaking at the National Association of China Shipowners Chinese New Year celebration on Wednesday.

Evergreen itself has 49 vessels of 463,442 teu under construction, but market leader MSC has the largest orderbook, with 133 ships for over 1.8m teu being built, followed by Cosco (884,272 teu), CMA CGM (816,476 teu).

Mr Chang told Taiwan’s de facto shipowners’ association: “After two years of amazing profits, the liner industry now faces three challenges. The first is the slowdown of international trade and the global economy; the second is the fall in container freight rates; and the third, the big number of new ships being built.”

Since the start of the year, the Shanghai Containerised Freight Index (SCFI) has contracted by more than 2% from its highest point in early 2022, with the Asia-US west coast and Asia-Europe routes falling the most.

Mr Chang said: “If the economy does not keep up with the growth of shipping supply, perhaps liner operators will embark on a price war, which is the unhappiest situation for our industry, unless we can significantly adjust the capacity. If the freight war continues, it may be difficult for earnings from the transpacific, Asia-Europe and other important routes to escape falling below breakeven levels. Even small shipping companies may have losses.

“If the Russia-Ukraine war ends, it is expected to bring relief to inflation and the energy crisis and [will] stimulate the market to return to normal consumption, which is the most important for the shipping industry.”

Mr Chang, a qualified master mariner, was appointed Evergreen chairman in October 2020, after working for the company for 30 years.

Yang Ming chairman Cheng Cheng-mount, who also attended the event, told journalists was no strong sign of economic recovery. He said, “Although China has abandoned its zero-Covid-19 policy and is acting to stabilise its economy, we can see that throughput in the container terminals isn’t significant, so it remains to be seen when the effect of the lifting of pandemic restrictions will boost the economy.”

 

By Martina Li in Taiwan 03 February 2023.
Source:The Loader Star. https://theloadstar.com/evergreen-chief-warns-overcapacity-could-spark-new-rates-war-among-liners/.  12 February 2023.

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