In this issue of Open Sea, MOL Executive Officer and Managing Director of MOL (Europe) B.V. Tetsuya Minato talks about the status of the European containership market.
Freight rate recovery under way on Asia/Europe routes
Q. What is the recent status of the northern European route?
Minato: For the past few years, the northern European route has maintained strong profitability thanks to active trade and higher freight rates. However, during the second half of last year, the demand/supply balance in the market temporarily lost ground due to the launch of 8,000 TEU containerships. This had a severe impact on freight rate negotiations for 2006. As a result, rates are down by an average of US$300 per TEU in 2006. Cargo traffic picked up after early spring, and we continued strength during the peak summer season. Though shipping companies will launch more large containerships, traffic is expected to grow nearly 10% from last year, and the demand/supply balance is holding firm. We restored freight rates at a certain level for some cargo owners in July. We plan to take this opportunity to ensure further recovery of rates.
Q. What about the Mediterranean Sea route?

Minato: Trade on the Mediterranean Sea is amazing, showing over 20% annual growth year after year. We also restarted the West Mediterranean Sea service (EMA Route, China/Italy-South France) jointly with Hanjin Shipping Co., Ltd. in 2005.

We expect traffic to lose a little ground in the future, as we saw with northern Europe, but we are confident that the Mediterranean Sea route will continue to grow in the long run. Shipping companies have started launching more large vessels. The market is one third the size of the Northern European route and it is located on the way to that route. So, the feeder services at hub ports are offered on the Mediterranean Sea route, making it more competitive.

On the other hand, the cargo traffic for the east Mediterranean Sea area (Turkey, Egypt, and the nations in the Black Sea coastal area) grew nearly 35% annually year after year. Shipping companies are rushing to deploy additional containerships. MOL responded by launching service to Turkey and Egypt last year. In the future, with an eye to services for Black Sea coastal nations, we will move quickly to expand our agency network and start planning direct service.
Hubs are Expanding in Benelux Countries
Q. We recently heard of plans to expand container terminals in Europe
Minato: Cargo traffic from Asia to Europe has continued to grow by around 15% every year since 2003. We expect continuous growth even after 2006 although it will slow down a bit. On the other hand, the capacity of habor/port facilities and container terminals that handle this cargo is reaching the critical limit. Various new terminal construction projects are being planned to address that issue.

The main attraction among these projects is the MV2 project in Rotterdam. When it is completed, Rotterdam's container loading/unloading capacity will be doubled. Most of the current terminal operators are bidding to participate in operation of the new facility. In the Benelux countries, there is also a terminal expansion proposed for Antwerp. And a new terminal is slated for construction in Wilhelmshaven, Germany, near the border with the Netherlands. All these projects will be completed after 2012 or 2013.
Q. MOL took over the Europe/South Africa route from AP Moller Maersk Group in November 2005. What is the latest on this route?
Minato: We actually started the service in February of this year. This expanded our African service network following the Europe/West Africa route, and allows us to offer a wider range of services to customers. The route operation is currently supported by automobile-related cargo and chemical products to the south and reefer cargo to the north. But we project cargo trade to increase due to expansion of automobile production in South Africa and rising demand as we get closer to the FIFA World Cup 2010 South Africa. We expect to serve an even broader range of customers in the future.

What's more, South Africa and its neighbors produce many natural resources, and we are planning to explore new markets in these nations.
Working with a Variety of Cultures
Q. In conclusion, what advice do you have for MOL Group staff working in Europe?
Minato: We have a multinational staff including Europeans, Africans, and Indians at MOL (Europe), and various cultures coexist there. Everybody, including Japanese staff, works hard to learn and accept cultural differences to ensure that the work goes smoothly. We take it for granted within overseas organizations, but I see many examples of the self-discipline our staff has to exercise to overcome the difficulties of working in a multi-cultural organization. However, this experience is indispensable for them if they are to become seasoned global specialists.

The European economic zone is going through some big changes with the expansion of the EU to 25 nations. The European market is expanding to the southeast. In the future, this will be accelerated by Russian and Turkish economic growth. Transport modes and container routes could also be in for major changes. We need to anticipate these changes and seize the opportunities that will ensure our long-term success.
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