Carriers Now Focusing on Profits Not Market Share

(International Freighting Weekly – Damian Brett)

Shippers should not negotiate contracts with the attitude that “volume is king”, as carriers are now more concerned with profitability than market share, according to a leading consultant.

In its Annual Container Market Review and Forecast 2010/11, Drewry Shipping Consultants said the days of carriers offering lower rates for large volumes in order to grab market share were gone and shippers should, therefore, work more closely with carriers to get value out of contracts.

The report also suggested the drive to remain profitable also meant carriers would only increase active tonnage if the necessary volumes were there. Read more here.

Clouds Over the Transpacific

(International Freighting Weekly – Mike King)

Pressure on rates as demand slows

New capacity and slow US restocking are threatening to put additional downward pressure on transpacific ocean freight rates, claim leading industry sources.

“Presently, the traffic in and out of China is softening,” said Byron Lee, MD of forwarder China Global Lines. “Carriers do not have full ships and rates have dropped every week [since August]. “It is a good time to canvass for new business, as we face no space problems and carriers are flexible and offering lower rates.”

Another forwarder said: “The transpacific peak season ended just as carriers added more capacity”. Read more here.

Shippers Cautious Over Call for Tighter Contracts with Shipping Lines

(International Freighting Weekly – Damian Brett)

It may be difficult for shippers to provide accurate long-term predictions on when, and how many, containers are to be shipped

Contracts between shippers and carriers should be tightened up, but it will be difficult for shippers to provide accurate data on when and in what quantity containers will be shipped.

European Shippers’ Council (ESC) Secretary General Nicolette van der Jagt said she supported carrier calls for tighter contracts between shippers and carriers, after Maersk Line CEO Eivind Kolding last week said contracts contained too much leeway that left both parties unclear about what had been agreed. Kolding pointed out that a contract may commit a shipping line to carry 5,000 boxes a year from China to Europe, but often it was not clear if that meant 100 boxes a week, or 50 one week and 150 the next, or where the containers would be shipped from.

And van der Jagt said some ESC members had taken the initiative to work on standard contract clauses that were more formal than used today. Read more here.

There’s Good News and Bad News for Container Shipping

(International Freighting Weekly – Damian Brett)

Overall throughput this year enough to combat effects of recession, but box shortage rebounds on Q4 prospects

The container shipping industry should brace itself for a weaker-than-expected fourth quarter, as inventory re-stocking and empty container movements slow, according to a leading analyst. In its Counting Containers report, analyst Macquarie expects fourth-quarter volumes to be weaker than in the third quarter because June, July and August figures were boosted by inventory re-stocking and the increased movement of empty containers, as the industry sought to combat the effects of a shortage.

The report explains that fourth-quarter volumes are normally around 0.7% up on the third quarter, but this year the analyst said it expected them to be up to 3% lower. Read more here.

Trans-Pacific Spot Rates Fall to Five-Month Low

(The Journal of Commerce – Bill Mongelluzzo)

Spot freight rates in eastbound trans-Pacific trade lanes declined last week to their lowest point since May as carriers expand capacity faster than the growth in cargo volume.

The Shanghai Containerized Freight Index average spot rate to the U.S. West Coast in the week ending Sept. 17 fell 2.9 percent from the week before to $2,493 per 40-foot container. That was down $74 from the previous week, the steepest one-week decline in the Shanghai Shipping Exchange index this year. That marked the 11th straight week that the spot rate declined, and it hit the lowest point since May 7. Read more here.

Container Traffic Growth to Slow, Claims Report

(International Freighting Weekly – Katerina Kerr)

Container traffic is expected to increase 12% this year, but will decline to half that in 2011, according to HSBC Global Research’s latest report. The research also projects an average rise of 17% in US$ per teu for this year, but only a 2% rise for 2011.

HSBC recorded a 20% rise in container volumes in the second quarter this year, with traffic in July up 11% on last year to 12.7 million teu, but 2% below figures for July 2008.

It said: “Globally, demand remains strong on intra-Asian trades, and recently had been particularly strong on Asia-Europe. Freight rates charged by container lines such as Maersk – which recently upgraded guidance – are up around 30%, year to date, globally, owing to healthy demand and supply-side discipline.” Read more here.

