The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Arawak Port Development Company’s (APD) chief executive yesterday admitted that Bahamian importers had a “fair concern” about an increase in shipping rates following Crowley’s pull-out, but maintained that there were still “sufficient” carriers serving the market.

Suggesting that a general shipping rate increase was “not imminent”, Michael Maura said that while they may eventually go up, the amount of increase would not be “significant”.

With Crowley’s decision to stop serving the Bahamian market from Jacksonville and Port Everglades come early August, many Bahamian importers have expressed concern to Tribune Business that the reduction in carrier competition could lead to increased rates - impacting wholesale and consumer prices.

The Bahamian commercial shipping market will now be dominated by two major players, Mediterranean Shipping Company (MSC) and Tropical Shipping, but Mr Maura said that even with Crowley’s exit the amount of used cargo space on Nassau routes will still fall - from 58 per cent to 48 per cent.

This is because MSC is taking over Crowley’s Jacksonville-Nassau route with a much larger 900 twenty-foot equipment unit (TEU) vessel, which will ultimately lead to empty cargo space in the market rising to 52 per cent - based on current demand.

Asked about potential shipping rate increases following Crowley’s withdrawal, Mr Maura said: “At the moment I would say that’s not an imminent threat, but if I was an importer that’s a fair concern.”

He added, though, that an obstacle to rate increases might be the desire of shipping companies to focus on market share as opposed to profits.

MSC’s new Jacksonville to Nassau route had increased its weekly calls on this market from two to three, and increased the collective TEU carrying capacity of its vessels from 470 TEUs to 1,870.

Mr Maura said that if Tropical followed suit, and increased its weekly sailings to Nassau from four to five, the capacity increase would push shipping rates down.

“Rate increases are a concern in the months ahead, and in time we could begin to see rates rise. I don’t see it as significant,” Mr Maura told Tribune Business.

“You might see carriers coming out to test the water with $100 increases. But trust me, there are there other carriers out there watching this very carefully.”

He explained further: “An increase in rates, however, also leads to new carriers entering the market, so any effort to increase rates will likely be tempered by the threat of new players.

“The sailings provided by MSC, Tropical and the smaller Bahamian carriers are sufficient to serve the market. Additionally, Crowley’s departure will attract the attention of other carriers that have been monitoring the Nassau market to see what volume opportunities Baha Mar creates.”

Noting that Nassau imports an average TEU total of 1,254 containers per week, Mr Maura said MSC’s new Jacksonville sailing would increase total vessel capacity from 2,178 weekly TEUs to 2,618.

Crowley currently has a capacity load of 460 TEUs on two weekly sailings, while Tropical’s four visits bring in a capacity of 1,120 TEUs.

“The average total vessel utilisation prior to Crowley’s departure and MSC’s additional vessel call was 58 per cent,” the APD chief added.

“Following Crowley’s departure and the addition of MSC’s vessel call from Jacksonville, the adjusted average total vessel utilisation will be 48 per cent.

“This also means that in aggregate 52 per cent of the cargo vessels calling Nassau will be empty. The alarming reality is that MSC’s TEU capacity in the market today is greater than the total Nassau TEU volume.”

Laying out the background further, Mr Maura said the “ocean cargo carriers haven’t made money in Nassau for over seven years, essentially”.

He added: “In 2007, MSC, and in 2011, ACL [Atlantic Caribbean Line] started a service to Nassau at a time when the market already had six carriers serving the market.

“MSC offered rates which were approximately 20 per cent less than the market at the time. They were successful in taking business from the original six carriers. And in 2011, ACL entered the market and similarly reduced rates to attract cargo volume with a specific focus on building materials. Again, the carriers in the market realised a loss in volume at the hand of a new competitor.”

He added: “In 2008, the global recession hit Nassau with a vengeance and the market contracted by 20 per cent. Again, in an effort to mitigate rising costs and reduced volumes, the carriers aggressively pursued their competitor’s cargo volumes.

“The tool they used was a ‘rate reduction’. After six months the carriers in the market were carrying less cargo than they previously had and at lower rates.

“Over the course of 2007 to 2012, rates had declined over 30 per cent, while every cost had increased. As an example, the cost of fuel had increase from approximately $60 per barrel in 2006 to $145 in July 2008, and now averages $95 per barrel.”