Ports Vary Response to West Coast Problems
Range of Responses from the Big to the Detailed as Problems Tackled
Apr 26, 2009
How ports and shipping companies on the West Coast of South America respond to the crisis of falling trade volumes is mainly good-housekeeping-pay-close-attention-to-detail type reactions rather than big bangs.
There can be no doubting the scale or the origin of the problems facing the sector, as Andres Silva of the Chilean ratings agency Humphreys pointed out. "The main problem (is) that the company have to face in these days is the economic and sector environment, that is characterized for a supply excess of shipment services. This supply excess make the volume transported lower and as a consequence the prices get lower too. All the things exposed had affected strongly the profit of the company in the last months."
Biggest One is the Biggest None
The biggest one is the also the biggest none. It looks increasingly likely that Punta Colonet, the Mexican super-port that was to be built as a container port to service the US market now won’t go ahead as planned. The logic for it remains, but not the money or the will.
A second sea change, although it is woven into several other issues, is the ending of Hutchison-Whampoa’s port at Manta in Ecuador. Quito accused the Hong Kong-based company of failing to invest the agreed amounts; the general view is that with trade and volumes sinking Hutch was better off out of it.
Strategy of Consolidation
Some, including Chile’s Valparaiso, are going for a strategy of consolidation. “In the course of 2009 we are concentrated in (sic) on the fine tuning of the ZEAL (External Logistics Support Zone) which is yielding good results in the operational efficiency of cargo flow,” said Harald Jaegar, manager of the Port Authority in response to questions from Suite 101.com.
Less of Whatever They Can
By contrast shipper CMA CGM is doing much less of whatever it can. This involves rationalizing, even merging some lines on slackening markets and returning vessels where the charter party is coming to an end or renegotiating charter rates (around 170 CMA CGM vessels are reaching the end of their charter party in 2009).
On the good housekeeping side it is reducing the speed of our vessels and deploying high-performance vessels. This will help reduce costs by 15%, says CMA CGM.
They are also rerouting some services. Both the FAL 2 Eastbound from Europe to Asia and PEX2 Eastbound between the Caribbean and Asia now go via the Cape of Good Hope to avoid charges for the Panama and Suez Canals. The savings generated, despite the addition of a extra vessel to keep the service weekly, are according to the company “substantial.”
More tellingly, CMA CGM is going for limited rate restorations. This is not a way of saying rebates (would that it were) but a polite way of admitting the scale of the problems the sector faces.
"On the Trade WCSA-Asia specifically, we have also cut capacity and decided on a rate restoration of USD 300/teu ex Asia to WCSA and of USD 200/teu ex WCSA, for implementation on April 1st. Rates had indeed been deteriorating to a level which was not acceptable and a restoration was needed to continue provide customers (with the same service)," a representative of CMA CGM told Suite101.com.
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