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Friday, September 20, 2019

Maritime Logistics Professional

No frills container carrier lining up for launch

Posted to Far East Maritime (by on February 11, 2010

At a time when most container line executives feel like running for the exits, a new shipping company is preparing to enter the business.

Neptune Orient Lines just reported a loss of US$741 million for 2009. China Shipping Container Lines is expected to soon announce a loss of US$1 billion.

Other results will begin to trickle in but no carrier handling containers will have done well last year. Rates at low levels, plunging demand for containerised imports and increasing operating costs have viciously attacked figures at the top and bottom lines of the balance sheets.

Yet amid this cascade of red ink comes the extraordinary story of a new container line that will begin operating in April.

Called “The Containership Company” (no one can ever accuse shipping people of being original), TCC will offer two services: China-North Europe and China-US West Coast.

How can anyone consider starting a container line in the current market, you ask? Well, it was precisely because of the weak container market that the company was formed.

The carrier is offering a low cost, no frills service. The Ryan Air of the sea.

With 500-plus container ships in lay up there is no shortage of cheap available capacity, and vessel charter costs are at all time lows.
An indication of the low operating costs of the new company can be seen by the size of its war chest. Just US$50 million is being raised for working capital.
Any self-respecting big carrier can lose 50 million bucks in a long weekend.
And speaking of big carriers, there is a very Danish feel to the personnel set up.
The bosses of TCC look like an AP Moller-Maersk old boys’ club. The only one who doesn’t have any Maersk experience on his CV is the fellow at the top, CEO Jakob Tolstrup-Moller. He started TCC with Captain Franck Kayser who, after a long career with Maersk, became vice president of CMA CGM.

But back to the services being offered by the new outfit.

On the China-US East Coast trade, TCC will launch its Great Dragon Service between Taicang port and Los Angeles in April that will deploy six vessels of between 2,500 and 3,250 TEU capacity.

Taicang International Gateway port is a joint venture between the Jiangsu provincial government and Hong Kong’s Modern Terminals just outside Shanghai. It was selected over Yangshan Deepwater Port or Waigaoqiao in Shanghai because of its proximity to the manufacturing centre of the Yangtze River Delta.

On the China-North Europe trade, TCC will launch the Western Dragon Service in May with 10-11 vessels ranging between 3,500 and 4,250 TEUs. This service will leave Taicang and call at Rotterdam and Hamburg in North Europe.

It is a bold move but one that could pay off. With slowing consumer demand – and having had to build in extra time to cope with the delays brought about by slow steaming, cargo rolling and space shortages – shippers have become more focused on cheaper transport services. A low cost carrier will be attractive.

However, it will be very interesting to see how the “no frills” side of the service plays out. Flying on a low cost airline is great until the flight is abruptly cancelled, you can’t reach customer service and your bags are never seen again.

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