Nervous U.S. Importers Stock-Up Early

(International Freighting Weekly – Mike King)

U.S. container imports are falling ahead of next month’s traditional peak shipping season, as a result of retailers’ attempts to avoid shipping surcharges and concerns over consumer confidence. Import volumes in July were up 25% on last year, at 1.38m teu, but are predicted to gradually contract, according to the latest Global Port Tracker report from the National Retail Federation (NRF) and Hackett Associates.

Hackett Associates founder Ben Hackett said: “There is sufficient evidence to suggest that importers anticipated the peak season and bought early – partly as a result of a fear of lack of capacity and containers, but to avoid the hefty peak season surcharges announced by all the carriers. We remain cautious about growth over the next 12 months. The good news is that the influx of new capacity will continue to put downward pressure on freight rates.”

However, volumes in the coming months are still predicted to show significant growth, compared with 2009 equivalents. Read more here.

Freight Rates To Tumble In H2 2010 Due To Overcapacity And Slower Demand

(Datamonitor)

International freight rates have increased over H1 2010 due to reduced transport capacity and increased freight demand, a trend that has been reflected in upswings in price indices such as the Baltic Dry Index and Danske Bank’s European Freight Forwarding Index. However, forecasted overcapacity and sluggish growth in freight volumes are expected to reduce rates in H2 2010.

Freight volumes rebounded in 2010, with the strongest recoveries being seen in North America and Asia Pacific. Various macroeconomic indicators have registered an upswing, confirming that economic activity has been in traction. According to the World Trade Organization, merchandise exports grew by 7% in Q2 2010 compared to Q1, primarily driven by the resumption of industrial activity and global trade, and the restocking of inventory. JPMorgan Global Manufacturing PMI has also signaled a recovery in global manufacturing by registering consecutive monthly growth since July 2009. However, the rate of expansion is expected to ease slightly due to the slower recovery seen in Europe and Japan. Read more here.

Overcapacity Could Force Transpacific Rates Down

(International Freighting Weekly – Mike King)

Forwarders claim lines have failed to impose surcharges as available space increases

Lines have failed to push through peak season surcharges (PSSs) on transpacific trades, and new capacity entering the market could see freight rates fall in the middle of the peak season, claim forwarders.

“Lines have been trying to impose the second PSS, but without much success,” said Paul Tsui, Chairman of the Hong Kong Association of Freight Forwarding and Logistics. “Not many customers are willing to pay, with so much additional capacity being added.”

A number of lines committed extra, short-term capacity to transpacific trades earlier this year to help alleviate equipment shortages and in response to criticism from shippers and the U.S. Federal Maritime Commission over rising freight costs, which some attributed to liner collusion.

In the coming weeks, the rise or fall of transpacific spot rates could depend on whether carriers are able and willing to move this temporary capacity to other trades, claim forwarder sources. Read more here.

Ocean Container Rates Still on the Decline

(International Freighting Weekly – Damian Brett)

Carriers reported to be cutting prices and looking for post-peak season guarantees

Global ocean container rates fell last week and forwarders say shipping lines are starting to look to guarantee cargo for after the peak season. For the week ending 20 August, the global Shanghai Containerised Freight Index, which is based on rates for 15 different destinations from Shanghai, dropped 13.46 points on the previous week to reach 1,513.60.

The index showed that all-in spot rates on services to European ports last week dropped by US$20 per teu on a week earlier, to reach $1,847.

Over the last four weeks, westbound Asia-Europe rates have dropped $43 per teu, according to the index. Read more here.

Box Surcharges Soar on Asia-Canada Run

(Cargonews Asia)

The cost of shipping consumer goods from Asia to Canada is surging, with another price increase kicking in Sunday, as freight forwarders face a shortage of containers this summer and fall, reported The Globe and Mail.

"This is traditionally the peak season for imports coming from China to Canada," said Perry Lo, president of Canaan Transport Group Inc, a freight forwarding firm based in Mississauga, Ontario. "And now we face a huge price hike." Lo's company, which serves as an intermediary between ocean-going vessel owners and retailers, will have to pay an extra US$900 for each larger-sized container transported, starting this Sunday. The increase comes on top of $1,500 in new charges since February, raising the total cost of importing each container to more than $6,000 – nearly triple the rates from early 2009, when the recession crushed global shipping. [...]

