Singapore-based Pacific International Lines may continue its fleet expansion, despite a 25% surge in its capacity in the past year, managing director Teo Siong Seng has revealed. “We are still watching the market. It is also very cheap to charter in vessels now. We don’t rule out building more ships though,” Mr Teo told the results briefing of Singamas Container Holdings, a PIL subsidiary listed in Hong Kong.
To retain flexibility, PIL’s general guideline is to maintain one-third chartered-in tonnage and two-thirds owned. The prevailing charter term is six months.
The company took delivery of 27 ships totalling 75,400 teu in the past year, rising to 15th place in Alphaliner’s top 100 container line ranking, overtaking Hyundai Merchant Marine, K Line and Zim. Nevertheless, unlike mainlane carriers, PIL operates primarily in the north-south trade, especially the Southeast Asia and Africa trades, and maintains a network in the Red Sea, South America and Australasia.
PIL’s biggest tonnage is the 6,600 teu class. The company has 18 ships on order, including 2 handysize bulk carriers and 16 containerships in the 3,900 teu, 4,335 teu and 6,606 teu ranges, according to Clarksons data.
Asked about implications of the P3 tie-up, Mr Teo described it as “a good sign that the top three container shipping operators, the three rivals, are looking to stabilise the environment and freight rates”. He said: “I think the September (general rate increase) will succeed as most shipping lines reported losses in the second quarter. On the other hand, cargo volume is not bad. I only hope rates won’t collapse in the fourth quarter.
“Early this year, many people thought this year would be better than the last. But hopefully P3 would bring more discipline in the market.”
Mr Teo also expected pent-up demand for new containers, as most lines deferred replacements due to dismal financial results.
“Containers ordered between 2003- 2008, boosted by China’s entry into the (World Trade Organisation), are about 10 years old and need to be replaced,” he said.
Singamas, the world’s second-largest container producer, is looking to automate its production line to offset labour costs in its China manufacturing base. The company has 16 factories on China’s coastline and in May disposed of one plant in Shunde, Guangdong Province due to labour shortages and low efficiency. Despite this, Mr Teo ruled out the possibility to move out of China. “We hear people moving (factories) out of China, but the advantage of China is logistics. It is so developed so the total cost doesn’t go up much.”
Singamas, which has suffered from soft container demand, aims to derive 40%-50% of its revenue from specialised containers in two to three years, as these are less vulnerable to market volatility. Today, dry freight containers account for almost 80% of the total revenue.
(Source: Lloyd’s List)
28 August 2013