Unifeeder sees fair volume growth, rates a worry

Danish shipping company Unifeeder, a private equity-owned firm seen as a candidate for a bourse listing, expects growth in volumes this year, though weak freight rates

are hurting the shipping lines it serves.
"I strongly believe that the volumes will be all right, and 2011 will be a year with reasonable growth," Unifeeder's Chief Commercial Officer Kim Kennet Larsen told Reuters.
Unifeeder, owned by European private equity investor Montagu since 2007, operates the largest feeder network for container transport in northern Europe, generating 2010 revenues of 2.6 billion Danish crowns ($490 million).
Feeder vessels are relatively small craft that serve deep-sea shipping lines by collecting and transporting containers between hub ports and smaller ports.
Global shipping, which sank into a deep slump in 2009 during the economic crisis, made a strong comeback in 2010, but rates began to fall again towards the end of last year and have remained under pressure this year.
"The market in 2011 has developed more or less as expected," Larsen said. "Our main concern is on the customer side.
Unifeeder's clients include Maersk Line , the world's biggest container shipping company, which beat earnings forecasts in the first quarter.
But many other container shippers have suffered losses.
"We are intensely monitoring the freight rates of our customers," Larsen said. "The problem with our market is that it is decoupled -- our expenses have grown sharply, while our customers are losing big money because their rates are falling."
"That isn't necessarily the best cocktail," he said.
Unifeeder fears that the shipping lines it serves will not be able to stabilise freight rates and that instability will spill over to the feeder business, Larsen said.
Soaring oil prices are lifting bunker fuel prices, and costs are also driven by the fact that Unifeeder doesn't own its vessels but charters them, and the charter market for feeder ships, which typically have capacity for less than 1,000 twenty-foot containers, is thin, which keeps prices up. And there is no relief in sight.
"Maybe around 30 ships will sail out of the yards this year globally," Larsen said.
"In 2011 and 2012 there are hardly any orders for (new) feeder ships. That means that the price pressure on the few ships left has been high and will probably continue to be so."
GIANT SHIPS
Maersk in February placed a $1.9 billion order in Korea for 10 giant container ships that will have capacity of 18,000 twenty-foot units (TEU) making them 16 percent bigger than anything now in service.
Larsen said that the arrival of such huge ships, which are due for delivery in 2013-2015, will change the industry.
"It will be a completely different business when most of the services from the Far East will be the big 13,000 plus TEU ships," Larsen said.
Many ports are already over-congested, and the arrival of the giant vessels might make the problem worse and lead to queues, hurting the reliability of delivery times, Larsen said.
Larsen said he believed Montagu was happy to have Unifeeder in its portfolio, but it was clear that the company could be sold if the right opportunity arose.
A Montagu executive declined to discuss the private equity firm's plans for its asset.
Source: Reuters