"The container prices are going up, up, up," said Ruth Snowden, executive director of the Canadian International Freight Forwarders Association. Read more here.

Retailers Pay More to Get Cargo (No Guarantee)

(Stephanie Clifford — New York Times)

The grills shaped like kegs and toolboxes, ordered for a Father’s Day promotion at Cost Plus World Market, arrived too late for the holiday. At the Container Store, platinum-color hangers, advertised in a summer sale catalog, were delivered days after the sale began. At True Value Hardware, the latecomers were fans and portable chairs.

Fighting for freight, retailers are outbidding each other to score scarce cargo space on ships, paying two to three times last year’s freight rates — in some cases, the highest rates in five years. And still, many are getting merchandise weeks late.

The problems stem from 2009, when stores slashed inventory. With little demand for shipping, ocean carriers took ships out of service: more than 11 percent of the global shipping fleet was idle in spring 2009, according to AXS-Alphaliner, an industry consultant.

Carriers also moved to “slow steaming,” traveling at slower and more fuel-efficient speeds, while the companies producing containers, the typically 20- or 40-foot boxes in which most consumer companies ship goods, essentially stopped making them.

“All my customers, they’re having a terrible time,” said Steven L. Horton, principal at Horton Global Strategies, which negotiates freight contracts for companies. “With the increased cost and them not knowing if they’re even going to get the space or equipment, it’s a weekly battle.”

Retailers and suppliers like Mattel, Polo Ralph Lauren, Jones Apparel Group, Costco, the VF Corporation, Big Lots and Lifetime Brands have reported being hit with higher prices and capacity shortages. Read more here.

Transpacific Rates Hit Five-Year High

(International Freighting Weekly – Damian Brett)

Spot prices for transpacific shipping services have grown by more than 180% during the past 12 months to reach a five-year high. Experts describe the increase as a “mini container shipping boom”.

Shipping consultant Drewry’s Hong Kong-Los Angeles container rate benchmark hit US$2,607 per 40ft container last week – 19% higher than the previous week and 182% higher than the same week in 2009.

But Drewry pointed out that the trade had been suffering with “serious overcapacity and price discounting” in 2009. It added that the jump in transpacific container rates reflected new peak season surcharges, very tight eastbound transpacific ship capacity and a shortage of boxes, which is becoming an issue in China as well as in the U.S. Read more here.

Carriers Eye Equipment Surcharge

(International Freighting Weekly – Mike King)

Box shortage sparks move towards repositioning fee

With a shortage of available containers in Asia, at least two leading carriers are understood by IFW to be attempting to introduce equipment repositioning surcharges. Shippers are already facing substantial peak season surcharges as capacity tightens on both the Asia-Europe and transpacific trades.

Joerg Twachtmann, Panalpina’s Global Head of Product & Procurement Ocean FCL, said: “There are shortages everywhere, especially in northern China, of 20ft boxes. With slow-steaming, there are more containers on the water on both main trades. “Carriers also stopped investing in boxes in 2009, and all this will continue to impact the flow of cargo. It also helps the carriers control supply.” He said capacity on Asia-Europe lanes was not as tight as on the “chock-a-block” transpacific, but both trades were suffering equipment bottlenecks. Read more here.

Battle for Space on the Transpacific

(International Freighting Weekly – Mike King)

Capacity squeeze and cargo backlogs at Chinese ports will force early surcharge

Carriers are poised to bring forward peak season surcharges on the transpacific trade as cargo piles up at ports across China due to a lack of containership capacity.

Paul Tsui, Chairman of the Hong Kong Association of Freight Forwarding and Logistics (HAFFA), said most sailings to the U.S. were hugely overbooked, resulting in the constant rollover of consignments. […]

Lines have been squeezing capacity on the transpacific trades in the lead-up to the annual contracting season, which is now almost complete. Read more here.

Freight Rates Back to 2007 Peak Levels

(Port News/Cargonews Asia)

Freight rates for container shipping trade lanes between Asia and Europe have returned to their peak levels of 2007 as exports gain strength and shipping companies control capacity over the route, reported the South China Morning Post.

Coscon, the largest shipping company on the mainland, said rates had increased to US$1,400 per TEU, plus a $510 bunker adjustment charge. Rates per FEU rose to $2,650, in addition to $1,020 in bunker charges.

