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June 09, 2014

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 28 THE JOURNAL OF COMMERCE JUNE 9.2014 By Peter T. Leach IN THE FACE of looming competition from new or expanded ocean shipping alliances among the biggest carriers, smaller lines are taking steps to ensure their own long- term survival. United Arab Shipping Co. is a case in point. In the last year, it has ordered 17 new post-Panamax container ships to replace its aging fleet, it overhauled its global man- agement structure to place responsibility on trade lanes rather than regions, and it is expanding its vessel-sharing alliance with China Shipping Container Lines on a few key trades where it is adding new services. "We are the P2," UASC President and CEO Jorn Hinge said in an interview at the company's regional North American head- quarters in Cranford, New Jersey. He thinks the planned debut of the P3 Network among Maersk Line, Mediterranean Ship- ping Co. and CMA CGM this fall — following delays in getting it approved — and service consolidations by the G6 and CKY HE alliances will help sustain rates in the Asia-Europe trade because the carriers belonging to them will be able to cut capacity by sus- pending unneeded port calls or entire sailings. "Rather than sailing with ships half full, they will suspend a string," he said. In the last year, the Dubai-based carrier teamed up in a vessel-sharing alliance with CSCL in the Asia-Europe and trans-Pacific trades. In April, the two carriers launched a new Asia-Europe network with three new services and two enhanced services. It added the capacity in that trade with slot-exchange arrangements with Hanjin Shipping and Evergreen Marine. UASC also is working closely with other carriers, including China Ocean Shipping Co., on slot exchanges on other routes, Hinge said. UASC and China Shipping have ordered huge new container ships that they will pool together in joint services in the Asia-Europe trade. "The game-changer for us was the cost of fuel," Hinge said, noting the cost of bunker oil has tripled over the last five or six years, and "it's not going to stop there." Also spurring the acquisition was the need to go green. U.S., Asian and Euro- pean regulators are requiring ships to burn cleaner and more expensive fuel within their territorial waters, and UASC needed a new fleet that would burn less fuel and cut carbon emissions. It placed the largest order in history last year when it signed a $2.5 billion agreement with Hyundai Heavy Industries for six ves- sels capable of carrying 18,800 TEUs and 11 14,500-TEU ships. All of the 18,800-TEU mega-ships will be deployed in the trades from Asia to North Europe and the Middle East and Mediterranean. The 14,500-TEU ships will be deployed in the Asia-Middle East route and in the intra-Asia trades, where some of the ports can't handle larger ships. CSCL also has ordered five 18,800-TEU ships that will join the six ordered by UASC to form a string of vessels in the Asia-Europe trade when all are delivered over the next few years. "We will have only half the head- ache," Hinge said. In anticipation of even stricter emissions standards to come by 2020, UASC is equipping the new ships with piping and dual-use engines that will enable it to convert from bunker to liquefied natural gas. The first 18,800-TEU behemoth is due for delivery this year in South Korea. "The size of the ships is not a big deal. It's the technology on the ships that's the big deal," Hinge said. The new ships won't have the tanks to store LNG when they are deliv- ered, but it will only take about a month to install them when emissions standards are increased, which Hinge expects in the next four or five years. 'P2' ALLIANCE TAKES SHAPE With a slew of big ships coming and partnerships in place, UASC goes all out to keep pace with mega-alliances "The size of the ships is not a big deal. It's the technology on the ships that's the big deal." Jorn Hinge

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