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Trans Global Logistics Monthly Market Update
December 2009 (Asian Edition)
When it comes to determining how strongly the economy is recovering, many leading economic indicators in recent months continue to present mixed signals.
The global economy is showing signs of improvement with growth dragging until employment picks up and consumer confidence improves. It is unlikely that retail numbers in US will show significant gains in the holiday season due to limited demand from consumers, limited consumer credit availability, and more inventory paring from retailers until conditions improve-which will continue to hinder freight volumes.
While Asia is leading the global economic recovery, with China pulling the strongest. India is also looking increasingly strong, Vietnam and Indonesia¡¦s economies are also on track to grow. China¡¦s strong recovery in domestic private investment, particularly in the property sector, as well as stronger consumption, is helping drive demand for imports from its Asian trading partners. As China can become of potential importer, the entire region will benefit.
Meanwhile there have been some positive developments in the ocean, rail, trucking and airfreight industries. The level of freight is weak in absolute terms, but, sequentially, it is moving up month to month. Overcapacity is now the critical feature in the container industry, forcing cargo shipping lines to reduce cost and adopt measures to match demand and supply ranging from reducing fuel consumption, parking ships, delaying delivery of new vessels to outright sending ships to yards for scrapping, and other measures such as super slow steaming which not only helps reduce fuel consumption, but also puts more ships into rotation. There are also some indications that demand for air freight is picking up, while at the same time, ongoing freight capacity reductions are taking hold to tighten the market up in 2010.
No matter what the transportation mode, carriers in 2010 are expected to push for increases in freight rates, but success will be measured in incremental gains over 2009 rates.
Here are some highlights reported from our service network:
USA: ¡§Data indicate that economic recovery is finally setting in. We can expect slow growth through the first half of 2010. The pace of growth, however, will depend critically on how much demand picks up, and how soon,¡¨ said Ken Goldstein, a Conference Board economist.
Transpacific Stabilization Agreement (TSA) members have already announced a General Rate Increase for 2010-2011 service contracts and implemented a Peak Season Surcharge. This is more a function of a dire need for revenue recovery rather than stabilization of supply and demand, as a very slow economic recovery is expected. Space is also tight going westbound, and carriers have announced a General Rate Increase effective December 5 for all cargo from USA to Asia.
South Korea: The space status is still critical due to local and transshipments. Airlines expect that around 500 tons of backlogs including local and transshipment for USA & Europe at ICN airport. Airlines will keep current rates until Dec 09 and whenever cargo demand weakens, airlines will reduce their capacity to maintain current market rates.
China: 15 out of the 27 EU's anti-dumping committee member states voted against a European Commission proposal to extend the dumping duties on leather shoes from China. The Council of the EU will have to make the final decision no later than January 2010 to either extend or end the anti-dumping measures.
For ocean freight, Intra Asia¡¦s space is tight and rates rise up due to volume increase. USA, Europe, and Australia lane rates and spaces are more stable compared to last month, the rates for Middle East, India and Pakistan, Red sea fluctuates, the cargo volume for South East Asia increased a lot so the rates also increased greatly, and Reefer cargo increased a lot as well. For airfreight, most carriers are increasing rates as a result of tight space and high demand. The cargo volume of US, Europe and Australia lanes increased compared to last month. Recently many airlines got overloaded for many flights causing backlogs at many airports.
Taiwan: According to China Airlines (CAL), air cargo shipment demand and rates rose sufficiently that it has put two mothballed cargo planes back into service and plans a third by early next month. EVA Airways also reported positive growth in October and increased air cargo tariffs on its US and Europe routes up between 10 and 15 per cent.
Hong Kong: For ocean freight, Europe, Australia and Latin America space is still tight in Nov; carriers keep increasing the rates for these lanes. Asia and China 's space and rates are stable. For airfreight, Christmas demand is causing a freight backlog at airports, with some forwarders waiting days to get cargo on planes. In Hong Kong, except to LAX, delays are tipped to last till mid-December despite increased capacity and higher airfreight charges.