"The market leaders such as Maersk and MSC have urged the industry to keep a balance between supply and demand, and most of the players have reacted positively to keep [control of] capacity," said an official from China Cosco, the parent of Coscon.

Coscon has kept 40,000 TEUs of capacity, or about 10 vessels at "hot lay-up", meaning idling the vessels outside the ports.

About 10 per cent of the global fleet is idled across the globe. Read more here.

EC Presses Ahead with Investigation into Alleged Forwarder Cartel

(International Freighting Weekly – Damian Brett)

Several freight forwarders – including Kuehne + Nagel (KN) and Panalpina – have received Statement of Objections from the European Commission over alleged price fixing. The EC said the statements had been sent out over allegations of price-fixing cartels within the firms’ air forwarding divisions.

It said: “The commission is investigating allegations that these companies fixed prices by colluding on the imposition, level, timing and application of various surcharges.

“The allegations concern four separate infringements involving the provision of freight forwarding services from the UK to outside the European Economic Area (EEA), from the EEA to the U.S., from China to the EEA and from southern China/Hong Kong to the EEA.” Read more here.

Related: Canada drops forwarder cartel case (IFW)

Global Container Freight Rates Are Increasing

(Logistics Today)

For the first time since mid-2008, average global container freight rates experienced a year-on-year increase in late 2009, according to a report from U.K.-based consulting firm Drewry. The Drewry Global Freight Rate Index recovered by 3% in the year to November 2009, after collapsing the first half of 2009, increasing by 18% between July and September 2009 and rising by another 6% between September and November 2009.

Between September and November, the global “all-in” container freight rate index rose from $2,040 per 40-ft container to $2,160, maintaining a trend of price rises that has lasted for more than six months. However, recent average global freight rates in late 2009 were still about 20% below the peak of 2007.

“On routes such as Asia to Europe, the year-on-year increase in spot rates amounts to at least 40% and we know from shippers that they are asked to agree to much higher freight rates under annual contracts renewed in early 2010,” says Philip Damas, director of Drewry Supply Chain Advisors. “January and February are a critical period for many shippers because a high proportion of annual contracts are renewed then.” Some shippers, he points out, are worried that they will be asked to pay higher freight rate levels and are unsure whether the requested rates are at or higher than market benchmark levels. Read more here.

Shippers May Face Higher Rates in 2010 as Space Gets Tight

(Logistics Management)

The active capacity of the world’s leading ocean cargo carriers dropped by 2.4% over the last 12 months.

According to a new report issued ASX-Alphaliner, capacity management has become the key to restoring the industry to profitability in 2010. “Although the total operated fleet of the top 20 carriers increased by 1.6% since 2009, the effective capacity dropped due to an increase in the idle fleet,” said analysts.

Analysts added that the combined capacity of the “Top 20” carriers reached 10.81 million twenty-foot-equivalent units (TEU) on 1 January 2010 compared to 10.63 million TEU in 2009. The idled capacity of these carriers currently stands at 743,000 TEU, representing 6.9% of the carriers’ operated fleet. The idle capacity for these carriers was 328,000 TEU or 3.1% of their fleet on 1 January 2009. Read more here.

Gloom in Global Shipping

(Export Development Canada – Peter G. Hall)

As the sun begins to set on 2009, international traders are likely breathing a collective sigh of relief. Accustomed to hefty annual increases, traders are weathering a 17% drop in global volumes thus far in the year, and there are few signs of rebound. Will traders’ fortunes revive in the coming year? […]

This mindset left the world largely unprepared for a correction. But the rising importance of trade tied its fortunes more closely to global trends – in essence, the consumption excesses of the West were exported everywhere, and in many locales, these became production and trade-related-infrastructure excesses. As such, at current activity levels there is sizeable surplus productive capacity worldwide.

Shippers agree heartily. The container business – red-hot in the bubble years – is estimated to have tumbled by over 10% in 2009, the worst year by a large margin in the industry’s half-century history. Certain key ports are registering volume declines of up to 30% in the first half of this year. Ports that handle origin-destination shipping are faring better than the large trans-shipment facilities. Singapore falls into the latter category, and year-to-date traffic is well below the average, down by over 16%. Read more and/or watch the video here.