December 7 - Effective December 14, AAL is entering a space sharing agreement with Swire Shipping that aims to further strengthen its breakbulk liner service between Asia and the East Coast of Australia.

Instead of a 30-day frequency, AAL and Swire will be offering a joint scheduled breakbulk liner service with an improved 20-day frequency and an additional five base ports.

The new service will connect the Asian ports of Tianjin, Qingdao and Shanghai (China), Incheon and Pusan (South Korea), Kaohsiung (Taiwan) and Phu My (Vietnam), with the Australian ports of Brisbane, Newcastle, Geelong, Melbourne, Bell Bay and Gladstone. Additional ports, including Dalian, Kobe, Townsville, Mackay and Portland, will be available on inducement.

AAL's two 31,000 dwt multipurpose heavy lift vessels, each with a combined lifting capacity of 700 tonnes - AAL Hong Kong and AAL Shanghai - will continue to be deployed on the route. Space can also be booked directly through AAL on two smaller vessels being deployed by Swire.

Through the slot sharing agreement, both AAL and Swire will work together to coordinate vessels, timings and port calls. However, both companies will retain their individual booking and marketing services for their respective customers.

Christophe Grammare, managing director of AAL's liner services division, explained the reasons behind the cooperation.

"The general market is not at its best at the moment, and Australia is relatively low. We are just coming down from a long mining boom and a number of LNG projects are coming to a close, while the steel industry is suffering due to anti-dumping measures.

"In addition, the strong competition and over capacity in the container industry has led to very cheap container rates, meaning that some customers are choosing to ship breakbulk cargo on containerships rather than specialist vessels."

Grammare admitted that this was not a temporary concern: "We expect the Australian market to remain down for the next year or two. There are a limited amount of projects to boost the economy, and there are no new developments on the cards.

"As a result we have been working with Swire, and due to the market conditions, we have agreed to coordinate our services, which will result in cost savings for both of us. We either had to downscale our services or create a proactive partnership.

"Having said that, we have structured this agreement to deliver fundamental benefits to our liner customers, including an increased number of base ports (increased to 13), improved transit times on individual sailings and superior frequency - from 30 days to 20 days."

When asked whether AAL would be developing similar partnerships on the surrounding trade lanes, Grammare explained that this would not be necessary. "There is no further development on the cards. In the Asia Pacific region, Swire and AAL are reasonable complimentary - this is the one service in which we were overlapping."

However, in terms of general consolidation in the shipping industry, Grammare was positive about the prospect of additional partnerships. "At the end of the day, consolidation is what the industry needs."

Grammare also confirmed that this new agreement between Swire and AAL would not be affected by Swire's existing partnership with Rickmers-Linie, which HLPFI reported about on June 8, 2015.

He explained that Swire was the obvious choice in terms of a partner in the Asia Pacific region. "With regards to business models, Swire is the closest thing to what AAL does." 

Moreover, he continued, both Swire and AAL offer a breakbulk liner service - something that Grammare believes is the best possible option in the declining market. "In the boom period, there were lots of tramp services in Australia, but now that volumes have dropped, it is a risky business for tramp operations. Therefore, a liner concept is the best option."

Grammare concluded: "We are acknowledging that the market conditions are different, so we want to make our service viable in the existing market, rather than wait for 'maybes' and conditions to improve."