UPDATE - ASIA REGION - MAY/JUNE 2010
As provided by Grant Daly, Safmarine's Asia Region Executive
Note: Safmarine's Asia Region covers 11 markets and is divided into three areas: GCA (China, Hong Kong, Taiwan), SEA (Singapore, Malaysia, Indonesia, Thailand, Philippines, Vietnam) and NEA (Japan and Korea).
The Chinese character for 'crisis' consists of two elements that are found both in the words 'danger' and 'opportunity'. Safmarine has by no means been exempt from the intense market and industry pressures of 2009, and while ensuring the necessary measures are taken to address our cost exposure 'danger' we have also taken the 'opportunity' to refocus our business in Asia.
The 'opportunity' measures include a refocus on our traditional core markets of Africa, the Middle East and Sub Continent. We have consolidated our total service offering and deployed several product enhancements. Capital flows into Africa continue to increase at record levels despite foreign direct investment worldwide. Sub-Saharan Africa's economy is expected to expand 4.7 percent this year, double the pace of 2009 (IMF).
Simultaneously we reinforced the way that we interact and engage with our customers. Critical to our core value proposition is the Access and Experience we provide our customers, this remains fundamental to our strategy and as the changes to the organization and network have been implemented, so too are we taking the opportunity to underscore and reinforce the manner in which we deal with our customers, with people making the difference!
- The decrease in 2009 in volume throughput of key Asian ports (such as Shanghai, Hong Kong and Singapore) has been well documented in the media, HKG down 14.6%, Singapore down 13.5% and Shanghai down 11%. This in context of a global container volume contraction of 9.5%
- There has been a steady resurgence in volume from the third quarter 2009 to date with increases in volume between 20 - 25% reported from the primary Chinese ports.
- The increases have been driven by the recovery of foreign trade markets as well as restocking initiatives in the key trading partners.
- The demand supply gap is expected to diminish this year, bolstered by deceleration of fleet growth
- Import growth is significantly exceeding the export growth recovery.
- Strong Q1 growth and renewed business confidence not withstanding, many of the fundamental challenges arising from the global financial crisis remain unsolved, such as asset bubbles, countries' debts, high unemployment rates and unstable currencies.
- There remain many and divergent views and expectations as to a 'W' or 'V' shaped economic recovery.
- Safmarine has seen signs of improvement through the first quarter with leading indicators such as continued PMI growth, as well as a volume and rate increases through the peak continuing from Q4.
- The traditional slack period over year end did not manifest to the degree normally expected.
- Safmarine continues to deliver year on year growth in volume as well as revenue, despite the withdrawal from the Transpacific trade
- In assesment of the current growth, consideration must be given, however, to the context of the falling market of this time a year ago, which influences the year on year results more positively. Despite the current volume growth, the market conditions for container shipping have not fully stabilised.
- Equipment provision is fast becoming a challenge in Asia
-South Africa (Safari): Volumes and revenues have been strong in the buildup to the Soccer World Cup.
In March we have launched and deployed a new, direct, fully-containerized service from Far East to East Africa. The new service, which is known as the Mashariki Express, offers a shorter transit from the Far East to Mombasa (Kenya) and Dar es Salaam (Tanzania) with weekly calls from Tanjung Pelepas. Tanjung Pelepas to Mombasa is 13 days and Dar es Salaam to Tanjung Pelepas, 21 days.
- Our direct Asia/West Africa product has extended its Africa range, offering improved product from particularly China to Nigeria. Tincan Island has recently been added as a discharge option.
-Our focus is on offering shipping services that accommodate the challenges of trading with Africa. For example, where possible we limit the number of port calls on a particular string in order to minimize the impact port congestion in one port could have on the credibility/integrity of the entire schedule.
Multi-Purpose (MPV) services:
- Safmarine offers a regular multi-purpose service from Asia to Africa, primarily focusing on China to West Africa. The service caters for the transportation of materials for infrastructure projects, production facilities as well as energy-related projects and services in Africa.
- A reduction in capacity to the Middle East has stabilized rates
- The Red Sea has become increasing firm driven by the market focus and prioritization of cargoes to Europe.
- As of Q3, we have opened acceptance on a new direct product between China and Chennai.
Rates and Volume have remained steady through the first quarter.
A number of new services have been introduced and capacity reintroduced to the trade in recent months which has led to rate levels stabilizing.
Safmarine will focus efforts on building its presence in the North African markets and reduce focus on the North West Continent.
As of the end of the traditional contracting period (April 2010) Safmarine will no longer offer a service on the Transpacific Trade. This was a difficult decision to make however in context of consecutive poor results in this service; combined with the market changes and economic crisis in 2009 the decision has been the right one. Our withdrawal has been phased over three quarters to ensure our commitments to our customers have been honored and that their interests have been at the forefront of the manner in which we have implemented.
Comments on Imports and Exports:
-Africa has traditionally been the core focus area - and remains so.
-West and Central Asia has been the fastest growing trade.
-China delivers the largest share of business within the region.
-South East Asia is producing good growth off a low base.
-Imports are primarily from Africa and are commodity based.
Comments on Capacity:
-The optimisation of assets and deployment of capacity are aspects of our business which are constantly under review - especially in a market such as the one we have today.
-Services have been integrated with the aim of providing the most cost effective product possible.
-Our focus is on ensuring that our shipping services are as cost efficient and reliable as possible, matching them to the needs of our customers.
-New services and revised string deployments have been launched and implemented on most trades.
-We have also seen a significant amount of tonnage withdrawn from the market, particularly on the Asia/Europe service, which more closely reflects the market demand. The changes more accurately represent the balance of trade.
-E-shipping is widely used by Safmarine's customers in the Asia region.
- 74 % of our bookings are received via the e-channels, 68% of shipping instructions and 72% of our bills of lading are printed by our customers in their premises, where they have 24/7 access to produce their documents
-www.safmarine.com and www.inttra.com are the most frequently used e-business channels.
As at May 13, 2010. See Images (People) for a photograph of Grant Daly.
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