Monday, June 13, 2011

Container freight continues to be battered by excess supply

Container shipping freight rates, which have shown signs of recovery at the beginning of the year, are now back sailing on choppy waters as rates continue to be battered by excess supply.
According to CIMB Research, despite the gloomy rate environment, containership newbuilding orders have zoomed ahead, with over a million twenty-foot equivalent units (TEUs) ordered year-to-date from about 700,000 TEUs last year.
“This has tilted the equilibrium negatively and supply is now expected to grow faster than demand in 2012 and 2013.” it said.
The research house said it was bullish on the sector at the start of the year based on a modest pace of newbuilding orders, but the dramatic surge of orders had taken it by surprise.
Excess supply: Maersk and MSC have already deferred proposed rate increases from June to July on weak ship utilisation.
“We are worried that liners are repeating the mistakes of the past,” it said in a recent sector report.
It said freight rates continued to be battered by excess supply, and base rates for Asia to Europe are probably close to zero.
“Rates between China and Europe have declined 60% to US$874 per TEU, from a peak of US$2,164 per TEU in March 2010, and are now close to zero after deducting the bunker adjustment factor of around US$750 per TEU.
“Spot rates have declined despite higher bunker prices, exacerbating the squeeze on margins,” said the research house.
CIMB Research expected rates could plummet below bunker costs over the next month or two.
“Maersk and MSC have already deferred proposed rate increases from June to July on weak ship utilisation, which could prevent a sustained rise in rates even during the coming peak season.
It said the present situation was much worse than its expectation at the start of the year.
According to Alphaliner, weekly Asia-Europe (AE) shipping capacity was 21% higher year-on-year (y-o-y) in May, substantially ahead of the 4% y-o-y rise in head-haul trade volume in April.
“Also, economic indicators in Europe appear to be weakening, with a flattish composite leading indicator for the big four European economies, weak retail sales, and rising retail stock levels.
The weekly expects carriers to begin cancelling services, redeploy capacity to other trades, or lay up ships if the situation continues.
Sharing the negative sentiment, according to CIMB Research, is Transpacific rates, which had resumed its downtrend after making tentative upward moves in April and early May.
“The Transpacific Stabilisation Agreement, a research and discussion group of 15 major container shipping lines had recommended US$400 per forty-foot-equivalent-unit increase in contract rates from May, but carriers likely lowered rates instead.
“According to Alphaliner, Transpacific capacity was 19% higher y-o-y in May against a 7% to 8% annual demand growth,” it said.
Source: BizStar

Monday, June 6, 2011

Kontena unveils logistics package for SMEs

Third party logistics provider Kontena Nasional Bhd will launch a warehouse and transportation package deal for small- and medium-sized enterprises (SMEs) today, which may make it viable for your favourite Penang halal "tao sah piah" manufacturer to bring it to a store near you.

The launch is in conjunction with Smidex Exhibition 2011.

SMEs have always been limited geographically due to high transportation costs. Starting out small, SMEs do not have the necessary volume to negotiate competitive rates with transportation providers.

"Our strategy is if we are able to cater, not to a single SME, but a group of SMEs in a single platform, in a single location, then we will be able to reduce the cost significantly, bearing in mind that once they grow they will be able to add volume to this produce of theirs," Kontena Nasional chief executive officer Hood Osman said in an interview here recently.

About 95 per cent of total businesses in Malaysia are SMEs.

Called 1 KN 1 Rate, Kontena Nasional's latest offering is customised to meet individual SMEs needs. It includes role consulting, planning, transport rates and warehouse rates.

Hood said the last six to eight months have been about bringing Kontena Nasional to a state of readiness to offer the services.

"We have applied halal certification and increased our fleet to multi-vehicle services. We used to be wholly in prime movers and hauliers, and have expanded our warehouses. These are all significant contributors to the whole infrastructure that will help facilitate the growth of SMEs," he said.

Kontena Nasional currently has about 15 warehouses nationwide, and is expected to add another three by the end of the year.

"We have used the past six months to make sure that we can cater to individual requirements, to do a bit of study, to see where SMEs are and how to go about servicing them," Hood said.

He said its studies have shown that SMEs generally do irregular deliveries, make sporadic requests and require too small a space in warehouses for retention.

Kontena Nasional expects to bring in between RM7 million and RM8 million in sales from the venture.

The second phase will be the introduction of its product to SMEs in Sabah and Sarawak.