Shipping News
Published March 31, 2004
Shipping News:
Transpacific carriers bullish on freight rates
They expect cargo demand to grow 10% over the 2004-05 contract season
By BETH JINKS
(SINGAPORE) Major carriers on the Asia-US trade lane say the ship capacity squeeze will continue this year after a 'buoyant' first quarter, in a strong push for significant freight rate increases in the lead up to new contract negotiations.
Full steam: TSA says vessels plying the Asia-US route were full for the first three months of 2004
The carriers also foreshadowed higher cost recoveries ahead, indicating they expected shippers and other segments of the supply chain to share the burden of the widening imbalance of East and West-bound cargo, soaring charter rates, fuel prices, and higher vessel and container costs, which they said had pushed costs up 25 per cent in the past year.
The 14 members of the rate-setting Transpacific Stabilisation Agreement (TSA) said 'they are confident that cargo demand will grow by around 10 per cent over the 2004-05 service contract season, in line with the 9-10 per cent annualised growth in vessel capacity anticipated during the same period'.
'Advance bookings and discussions with customers suggest that the trend of tight space will continue through much of April, and resume after a typical May lull, with summer back-to-school and holiday shipments leading a peak season spike through September,' the TSA said, adding that air cargo carriers were in a similar position.
They added that vessels plying the Asia-US route were full for the first three months of 2004, barring the traditional lull during the weeks surrounding Chinese New Year.
Rebuffing fears of future overcapacity fuelled by the newbuilding boom, the TSA sited a Drewry Shipping Consultants projection that demand and supply growth in the transpacific market will stay roughly in line through 2006 - meaning freight rates are unlikely to fall any time soon.
TSA members, including APL, CMA-CGM, Evergreen, Hanjin, Hapag Lloyd. HMM, K Line, Maersk, MOL, NYK, OOCL, P&O Nedlloyd and Yangming, are in the midst of new negotiations with shippers for annual contracts that kick off in May, and need to paint as full a picture as possible to push through rate increases comparable to those achieved on the Asia-Europe trades at the start of this year.
Citing more detailed bullish figures to back up its case, the TSA said the China-fuelled imbalance 'has produced a near 2.5-to-1 ratio of loaded containers moving to the US versus returning to Asia', translating to 53,000 FEUs sailing back to Asia empty each week in 2003.
Chinese manufacturing now accounts for 60 per cent of the 9.1 million TEUs exported to the US from Asia annually, a trend TSA expects to continue.
The members added that Asia-US shipments grew 9.3 per cent in 2003 over 'a near record year in 2002', fuelled by replenished inventories and greater consumer spending power in the US from tax cuts and lower interest rates.
'Neither a dramatic adjustment to exchange rates, a near-term increase in US interest rates, nor a tangible protectionist US backlash over jobs are likely to dampen two-way trade,' the TSA predicted.
'Japanese and Korean shipments to the US also posted significant gains in 2003, particularly in automobiles and parts, and in consumer electronics.'
The TSA added that exports from 'Thailand, Vietnam and elsewhere' are also expected to increase, with another trade boost likely from the elimination of global textile quotas.
To justify cost recovery efforts, the TSA said carriers had forked out significant investments to improve logistics infrastructure in Asia to cope with the cargo boom.
With shipyards full all over the world, the cost of newbuild container vessels rose 16 per cent in 2003, while charter rates have more than doubled for ships smaller than 3,500 TEUs, and risen 75 per cent for those larger, as demand spikes particularly for feeder-sized tonnage.
'Even at these rates, all but 0.1 per cent of global container capacity is fully booked,' the TSA said.
The members argued that rising steel prices made containers more expensive and led manufacturers to cut back production, while port congestion and overland hold-ups caused 'sporadic container shortages'.
'Optimising utilisation, and complying with new security mandates, have required significant investment in information systems, screening technology and administrative reorganisation,' the TSA said. 'Rising oil and gas prices - apart from marine fuel - have meant higher rail, trucking and port charges that have, to date, been absorbed by carriers.'
TSA executive director Albert Pierce said that ports, terminal and warehouse operators, transportation intermediaries and customers 'must redouble their efforts to cooperate, communicate and share the burdens we confront as an industry to keep the cargo moving' |
