Container shipping industry to incur 2012 losses

by Natalie Greve

The international container shipping industry will take a beating in the upcoming financial year as a result of low freight rates, increased shipping capacity and unpredictable trade volumes, predicts South African freight shipping firm Ocean Africa CEO Andrew Thomas.

He says new container vessels ordered in the past four to five years are now entering the market, increasing capacity and competing for market share, which is driving freight rates further downward.

He asserts that while demand for volume is healthy, this has not translated into increased freight rates, and expenses such as fuel costs remain relatively high.

“Significant losses of about $15-billion were observed among the major container shipping lines in 2009, and I believe that we will observe a similar trend in the upcoming year. The industry earnings last year were in the region of $10-million but the 2011 fiscal year is looking like an absolute disaster,” he says.

Most losses have been observed in the Asia to Europe and the Asia to US trade routes, reports Thomas.

Further, he asserts that South Africa’s position within the global network has not protected it from the downturn trend, and the fact that most of the global shipping lines are trading in South Africa has eroded rates within the local industry.

Port of Durban Expansion

Despite weakening global shipping rates, the movement of containers in and out of the Port of Durban has seen a steady increase over the past few years, and Thomas reports that, in 2011, about 2.7- million containers will be moved through the port – a 7% to 8% increase on last year’s figures.

“This growth can be attributed to the increasingly prominent role that South African ports are playing in international trade, which is driving container volumes. Durban itself is an important Southern African hub within the global shipping network,” he says.

The Durban port’s container handling facilities are unable to fully service the growing demand for services owing to inadequate capacity.

Extensive plans for port expansion to accommodate this growing demand have been outlined by the Port of Durban operator, parastatal organisation the Transnet National Ports Authority (TNPA).

Creamer Media’s Research Channel Africa reported in October that the R110.5- billion five-year project, initiated in September 2008, had already included the completion of Phase 1 of the car terminal improvement section, as well as the deepening and widening of the port’s entrance channel, which was completed in 2010.


Improvements to Pier 2, including the installation of port cranes, will be carried out during the 2012/13 financial year.

“There is no doubt that we need addi- tional container handling capacity in the port, and this can be achieved through improvements to the existing container terminal and expansion implementation. While there have been some significant improvements to the Pier 1 facility, there still remains a considerable amount of work to be done,” says Thomas.

He says that, as a result of this lack of capacity, the Port of Durban container- handling industry is not maintaining the levels of efficiencies that it should, and as a result, discretionary volumes of ship- ping cargo are finding alternative ways of entering the market.

“We are seeing ships entering the harbour that cannot load to their maximum capacity as a result of the draught restriction in the port. While the harbour mouth itself has been widened and deepened at significant cost, the shipping berths themselves have not, which prevents us from capitalising on the improvements. We have seen very little economic benefit from the improvements thus far,” says Thomas.

Despite the challenges, he says that stakeholders in the industry are aligning themselves with the TNPA to resolve the capacity issues and acknowledge that they have a role to play in the decision-making process.

Further, Thomas asserts that increased efficiencies at the Port of Durban will only come about through a combination of wise investment and efficiency gains, which can only be achieved through the cooperation of the private sector and the TNPA.

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