Shenzhen: Quit the infighting and focus on maintaining freight rates was the dramatic message delivered by the president and ceo of Kawasaki Kisen Kaisha to his container counterparts at the World Shipping Summit. Hiroyuki Maekawa pulled no punches as he warned his industry colleagues that history was repeating itself once again to the detriment of all in the box shiping business.
"We have been repeating the same ridiculous behaviour," he said. "We've been irresponsible and easily relying on rate competition to secure our own respective market share once adverse market conditions arise. But this kind of thinking or approach will eventually return right back to those who initiate such thoughtless and bad spiral rate competition," he warned.
In the current cycle, Maersk Line has been widely cited as the main player dragging down rates.
"In spite of common wishes among the carriers for freight rate recovery, carriers still seem to be under the spell of fear and suspicion about losing market share due to possible overtonnage by large numbers of newbuildings ... that are coming into the market," he continued.
Taking his own company as an example of the financial pressures container shipping lines face at the moment, Maekawa noted "K" Line moves around 3m teu a year, consuming 2m tons of bunker fuel, providing 67 services in total calling at 570 ports worldwide. Bunker costs come in at US$700m and port charges set "K" Line back a further $200m. In case the average freight rate per teu slides $50 that would knock $150m off the firm's revenues. Likewise, if bunker costs rise by $50 a ton, that would add $100m in costs.
"Our estimated bottom line in year 2006 will deteriorate almost $400m compared with year 2004 in spite of our continued efforts to cut costs," Maekawa told delegates.
In closing, the "K" Line president quoted Charles Darwin who once wrote, "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change."
"I really hope that all of us containership carriers can be wisely responsive to change," Maekawa concluded. [02/11/06]
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