Friday, December 3, 2021

Kotor Bay in for MSC

MSC's weekly Indus 2 service brought in its eighth ship today (December 3). So far all the ships on the service have been new to Halifax and Kotor Bay is no exception. Built in 2009 by Hyundai Samho as Hyundai Loyalty it was renamed in February of 2021.

 It is a 94,479 gt, 95,810 dwt ship with a capacity of 8562 TEU. The ship arrived off Halifax November 29, which was its scheduled arrival day. However it remained at anchor, hove to or steaming about until this morning. That allowed the seventh ship on the service, MSC Silvana, to clear. It had been due November 18 but was delayed - largely due to weather.

When the Indus 2 weekly service from northwest India began its Halifax calls with the arrival of MSC Stella on October 5, it was reported that there would be eight ships on the rotation. It appears that some of the earlier ships will not be back, and other ships have been assigned. All are to be of the 8500 TEU size.

Several sources have declared that MSC (Mediterranean Shipping Company) has just passed Maersk as the world's largest container shipping company, or will do so by the end of the month. No matter who is correct, it is certainly an impressive achievement, and maybe a risky gamble.

MSC has been on a ship buying spree, since August 2020 purchasing 125 second hand ships. It currently has about 1 million TEUs of ships on order from shipyards. Its current fleet represents 633 ships of 4,239,668 TEUs. The majority of the ships are chartered. For example the above mentioned Kotor Bay which is part of the Eastern Pacific Shipping Pte fleet - one of the Ofer companies.

Maersk on the other hand has 729 ships in its fleet, totaling 4,234,302 TEU. (as of November 24, 2021). Maersk has a very small order book and is not projecting great growth in its fleet. Maersk also owns the majority of the ships in its fleet, but whether these are "bought and paid" or heavily financed and leveraged is not known to me.

In any event it must be a great time to be in the container business as many companies are reporting astronomical increases in returns year over year. Hapag-Lloyd for instance made more money in QI to Q3 of 2021 than it made in the previous five years combined. They are now charging $1,100 over cost to ship a container, versus $50 a year before.

One report says that the pre-pandemic August 2020 cost of shipping a container from East Asia to the US West Coast was $2,000. As of September 2021 that had grown to $20,000, however rates dropped by more than 20% in November after shippers were no longer pressing for pre-Chrsitmas deliveries to the US. The miserable schedule reliability rates (less than 50% of containers are meeting schedules) and the huge backlogs at key ports, while frustrating customers, do not seem to have diminshed the carriers profitability, or expansion plans - at least for now.

Shipping is a high stakes, high risk business, and how long MSC remains on top depends on whether Maersk decides to buy one of its competitors. That might give regulators fits since each line now controls 16.9% of the market. In any event MSC's putty coloured boxes will remain a common sight in Halifax whether on ships, trucks or rails.


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