Zim Looks To Central America ETR

In our recent overview of container shipping we recognised the potential support that emerging trade routes (ETRs) would give to the overtonnaged fleet as the sector struggled on the traditional big money routes of Asia-Europe and the transpacific ( see 'Box Supply: Overcapacity Remains, But ETRs Offer Hope', August 2). The latest shipping company to increase its exposure to one such route is Israeli firm Zim, which is introducing a new west coast Central America service this month.

Zim, the Israeli flag carrier and part of the conglomerate Israel Corp, has announced that it is to launch a new service in August. The Balboa Central America Express (BCA) will operate two vessels on a weekly basis, on the following rotation: Balboa (Panama), Acajutla (El Salvador), Puerto Quetzal (Guatemala), Lazaro Cardenas (Mexico), PUERTO Quetzal, Acajutla and Balboa. The service will connect with Zim's Container Service Pacific (ZCP) at the hub port of Balboa. Via this link the newly launched ETR service will connect with destinations in Asia.

Growth Not Letting Up
Global Container Ship Fleet (DWT & % Change y-o-y)

BMI has previously highlighted the growth of ETRs in importance to global shipping companies. As the larger routes such as the transpacific and the Asia-Europe route have become saturated by ever larger vessels and increasing capacity, growth in ETRs has helped support shipping firms forced to cascade vessels down onto lesser routes. Intra-Asia in particular has been a boom ETR for liner companies in recent years - Intra-Asia trade was the largest gainer for market leader Maersk Line in terms of container volumes in 2012, expanding by 19%, followed by Latin America on 10%. By contrast Asia-Europe volumes grew by just 3%.

This growth is enticing other carriers to place larger ships on the route. In May 2013 Evergreen and COSCON announced they would replace 11 of their 3,400-4,200TEU ships currently operating on their joint Far East-East Coast South America (ESA) with a fleet of 8,000-9,000TEU capacity vessels. In the same month Hamburg Sud christened two new 9,600TEU capacity ships, which have since been added to the firm's Asia-East Coast South America operations. Zim's new service will utilise the Zim Shenzen, with a capacity of 4,900TEUs, but we see scope for this to be raised in the coming months should there prove to be sufficient demand.

Upside Risk
Port Of Balboa Tonnage Throughput, 2008-2017 ('000 Tonnes)

The new service from Zim offers upside risk to our throughput growth forecasts for the Panamanian port of Balboa. At present out medium-term forecast envisions an average growth rate of 7.1% in tonnage throughput over the period. In 2013 we forecast growth of 6.9%, which if realised would see 24.48mn tonnes handled by year-end. Equally, the new service could help Zim return to the black. As with many other container shipping lines the firm has been struggling with negative earnings over recent years; the firm has suffered over US$1bn in losses since 2008.

This article is tagged to:
Sector: Freight Transport, Shipping
Geography: Latin America, Guatemala, Mexico, Panama, El Salvador

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