OOCL makes adjustments to accommodate today’s world trade scene

By: | at 08:00 PM | Channel(s): Liner Shipping  

By Karen E. Thuermer, AJOT

The word from Orient Overseas Container Line (OOCL), based in Hong Kong, is that while the world economy is still tenuous, business is recovering.
In an interview at OOCL’s corporate office in Hong Kong in January, C.L. Ting, OOCL managing director, revealed that his steamship line, which is part of the Grand Alliance, is seeing the biggest recovery, as far are steamship rates are concerned, coming from Europe.
This is the result of either increased trade in that region, or better positioning of carrier fleets, thereby increasing their demand. The world view is, improvement is largely base on improving global trade conditions.
This is partially evidenced by the March 22, 2010, OOCL announcement that the liner was partially reinstating some of its previously withdrawn capacity on the Asia – North Europe trade loop by launching new service.
That new service, Loop D, is jointly operated by OOCL and Grand Alliance carriers Hapag-Lloyd (HPL), Nippon Yusen Kaisha (NYK) and the New World Alliance carriers (APL, HMM and MOL). It entails ten vessels with a capacity of 6,000 TEU. The port rotation is: Qingdao, Yangshan, Shekou, Yantian, Singapore, Suez, Le Havre, Southampton, Rotterdam, Hamburg, Suez, Singapore, Chiwan, Shekou, and Qingdao in a 70-day round trip.
To further make the point, Ting stresses that the market for steamship line business peaked in 2008 then hit its lowest point in June 2009 when rates tumbled 40 percent. According to Ting, rates have been recovering ever since. By January, in fact, Ting reports that rates were only 15% lower than when they hit their peak.
“Everything depends on cost levels, ,” he says. “And the North American market is the slowest of all the markets to recover.”
At the time of the interview, North American volumes were 10 percent below the overall average of 2008, making it impossible for the steamship line to sustain its current rate levels. Consequently, in early February, OOCL announced a general rate increase on trans Atlantic trade, effective from April 1, 2010.
In a statement released by OOCL, it reported: “The increases are required in order to maintain a viable service level and a comprehensive liner network.”
Effective April 1, ocean rates for cargo loading or discharging at U.S. or Mexican ports were increased $400 per 20 foot container and $500 per 40 foot container, and ocean rates for cargo loading or discharging at Montreal were increased $320 per 20 foot container and $400 per 40 foot container.
Slow Steaming
One way the carrier has been dealing with the slow down in business overall is to introduce what is referred to as “slow steaming.” Here, ships operate at slower speeds, thereby using less fuel and cutting costs.
“This is especially useful since oil prices are still high,” Ting says. “At $350 per ton on bunker fuel, there are real economical reasons to slow steam.”
Slow steaming has especially been a viable option since manufacturers and shippers have not required faster turn around of shipments to replenish goods.
Ting reveals that slow steaming has particularly been implemented in the West trades.
“It means we have needed to add vessels to cover ports,” he adds. “But with lower capacity, slower steaming helps reduce costs. If the economics are right, customers accept one to two days longer in transit times.”
But there are other benefits. Slow steaming emits fewer green house gases, an increasingly important issue to ocean carriers that much consider their carbon footprint.
“In fact, some customers are concerned about what the carbon footprint of transporting goods is,” he says.
Keeping adequate coverage of ports, however, has been a concern for OOCL and a priority despite the slow down in transported goods.
“We want to keep the ports covered with our service,” Ting comments. “The main thing is to satisfy the demand of our customers.”
Given that trade remains healthy in Asia and Vietnam is particularly experiencing g

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American Journal of Transportation