UASC: Alliances Will Help Box Markets on a "Slow Journey to Recovery"

UASC is a member of the Ocean Three alliance

United Arab Shipping Co. (UASC)'s President and CEO Jorn Hinge says shipping alliances will help the box markets on a "slow journey to recovery" and lead to the stabilisation of freight rates, the Wall Street Journal reports.

Since the global financial crisis took hold in 2008, freight rates have been depressed and the market has been plagued by overcapacity, but the UASC head said better times are on the horizon for box shippers, at least for the big players.

"The biggest challenge in shipping is to control your costs, and fuel is the biggest cost," said Hinge.

"Modern, big ships carry more cargo using less fuel, and this makes it more difficult for [smaller competitors] to be in the trade," he added.

According to the report, smaller carriers have played a part in keeping shipping rates down, undercutting big operators in the hope that they can continue trading until rates improve.

But alliances such as Ocean Three, of which UASC is a member along with CMA CGM, and China Shipping Container Lines (CSCL), and the 2M alliance of Maersk Line and Mediterranean Shipping Co. (MSC), should aid the bigger players and see smaller operators squeezed out, leading to less volatility in freight rates, noted Hinge.

"If you are in a group and cancel one of your five or six departures during low seasons, you will still be OK as the other departures will still have a full cargo and cater to the needs of your customers," he explained.

"But if you only have two departures and stop one of them, you are dead."

There was nonetheless a note of caution from Hinge that the road to recovery may not be smooth.

"In the second quarter and most of the third quarter, we operated fully loaded ships in Asia-Europe with demand growing 7% to 8%," he said.

"It was a good year, but economic recovery is still sporadic, and until consumers feel confident enough to go out and buy things they don't really need, we can't talk about a sustained recovery in container shipping," he continued.

Last month CMA CGM Vice Chairman Rodolphe Saade said Ocean Three would save $1 billion or more annually.