Sunday, July 19, 2009

Slight recovery in two major shipping routes

Malaysia’s shipping industry has seen a slight recovery in volumes and freight rates in trade routes from Asia to Europe and the United States as the peak season approaches in the next two months.

“There has been a slight increase in volume but it is still weak. And the current freight rates have improved by 15% to 20% from their slump in January,” Wilhelmsen Ships Service Malaysia managing director Winston Loo told StarBiz.

“The current improvement in freight rates is still considered below healthy levels but it certainly helps mitigate, to a certain extent, rising fuel costs,” he said.

Loo said most shipping lines had also implemented a rate-restoration exercise.

Shipping containers are seen at the Port Newark Container Terminal near New York City.-Reuters

The exercise aims to counterbalance the books of shippers due to the high operating costs incurred after the drastic fall in volumes and ocean freight rates since the beginning of the global economic crisis.

Loo said that the end of July was a curtain raiser for the usual traditional peak shipping period in August and September due to preparations for the festive season by year’s end.

United Arab Shipping Co Malaysia Sdn Bhd country general manager Desmond Yong said the rate-restoration exercise was implemented because the previous rates charged, especially in the first quarter, were “beyond survival”.

“The rates then were about 50% less on a year-on-year basis,” he noted, adding that the current freight rates for a container from Malaysia to Europe were about US$300.

Yong said the current container shipping capacity was quite tight due to the rise in exports from China to Europe and the United States.

“Malaysia, too, is currently recording a year-on-year increase in exports to these two markets,” he said.

Trans-Asia Shipping Corp Bhd (Tasco) head of non-vessel operating common carrier, K.H. Lim, said the overall export volumes to both the United States and Europe had picked up as the July–September peak season approached.

“This is the time when major importers start buying all those back-to-school merchandise, summer holiday stuff, followed by Christmas sales goods.

“However, the current numbers are still way behind compared with a few years ago when the US economy was still unaffected,” he said.

He added that December and January were always the slowest months as most of the merchandise had already reached the retail outlets.

Usually, according to Lim, shipping lines will impose peak season surcharges from June 15 to Nov 15 but so far, none of the liners had done so.

“Nevertheless, the capacity of trade routes to Europe from Asia is quite tight now as most of the major lines have withdrawn, consolidated, merged or suspended trade that doesn’t generate enough cargo or considered non-profitable,” he said.

Asean Port Association (APA) working committee chairman Datuk Capt Abdul Rahim Abd Aziz said many, if not all, shipping lines had reported losing US$250mil to US$350mil per quarter since the global economic meltdown.

“Ships laid up as of last month were reported to be about one million 20ft equivalent units (TEUs), corresponding to 400 vessels worldwide – which is about 10% of the world’s capacity.

“The current situation is expected to stay till early part of next year,” he said in Kota Kinabalu recently.

Correspondingly, Abdul Rahim said the decline in Malaysia’s ports’ volume was between 25% and 30%.

“But I am happy to report that it has stabilised somewhat since about a few of months ago. Nevertheless, it’s too early to tell whether this stabilisation is here to stay and improve, or otherwise,” he said.

Source: StarBiz

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