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.

Analyst Predicts Shortage of Containerships by 2012

(International Freighting Weekly – Mike King)

There could be a shortage of containerships by 2012 as the newbuilding orderbook approaches 10-year lows, according to new analysis by Macquarie Equities Research. In its latest Vital Signs shipping report, Macquarie found that the current boxship orderbook would produce a 10% increase in the global fleet’s size next year, falling to 6% growth in 2012.

“Based on our view that volumes will achieve minimum growth of 8% a year, we are potentially facing a shortage of capacity in 2012,” said the authors. “The orderbook as a percentage of the current fleet is approaching lows last seen in 2003, ahead of the last boom in containership profits.”

Alphaliner estimates that some 6.7% of the orderbook has been cancelled since the beginning of the global financial crisis in October 2008, while scrapping has also made a sizeable dent in capacity.

In 2009, only two new containership orders were placed and this year, the 55 vessels that have been ordered equates to just 2.2% of the existing fleet. Macquarie said: “Due to solid deliveries year-to-date, the orderbook has fallen to 26.4% of the cellular fleet from 36.1% in January and a peak of 64.2% in November 2007.” Read more here.

Couriers Shift from Packages to Freight

(Air Cargo World)

A survey by the Messenger Courier Association of America (MCAA) said its members are changing from delivering letters and packages to becoming “key players in the global supply chain, a dramatic shift from their previous role”.

The MCAA members have migrated towards handling larger freight with 71% of respondents offering expedited freight delivery. Some 42% of members reported an increase in larger freight deliveries.

“This survey verifies what we’ve been hearing from our members – participating in the growing need for global deliveries has kept them viable and successful,” said Chris MacKrell, president of MCAA. “The majority of our members (53%) say their businesses are doing better than a year ago.

“An important component of that success is the industry’s shifting role as a key player in the global supply chain. That contrasts with the old-fashioned view of our industry as one consisting of mom and pop companies delivering letters.”

The shift is supported by increasingly sophisticated technology noted Mackrell: “Seventy-five percent of respondents told us that their communications’ systems were integrated into their business systems and 93% accept orders via the internet. An increasing number (24%) are able to capture data directly from customers’ websites.”

Key industry sectors served by MCAA members are medical, banking, pharmaceutical, high-tech, 3PLs and government. The survey indicated that most of his members have over 20 years’ industry experience.

West Canadian Ports Vie for China Trade

(Shanghai Daily)

Two small west coast Canadian cities are vying to become key players for China’s North American logistic needs, citing an advantage of faster delivery time to the American heartland and a sound and stable business environment, reported the Shanghai Daily.

Over the past few years under the Asia Pacific Gateway and Corridor programme, a US$2.8 billion initiative launched in 2006 involving the participation of the Canadian federal government, as well as those at the provincial and municipal levels, the northern British Columbia cities of Prince George and Prince Rupert have emerged as increasingly important parts of the process.

Created by the ruling Conservative Party government, the programme involved a radical transformation of traditional mode-specific transport framework of private carriers to a more integrated approach to establish the most efficient transport network to best serve global supply chains between Asia and North America.

Following a few years of heavy investment and infrastructure construction, the pieces are now in place for both Prince George and Prince Rupert to make a significant logistical difference. 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.

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.

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.

Container Shipping Growth Rates Remain High, But Analysts Predict Drop

(JOC/PR Newswire)

August through October typically marks the highest shipping annual point, with volumes reflecting the U.S. import of goods to stock store shelves for the holidays. This year, however, it looks as if the peak may have passed before it even arrived. A growing field of research analysts, industry observers and even shipping executives is predicting a slowdown in growth deeper into the year after a strong rebound in shipping volume in the second quarter.

The first half of the year has been one of double-digit growth for cargo, as retailers finally restocked shelves and shippers, nervous about potential capacity shortages, decided to move their holiday season goods earlier than usual, shifting the annual peak shipping season to July. As August comes to a close, however, PIERS Global Intelligence Solutions, a sister company to The Journal of Commerce, expects year-to-year growth in container imports to cool from as estimated 17.6 percent rate in the second quarter to 7.8 percent in the third quarter and 1.4 percent in the fourth quarter. Unemployment, tight credit and underwater mortgages, will continue to hurt import volumes in the months ahead.

