The extent of the container market deterioration during the last quarter of 2008 was made apparent in recent days with the latest set of financial results making worrying reading for even the most optimistic shippers.

The NOL Group, for example, reported that during the last three months of 2008 it recorded a loss of US$149 million with profits diving 84 percent for the full year, even though volumes carried by its liner arm, APL, were up some five percent.
The industry saw the demise of Hanjin-owned Senator Lines, which, as an 80 percent specific-market player, closed for business last month.
There are also serious concerns over the financial status of Compania Sud-Americana Vapores (CSAV) following a loss of $38.6 million in 2008 against a profit of $117 million in 2007. Parent CSAV Norasia has started cutting jobs in Hong Kong, Chile and Germany.
Continuing the bleak picture, some 20 plus percent of slot capacity on the Asia-North Europe and Asia-Mediterranean trades has been slashed in an effort to address the supply/demand side, while the Asia-US West Coast and US East Coast figures together posted a 10 percent drop in capacity.
On the Asia-Europe trades, more and more lines are charging all-in freight rates that include basic rates plus surcharges such as Bunker Adjustment Factors (BAF) and Currency Adjustment Factors (CAF). Given that the BAF levels have dropped from around $700 per TEU in September 2008 to a mere $200 per TEU in February 2009, the basic rates are now a third of what they were a year ago.
In an effort to improve revenue, Mitsui-OSK Lines, CMA CGM and Maersk have proposed a series of rate restoration increases through 2009 and other lines are expected to follow suit.
Separately, a "cat and mouse game" is going on between shipping lines and the Suez Canal Authority that is already putting pressure on the authority to lower its transit rates, say industry sources.
The voyage by the vessels via the Cape of Good Hope adds seven days to the transit time eastbound, but given this is an eastbound re-routing and moves non-time sensitive cargo, the extra seven days, particularly in the slack season, are of little significance for the trade.
Maersk has taken the initiative to send one of its Asia-Europe services eastbound - the AE7 - around the Cape, to cut out transit costs.
Mediterranean Shipping Co and CMA CGM have also followed the initiative, and more could follow, if Suez Canal transit costs are not dropped.
The cost of sending one of the Maersk PS class vessels deployed on the AE7 via the Suez Canal is a staggering $850,000 to $870,000 per voyage. Eight PS class vessels, which have a nominal capacity of 11,000 TEUs, and a vessel of around 8,500 TEU capacity are deployed on the Asia-Europe service.
The important operational factor is that based on slow steaming and fuel cost savings, the extra transit time will be seven days thereby allowing the vessels to slot in on Asia port rotation with the same berthing windows provided under the Suez route. The Suez transit costs for PS vessels is close to $1 million per voyage.
The Cape initiative makes a lot of sense during the slack season, particularly given that eastbound volumes are less time-sensitive than those moving westbound on the Asia-Europe trade.
It is also an initiative that has the foundations to develop both east and westbound routes, given some careful planning by the sales, marketing and operations departments of the shipping lines, although the vessels taking the longer route to Asia are too large to call at African ports.
But, in the long term, if the Suez Canal Authority agrees to cut its canal transit costs, it is likely the lines will re-think the seven-day extension via the scenic route and revert to what makes a lot more financial sense in the present economical climate.