2012-02-03 16:29:00 - South Korea Shipping Report Q1 2012 - a new market research report on companiesandmarkets.com

South Korea appears to be in a relatively healthy position in terms of its port sector in the mid term, with tonnage throughput growth of over 5% forecast in 2012. However, the container shipping sector as a whole is set to face a tough 2012, which may adversely affect South Korea as a result.

Container lines introduced peak season surcharges in an attempt to lift rates on both the major trade routes of Asia-Europe and the transpacific during 2011. These failed, however, with rates ticking up on the Asia- Europe for five consecutive weeks and on the transpacific for two consecutive weeks in August, before recommencing their downward trajectory. At the time of writing, the Shanghai Containerised Freight Index´s last published

 

 

data for September 30 puts rates for both Asia-Europe and transpacific at the lowest levels we have seen since we started tracking the index back in August 2010.

As far as opportunities are concerned for South Korea´s maritime sector, Japanese shipping company KLine announced plans to begin operating a new service between South Korea and western India at the end of November 2011. The Maritime Information Centre reports that the weekly service will also call at Shanghai and Singapore, with Karachi the furthest destination. Other opportunities can be found in the Trends and Developments section of this report.

Headline Industry Data

- 2012 tonnage throughput at the Port of Busan forecast to increase by 5.12%.
- 2012 tonnage throughput at the Port of Incheon forecast to grow by 4.15%.
- Container throughput at the Port of Busan is set to rise by 3.84% in 2012, while the Port of Incheon is predicted to see a 8.67% increase.
- The total value of South Korea´s trade (imports plus exports) is set to enjoy real growth of 6.70% in 2012.

Key Industry Trends

South Korean Shipbuilders On Top As Japan And China See New Order Declines

Although shipbuilders are seeing orders for new vessels diminish as shipping lines keep their spending in check in a climate of global economic uncertainty, we note that South Korea may avoid the drop-off in demand. China outpaced South Korea to become the world´s top shipbuilder in 2009 in terms of the number of new orders received, as its builders attracted new custom with cheaper prices. However, South Korea regained the position of having the most new orders in the first eight months of 2011, winning US$37.8bn of orders compared with US$10.3bn for China, according to market research firm Clarkson.

Emirates Shipping Line Attracted By Intra-Asia´s Short And Long Term Outlook

UAE-based shipping firm Emirates Shipping Line moved to purchase slots on a weekly Korea-India Service (KIS) that was launched on October 29 2011, thus expanding its exposure to intra-Asia. The company is not alone in its desire to increase its coverage of intra-Asia, as lines continue to be attracted by the trade route´s short and long-term benefits.

STX Moves To Protect Itself From Rate Volatility

In a bid to protect itself from the volatile dry bulk spot market, STX Pan Ocean has moved to sign longterm contracts of affreightment. Its three-year contract of affreightment with Fibria Celulose is the beginning of a US$5bn consecutive voyage charter that STX agreed with the Brazilian pulp and paper giant in October 2010. We note that, in the past two years, STX Pan Ocean has been pursuing a strategy to shield itself from the dry bulk spot market by charting its vessels on long-term contracts. In 2009 the shipping line signed a 25-year freight contract with Brazilian mining giant Vale to transport iron ore.

Key Risks To Outlook

On the upside, Colombia is continuing to attract Asian investment in its port and freight infrastructure as rapidly growing economies seek to secure access to the Andean nation´s vast reserves of coal by developing its transport links. We have already seen China express its interest in developing Colombia´s coal-hauling rail network. Now South Korea looks set to make its first major investment in the country as it seeks to ensure access to a coal mine that is being billed as a ´second Cerrejon´.

On the downside, the global container shipping sector is set to face a tough year as demand ebbs and the threat of overcapacity remains. Container lines will no doubt be looking to force rates up in 2012, as operators face a year of losses in 2011 on the back of sustained declines in rates on the major trade routes, brought about by overcapacity. We warn that carriers will face an uphill struggle in 2012, as overcapacity is set to remain an issue and could become more acute with the slowing global growth outlook.

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