Site icon Ships & Ports

NYK quits Nigeria route as trade goes ‘from bad to worse’ with rates and volumes falling

OLYMPUS DIGITAL CAMERA
OLYMPUS DIGITAL CAMERA

 

NYK is to exit the Asia-West Africa trade, and could be the first of many operators, according to Drewry.

The analyst says more carriers might quit the sector as container volumes continue to fall, resulting in reduced vessel load factors and declining freight rates.

Data from Container Trades Statistics shows that southbound volumes from Asia to West Africa decreased in nine of the first ten months of 2015; compared with the previous year, with the most recent year-on-year declines reaching 10%.

“The lacklustre demand in the trade has forced carriers to curb any growth to capacity with the monthly count of available southbound slots generally static in the last few months,” said Drewry.

It noted that southbound utilisation levels on vessels fell to 64% in October, versus the low-70% range of a year ago.

Spot freight rates have subsequently plunged to around half of their average value of last year, and during November stood at around $1,800 per 40ft.

Drewry said the situation on the trade had gone from “bad to worse”, “showing no signs of recovery”.

NYK has operated the Asia-West Africa service, which it dubbed WAX, together with Hapag-Lloyd and Gold Star Line (GSL) since January, following a reshuffle of vessel-sharing agreements on the route.

The remaining partners are continuing to operate the link – branded WSX by Hapag-Lloyd and FAX by GSL – deploying a dozen 2,500-3,500 teu ships, and are understood to have replaced the two vessels previously provided by NYK with freshly chartered tonnage.

The service features two calls in Nigeria, Lagos-Apapa and Lagos-Tincan, but Africa’s largest economy has suffered badly from crashing oil prices as it relies on this revenue for over 90% of its foreign exchange earnings.

With a glut in supply, Nigeria is having difficulty selling its oil and has been forced to sell much of its production on spot at even lower rates.

Nigeria’s currency, the naira, has subsequently fallen to record lows against the US dollar, and construction contracts and international investment have stalled with consumer demand also considerably reduced.

Falling cargo volumes – 30% down on a year ago – had obliged APM Terminals to cut its workforce at its facilities in Apapa.

Prices of commodities such as iron ore, copper, rubber and cotton have also plunged this year in what the World Bank describes as a “challenging year for the continent”.

Encouraged by 7% southbound growth in 2014, NYK has no doubt become disillusioned with the prospects on the trade and decided to quit the route rather than tough it out and wait for a recovery.

Like many carriers operating under extreme financial pressure, NYK constantly reviews its service links and is no longer concerned about any bad PR that may follow the short notice exit.

It follows compatriot MOL’s announcement in June that it was withdrawing from the Europe-West Africa trade after poor results.

“Our decision was inspired by the poor results… based on the present market outlook and cost exposure, conditions for an improvement of the results are not favourable,” it said at the time.



Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.

Exit mobile version