“No one seems to be predicting a slump to the volumes of 2009,” reports The Journal of Commerce Cover Story. “While consumer spending generates 70 percent of U.S. economic activity, economists note container volumes also include industrial components and foodstuffs with limited sensitivity to consumer demand.” Read more here.

Cargo at a Standstill in Karachi After Politician Is Murdered

(International Freighting Weekly – David Badger)

Hauliers won't risk bringing trucks into the city to port as violence goes on

Cargo movement has come to a standstill in Pakistan’s southern coastal city of Karachi this week, amid violent scenes following the murder of a prominent local politician who was shot dead on Monday. [...]

Hauliers said they wouldn’t take risk bringing their vehicles into the city to the port to deliver or collect import containers, while trucks already loaded were not leaving the port area, staying parked inside the locked port entrance. However, dockside activity inside Karachi Port and Port Qasim has carried on as normal, with loading and unloading of cargo and arrivals and departures of vessels continuing throughout the day. 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.

New Wrinkle for Trans-Pacific Peak Shipping Season, Retail Importers Push Asian Suppliers Further into Supply Chain

(PRNewswire)

Facing greater uncertainty in the consumer market, North American retailers are trying to hold off purchases of finished goods until as late as possible by pushing their suppliers in Asia to retain ownership of products deeper into the supply chain, reports The Journal of Commerce. The retailers are trying to hedge their risks and hold onto cash, and that means more suppliers that provided goods on the docks in Asia are being called on to manage the transportation of finished products through increasingly congested trans-Pacific distribution channels.

Many suppliers previously required to just move their products to Asian shores must now get their goods from factory floor to U.S. retail door. The impact of the change in procedure is stretching from the docks of Hong Kong and Shanghai to intermodal networks in North America, where decreased equipment and drivers are already increasing pressure on transload operators. Reduced cycle time and cost savings make this appealing to importers, but it’s causing panic among suppliers and a splintering of the supply chain at a critical moment, with volumes increasing but resources limited.

“The long-existing supply chain model is broken,” said Patrick Ahern, vice president for international at National Retail Systems, a New Jersey-based provider of logistics to retail importers. “And it hasn’t been replaced by a new model.”

Companies Engaged in Global Trade Are More Optimistic About Economy

(Logistics Today)

Although concerned about the economy, small- and medium-sized business exporters are confident about their companies' futures, especially when it comes to international sales, according to a recent survey commissioned by UPS.

Of the small- and medium-sized business exporters interviewed, 85% say the economy is their top concern, far exceeding their worries about any other issue. However, most respondents indicate they remained positive about their businesses and their international sales opportunities. More than three-quarters (78%) say they are confident international sales leads will materialize.

“Entrepreneurs who export are self-assured, adaptable and resilient so it doesn't surprise me that the survey shows exporters are confident about meeting their business goals,” says Laurel Delaney, owner of small-business consulting firm Global Trade Source.

The survey found that most small- and medium-sized businesses (61%) that had expanded into foreign markets did so with a sound plan. And, exporters are quick to learn about the in's and out's of exporting; more than half (53%) say they do not find the process of exporting frustrating. However, those who were newer to exporting say documentation and customs requirements are the biggest barriers to expansion. Read more here.

Smaller Manufacturers Reject Global Supply Chain Strategies

(Transport Intelligence – John Manners-Bell)

Global consultancy IDC Manufacturing Insights has recently conducted a worldwide study of over 700 small and medium-sized enterprises (SMEs) in the manufacturing industry on behalf of Infor and IBM.

One of the key results of the study found that manufacturers, while pressured to reduce costs, have pulled back on the prevalence of low-cost country sourcing. According to the survey, there seems to be an increased focus on the importance of customer fulfilment in contrast with a previous emphasis on low-cost sourcing strategies.

The consultancy asserted that low-cost sourcing could result in lower responsiveness and poor customer service, higher costs, and additional risk factors such as supply chain disruptions, diminished IP protection and environmental concerns. The study indicated that North American and European manufacturers would focus on improving their own operations for the medium-term as opposed to aggressively looking to sourcing partners to cut costs. Read more here (subscription required).

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.

No Silver Linings As Eruption Fall-Out Continues

(Procurement Leaders)

In procurement it’s always best to expect the unexpected but, even after the cataclysmic economic conditions experienced over the past two years, only the most ardent pessimist could have predicted a volcano in Iceland bringing the world to its knees.

The wholesale closure of European air space did more than disrupt an already ailing airline industry, it disrupted supply chains to an almost unprecedented extent.

