Niche Carriers Can Still Thrive on East-West Trade: Drewry

The consultants say niche carriers can thrive if they remain modest in size and offer a superior product.

Niche carriers can still operate successfully in the East-West container trades as long as they offer "a unique proposition that delivers freight premiums," according to Drewry Shipping Consultants Ltd. (Drewry). 

Writing in its latest Container Insight, Drewry used Matson Inc. as an example of such a carrier, calling it "an anomaly" in container shipping and one that is thriving on the highly competitive route.

Matson Navigation for the first quarter of 2015 reported a surge in operating profit of $44 million, up from $9 million in the same period last year.

"Amid the battle of the big lines one carrier continues to plot its own, very profitable, course," it said.

"The company has just posted its best operating margin in at least two years, at levels that its international competitors could only dream of."

Matson Navigation operates a single Transpacific service between China and Long Beach on the US West Coast with five ships averaging 2,700 twenty-foot equivalent unit (TEU) capacity compared to other dedicated Asia to U.S. West Coast market (USWC) ships of approximately 8,000 TEU.

Matson's Q1 2015 report states that it competes "by offering fast and reliable freight availability from the ports of Xiamen, Ningbo and Shanghai in China to Long Beach, California using its newest and most fuel efficient ships, providing fixed day arrivals in Long Beach and next-day cargo availability."

Drewry noted its service is further differentiated by offering a dedicated Long Beach terminal for fast truck turn times, an off-dock container yard, and one-stop intermodal connections.

China volumes were said to account for around 20 percent of Matson's volumes, and Drewry estimated it had a little over 1 percent of the whole Asia to USWC market.

Matson's China volumes grew by 5 percent in the first quarter, but the real driver of the increased profits was said to be the higher freight rates it was able to charge shippers for its Transpacific service, which was less affected by the USWC congestion than other carriers.

"Small lines cannot compete on costs so to thrive they have to remain modest in size to limit expense and offer a superior product," Drewry concluded.

Overall, Matson in May reported a net income of $25 million for Q1 2015 compared with $3.4 million for Q1 2014.