Vietnam: The latest IMF World Economic Outlook indicates that Vietnam is likely to outperform most of its Southeast Asian neighbors in terms of growth rates for 2009. Airfreight space is still very tight. Carriers are accepting express services booking instead of normal services booking. Rates keep increasing.
Indian Subcontinent: There are heavy backlogs at the airports, even at the Transshipment. Many airlines have increased FSC due to International Fuel Index rise. Ocean Lines too are experiencing back logs and many lines are off-loading their containers behind. The freight rate is increased to all sectors from 1st November 09. Sea Exports have come down to the extent of 40% compared to last month of 60%, Whereas Air Exports have been tremendously shot up to the extent of 80% compared to last month of 60% from BLR.
Market information provided by our trade lane managers: North America Trade
November is the one of the busiest month during traditional peak season for air freight forwarding however the air freight surge impact is more serious than previous years because of extra high demand of air cargo space in Asia gateway such as Hong Kong, Shanghai, Singapore, Taiwan and Korea for US and Europe. It¡¦s because inventory level of most of the retailers are still at very low level, which is unable to catch up stock replenishment needs by ocean freight for Thanksgiving and Christmas sales.
The airfreight rate surge ex Asia to USA and Europe has started from late August and has reached to an other zenith level in November as a result of abnormal imbalance of supply and demand for air cargo space from airlines by cutting back commercial cargo freighter where space and backlog become extra critical and getting more serious respectively.
Expect the demand of air cargo needs ex Asia for US and EU to remain strong in the following weeks in December. Customer has to expect longer transit times to affect the merchandises going out of origin due to serious backlog unless priority service or express service charges will be committed.
Ocean Freight demand for US becomes normal in late November after the demand surge in early November especially in Shanghai and Shenzhen, China. However ocean carriers still have the intention to cut back space in order to keep the demand and maintain price level or hike rates as most of the carriers are still suffering loss at current ocean freight rate level.
- Grand Alliance, New World Alliance to combine Asia-U.S. services
The Grand Alliance and the New World Alliance will combine two all-water services from Asia to the U.S. East Coast as part of their combined capacity cutbacks during the slack winter season. The temporary reductions will take effect from Dec. 1 and last for around 18 weeks.
As of Dec. 2 the NYX, which is an NWA service, will temporarily replace the GA¡¦s South China East Coast Express (SCE) during the winter program. The revised port rotation is Shanghai, Ningbo, Shekou, Yantian, Hong Kong, Kaohsiung, Panama Canal, Manzanillo, New York, Norfolk, Savannah, Jacksonville, Miami, Manzanillo, Panama Canal, Balboa, Yokohama and Pusan.
The GA will operate its North & Central China East Coast Express (NCE) during the winter season with a new call at Kingston. The new port rotation of the NCE will be as follows: Pusan, Qingdao, Ningbo, Shanghai, Panama, Kingston, New York, Norfolk, Savannah, Kingston, Panama and back to Pusan.
The NWA will also continue to operate its APX (Atlantic Pacific Express) with eight, 4,000-TEU vessels during the winter season on the following port rotation: Shanghai, Yantian, Hong Kong, Kaoshiung, Manzanillo, New York, Norfolk, Savannah, Manzanillo, Yokohama, Busan, and back to Shanghai.
Australia Trade
Current BAF: US 375 per TEU
New BAF w.e.f. Dec 4th: US 400 per TEU
According to economists, Australia trading condition (including profit margin, trading transactions and employment rate) has been recovered, back to the stage prior to the global crisis.
However, some carriers still forecast 2010 as a tough year and some organizations suggest maintaining current capacity in 2010 to push up freight to recover losses from 2009.
- Toll acquires a New Zealand forwarder
Toll announced the acquisition of Express Logistics Group, a New Zealand big forwarding agent who has 12 branches over NZ, Australia & USA.
- Natural gas from Papua New Guinea to China
Energy companies in Papua New Guinea will start shipping liquefied natural gas to China from the end of 2013, after signing of an agreement with China Petroleum & Chemical Corp (Sinopec). The partners in the first LNG project in Papua New Guinea will build a $15bn export plant in the next four years.
