China Shipping (Europe) boss wants more consolidation
Zenggang Yu, president of China Shipping (Europe) Holding, said Tuesday that more liner shipping consolidation is vital if the industry is to return to profit.
'The actual facts are clear. There is and or will be overcapacity in the major trades. Freight rates in general are too low,' Yu told delegates at the Intermodal 2006 conference in Hamburg.
'It is virtually impossible to come to at least what might call concerted action with regards to newbuilding programs to even the rate levels.
'One major reason for this is that there are too many players in the market. In my view, consolidation will and has to continue,' Yu said.
Yu believes cargo volumes will maintain their growth rates, driven by the Chinese export and the emerging Indian sub-continental trades. 'One can be rather confident for the next few years,' he said.
The China Shipping executive added that he expects to see 'substantial changes' in cargo flows with ships cascading from traditional trades to smaller, less established markets, which will also help ease any future overcapacity issues.
'Consequently, such supply and demand scenarios will change,' Yu said. 'If the U.S. East Coast could handle the ultra-large ships, why shouldn’t a 5,000-TEU vessel go via West Africa to the Far East?'
For this to happen, Yu said major investment is required. 'Large trade areas like the U.S. East Coast to Africa will have to improve or even establish an adequate terminal structure to allow our industry to serve such consumer areas in an efficient way,' he said.