Qingdao: While domestic coastal container shipping market is still a battlefield for shipping companies that are struggling to survive, Lucky Trans, a domestic container shipping company headquartered in Qingdao, tends to get away from the price war and is making efforts to transform.
Lucky Trans was established in 2004, it currently operates five self-owned 2,400 teu containerships and another 15 containerships on time charter, offering services in the domestic coastal market and Yangtze River with offices in more than 20 port cities. The company uses Qingdao port, Rizhao port and Lianyungang Port as its hubs and is specialised in offering medium-short range shipping services.
“We had great opportunities and developed fast in the first five years, but after 2010, things were different,” says Zhang Jian, president of Lucky Trans.
“The shipping downturn has made many domestic shipowners switch their vessels from the international market to the domestic coastal market, and many state run shipping companies also started to order small container vessels to join the market, which has caused great overcapacity problems in the market,” Zhang says.
According to Zhang, in the past a couple of years, most shipping companies in the domestic liner market were suffering from losses and some of them have already quit the market or gone bankrupt.
“The price war between shipping companies still continues and the coordination mechanism of the industry is hardly working,” he continues.
Given the harsh market condition, Zhang decided to make a change for the company. He chose to transform the company from a single ship operator to a comprehensive logistics service provider in 2013.
“Currently it is obvious that the ships in the domestic container shipping market are getting larger, it seems that it would save shipping costs for the cargo owners, but actually shipping is only one segment of the whole logistics chain, and it has a limited affect on the cost control of the entire logistics chain,” says Zhang.
Zhang says Lucky Trans has optimised the company’s operating structure to better cope with the logistics business; the company has also developed a land logistics division to provide connections to its shipping business. Currently Lucky Trans runs 15 container yards and more than 1,500 trucks, offering door-to-door services. It has formed strategic logistics partnerships with several famous companies including Tsingtao Beer, Hua Tai Group and Asia Pulp and Paper.
“What we are doing is to reduce cargo transits and connect cargo owners directly with the shipping companies. We don’t even have to choose to use our own vessels for each business; we can choose the most cost efficient ones for our clients, which has added much more flexibility for our operation,” Zhang says.
Zhang believes that the domestic container shipping market is facing lots of restructuring and adjustment in the next few years, and the outlook is still not optimistic.
Zhang calls on the government and industry associations to reduce the severe competition in the market through establishing industry orders and reducing tax.
“From the current development of the company and the industry, I think we made a wise decision and there is still room for us to develop,” Zhang says.