EMEA Trade
- Europe-Asia Box Trade Recovering
The Asia-Europe container trade rebounded from the deep declines in traffic during the ?rst half of the year, driven by a surge in shipments on the eastbound trade from Mediterranean ports.
Traffic is still down from the same period in 2008 but the rate of decline as slowed compared with the previous quarters, the European Liner Affairs Association said.
Overall traffic on the Asia-Europe trade totaled 13.6 million TEUs in the ?rst nine months of 2009 compared with 16.7 million TEUs in the same period in 2008.
- CKYH, Evergreen to Combine U.S.-Europe Lanes
Evergreen Line and the CKYH Alliance (Coscon, ¡§K¡¨LINE, Yang Ming, Hanjin Shipping) will launch a cooperative service in the U.S. East Coast ¡V Northwest Europe trade.
Trans-Atlantic Express, or TAE, is a combination of two existing lanes. CKYH Alliance operated TAS1 (Trans Atlantic Service Loop 1), and Evergreen Line operated NUE (North Asia ¡V U.S. East Coast ¡V European Pendulum).
TAE service will operate with a total of four vessels with loadable capacity of approximately 2,400 20-foot equivalent units. CKYH will jointly deploy two vessels. Evergreen Line will deploy the other two.
The port rotation is as follows: Antwerp ¡V Bremerhaven ¡V Rotterdam ¡V Le Havre¡V New York ¡V Norfolk ¡V Charleston ¡V Antwerp.
- Carrier says it will beat forecasts with cost cuts, growing volume, rising rates
French ocean carrier CMA CGM said Nov. 18 it expects to break even in December, ahead of recent forecasts, and return to operating profitability in 2010.
CMA CGM, which is negotiating with its banks to restructure its $5.6 billion debt, said it is ahead of its "cautious" forecasts in September thanks to cost cuts, growing cargo volume and rising freight rates on most liner routes.
CMA CGM, the world's third largest ocean carrier, lost $515 million in the first half of 2009 on revenue of $4.8 billion.
Freight rates have risen on most routes, including Asia-Europe, Asia-Mediterranean and Asia-South America.
CMA CGM's Asia-Europe trade, which accounts for nearly a quarter of its total volume, returned to profitability in October and its other services are expected to break even by the end of the year.
Latin America Trade
- The cellular fleet reaches approx13 million teu with 4,722 ships
- Idle ship fleet rises to 11% of total capacity
- ECSA rates will remain in 1st two week of December
- WCSA rates are expected go down in December
- Liner market recovery still uneven
Carriers are showing different trends over the first nine months of this year, with no clear indication that carriers have managed to stem the losses incurred. Latest operating results of the main liner operators show that the recovery is still uneven and some carriers still have some way to go before returning to profitability.
- APL and Maersk secure loans
Container shipping lines APL and Maersk have secured new loans to finance the purchase of vessels. Neptune Orient Lines (NOL), the parent company of APL, has made a filing to the Singapore stock exchange confirming that it has secured a term loan of up to US$160 million from DBS Bank in Singapore. AP Moller-Maersk has secured a DKK 2.6 billion ($523 million) loan through the state-owned Danish export credit agency Eksport Kredit Fonden (EKF) under the export lending scheme.
To keep you informed, TGL offices throughout Asia gathered the market intelligence from our local operations managers, carrier personnel and cargo handlers.
If you would like more information, or if you are having difficulty securing dependable lift to meet your logistics needs, please contact your local Trans Global Logistics representative. We are committed to customer service and providing consistent operational excellence throughout the globe.
Trans Global Logistics is a leading Hong Kong-based logistics company, providing air and ocean transportation, warehousing and distribution, and customs brokerage services. The company has 47 offices in 18 countries in Asia and North America and more than 500 employees. Trans Global has strong relationships and contracts with international airlines and steamship lines, providing cargo space throughout the year and during the peak-shipping season. The company has a Class A forwarder's license in China and CAAC approvals. Visit Trans Global on the web at www.tglogistics.net
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