Potentially disastrous it might have been, but what the latest crisis did was to offer procurement operations the opportunity to show that the painful lessons handed out on a regular basis throughout the credit crunch have been learnt and, more crucially, acted upon.

So, as Eyjafjallajokull continues to spew out ash and the dust steadfastly refuses to settle, do the supply chain risk pledges made by some of the biggest names in the corporate world amount to anything more than hot air?

“A couple of things have happened (as a result of the eruption),” Gary Lynch, global leader of Marsh’s global supply chain risk management practice, tells Procurement Leaders. “One of the major challenges that businesses face is to define their business continuity strategies and resilience in the supply chain — and a great many are beginning to realise that the way they approach the problem isn’t good enough.” Read more here.

Today’s Growth Is the Real Thing

(International Freighting Weekly – Damian Brett)

Statistics were misunderstood and volume increases not down to restocking

Current growth in cargo volumes is sustainable, and is down to a genuine increase in real growth and not inventory re-stocking, according to speakers at the Shippers’ Voice seminars at this week’s Multimodal exhibition.

President and CEO of Cargolux Ulrich Ogiermann and analysts Mike Garratt, director of MDS Transmodal, and Ben Hackett, director of Hackett Associates, all agreed that consumer demand had fuelled growth in trade and cargo volumes over the first four months of the year.

“Restocking has already taken place,” said Ogiermann. “From our point of view, it took place last year and drove up demand at the end of 2009, and maybe also in the first month of 2010. Now we are seeing a genuine increase of air cargo demand, because consumers are requesting high-value goods, such as mobile phones, ipads and so on. There is genuine demand coming back.” Read more here.

Import, Export Consignments Remain Stuck at Ports [Pakistan]

(The News.com)

The government’s decision to observe two-day weekly holidays created confusion on Saturday as customs officials responsible for clearing import and export consignments at the Karachi Port remained absent from their duties.

Loading and unloading of goods from the vessels continued as usual, but freight forwarders could not take imported cargo out of the port, due to absence of customs officials.

“Like airports, the seaports operate round-the-week," a Karachi Port Trust (KPT) official said. “But the customs officials seem to have taken the announcement too seriously. They think it is a complete holiday.” Read more here.

Ash Cloud Halts Northern European Air Cargo – No End in Sight

(Video: RT News • Story: Transport Intelligence)



The eruption of the Eyjafjallajökull volcano in Iceland has had an extraordinary effect on the air transport system of northern Europe. Since Thursday the air space of first Britain, Norway, the Netherlands and now Germany, Austria, Belgium, Denmark, Finland, France, Germany, Latvia, Luxembourg, Poland, Slovakia, the Czech Republic, Bulgaria, Sweden and Switzerland have been shut to all commercial traffic. The suspension of activity is set to continue into at least the beginning of the week. Further disruption seems likely as the volcano will certainly continue to erupt. […]

The obvious reaction by logistics planners will be to use other modes of transport. This is not as difficult as it might first appear. Air freight for traffic within Europe is of secondary importance.

Although the location of a number of very large airports, it is often just as quick to move goods within Europe by road. A good example of this is traffic between Britain and France. This route has access to good ferry services and roads. These can easily be stretched to more distant locations such as Spain or Germany. Read more here.

Related:

• Shippers Face Steep Air Cargo Rate Hikes (JOC)
• Air Freight Backlogs Build Across Asia (International Freighting Weekly)

U.S. Import Boom Will Continue into Summer

(International Freighting Weekly – Mike King)

Retailers stock up as consumer spending gets back on course

U.S. retailers will continue to import containers at significantly higher volume levels than last year until at least late summer, according to leading forecasters. One Asia-based analyst said: “U.S. retail stocks are growing, which is a good indicator for container markets. U.S. retail spending is clearly increasing and we’re expecting 14-16% year-on-year growth into the US this quarter.”

February was the third successive month to show year-on-year volume gains at U.S. container ports, following 28 months of continuous decline, according to the monthly Global Port Tracker report produced for the U.S. National Retail Federation (NRF) by consultancy Hackett Associates. Jonathan Gold, NRF VP for supply chain and customs policy, said: “We expect these numbers to continue to climb as merchants and their customers move away from recession and back toward normal shopping habits.”

Member shipping lines of the Transpacific Stabilisation Agreement are understood to have been successful in introducing general rate increases in both directions on lanes between Asia and the U.S. Read more here.