The consensus of opinion among analysts is that there is no end in sight to the current bleak period in the container liner sector. Tuan Hua Joo, executive partner, Alphaliner, has suggested that we are now in the equivalent of a “capacity arms race” triggered by Maersk’s order for 20 Triple-E vessels in 2011.

Speaking recently at the TOC Container Supply China Conference in Singapore he elaborated: “Maersk miscalculated that it could push some of its competitors out of the way, but eventually it was forced to form the P3 alliance ? taking the step that indicated there was something wrong.

“But,” he continued, “the independents aren’t giving up either, and the ‘arms race’ triggered by the Triple E orders is getting worse. The number of new ships is getting quite a scary picture, and next year it is going to get even uglier.”

Drewry Maritime Research is forecasting 5.7% global supply growth (container liner fleet) followed by 6.7% in 2015 with the delivery of 115 more ULCVs and a large number of vessels in the 8,000-10,000 teu category. In 2014 demand growth of just over 4% is anticipated and given these factors Drewry does not expect “any real opportunity for the industry to draw breath and recover until 2016 and", it warns, “this is still dependent on what happens with the order book".

The situation is so dire that some lines which have sold a large slice of their terminal assets in a previous downturn have been compelled to sell other assets. Hyundai Merchant Marine which announced a major organisational restructuring recently sold its LNG business for one billion dollars as part of plans to raise $3.17bn. Neptune Orient Lines sold its Singapore headquarters building early in 2013 raising $200m.

Clearly, the ‘family silver' is for sale. The dire situation behind this is further amplified by Dynaliners, which noted recently: “The 2013 overview of the financial results of twenty main container liner operators show a pond of red ink... the positive income is concentrated on just two carriers: CMA CGM ($408m) and Maersk Line ($1.51bn). On the negative side, HMM ($657m), Hanjin ($644m), Zim ($539m) and China Shipping ($423m).

Recent experience coupled with the forward picture in the liner market thus suggests there will be ‘more to come’ as regards the sale of terminal assets. So where precisely will this take place?

Major lines own a myriad of small shareholdings in terminals some of which undoubtedly do not have the strategic value they once had and as such are eminently suitable for disposal although it is hard to imagine that there will be much interest in a broad context in the sale of such stakes. History shows that they normally go to the parent terminal operator if there is one.

The dedicated terminals owned by lines in the US and in Asia are other candidates for sale but again may not be of major interest due to their cost centre orientation. There may also be some inclination to sell terminal stakes resulting from the new alliances formed. How essential, for example, is it for CMA CGM to retain a stake in the DPW Maasvlakte 2 terminal originally secured as part of its involvement in the New World Alliance?

(Source : Port Strategy)