Yang Ming Marine Transport Corp (陽明海運), the nation’s No. 2 container shipper, plans to make yet another capacity adjustment in 10 days, reflecting rapidly falling shipping traffic amid the global economic slowdown.
Yang Ming announced in a statement on Friday that the company and its shipping peers had agreed to cut shipping capacity by an additional 30 percent for Asia-Europe routes, to take effect early next month and run through the end of March.
RATIONALIZATION PLAN
Yang Ming is part of the CKYH Alliance, which also includes Hong Kong’s Cosco Pacific Ltd (中遠太平洋), Japan’s Kawasaki Kisen Kaisha Ltd and South Korea’s Hanjin Shipping Co.
Under the alliance’s rationalization plan, the shippers will also combine some of their Asia-Europe routes beginning at the end of this month.
“CKYH’s weekly capacity to North Europe during the slack season will be reduced by about 16,000 TEU [20-foot equivalent unit] or 30 percent of existing capacity,” Yang Ming said in the statement.
On Nov. 13, the Taiwanese shipper said the regional alliance had agreed to cut shipping capacity by between 9 percent and 18 percent on various routes beginning later this month.
The four shippers had also decided to suspend their express services along the China-northwest Europe route starting at the end of January.
The shipping group’s recent capacity reduction efforts reflect how severely the weakening global economy is affecting its business prospects, analysts said.
“The container shipping sector is experiencing difficult market conditions,” said Daniel Hsiao (蕭黎明) and Raymond Hsu (許智清), Taiwan Ratings credit analysts. “The regional and global economic slowdown has had an immediate weakening effect on the demand for goods globally.”
THE CHINA EFFECT
As China’s GDP grew by only 9 percent year-on-year in the July-September quarter — the slowest in five years — the implications of the country’s weakening growth are expected to have a “dramatic” impact on global container shipping, Hsiao and Hsu wrote in a statement earlier last week.
The analysts also said that container shippers were particularly vulnerable to the risk of excess shipping capacity.
Some of them had recently resorted to dry bulk business to offset weak container shipping operations, they said.
“Although much lower bunker costs will provide some relief to liner operators, the excess capacity will burden the industry for a very long time,” Hsiao and Hsu said in the statement.
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