Trans Global Logistics Monthly Market Update
January 2010 (Asian Edition)

Expert voices and recent industry data point to indications that an economic and trade recovery is under way. The crunch point will probably come in the following few months when it should become more apparent whether the recent market improvement was just a temporary upward blip, fuelled by seasonal factors and restocking by companies, which had run down their inventories, or the start of a sustained recovery.

Shipping activity in raw materials, project cargo and other categories support hopes of sustainability. The optimism was helped in part by the re-emergence of a peak-shipping season in export-driven Asian markets. Airfreight demand out of Asia becomes soft in December after the airfreight surge in November in order to catch up the traditional seasons sales and replenishment of the close-to-zero inventory. Although the air freight demand is getting soft the airlines still tend to reduce the air cargo capacity and create the imbalance of supply and demand in the market so as to keep the rate level in a high side comparing to the rate offered in early months in 2009.

China has been the muscle behind the worldwide economic recovery for much of 2009. That role will continue in the New Year as China maintains its catalyst role. Surveys indicated positive effects from the second round of China¡¦s stimulus spending as demand for manufactured goods, led by metal products, raised with government spending. Reports on Chinese manufacturing showed production at the country¡¦s factories surged in December, pointing to a full recovery in 2010. The improved trends should carry over into the first few weeks of 2010 and up to the start of the Chinese New Year holiday in mid-February.

However, before shippers' confidence to rebuild is restored, carriers will need to return to higher levels of capacity, and they plan to move forward on that very cautiously. As the market return to growth this year, freight rates may rise as carriers curb capacity increases.

Here are some highlights reported from our service network:

USA: On December 15, ocean carriers (both TSA and non-TSA members) announced an Emergency Revenue Charge (a GRI with a new name) in the amount of $320/20', $400/40STD, $450/40HQ and $505/45', citing a dire need to recover lost revenue from eroded freight rates and survive. This increase will be applied to all rates from Asia (including the Sub-Continent) to the USA and Canada. Space remains a problem from North China, especially Shanghai, and vessels are expected to remain full through the end of January. Airfreight traffic at LAX grew 3.5 percent in October as the major trans-Pacific gateway showed signs of a growing recovery in cargo business. The gain was the latest in a string of reported increases in cargo numbers across the air cargo industry, including reports of growing demand in Asia that is leading to capacity shortages at some Asian gateways.

South Korea:Korea is poised to raise the nation's trade under free trade agreements to 50 percent by the first half of next year. According to the country's Trade Ministry, Korea¡¦s trade under its five bilateral deals currently in effect namely those with Chile, Singapore, the European Free Trade Association, the Association of Southeast Asian Nations and India account for 14 percent of total trade. Once the pending trade pacts with the United States and the European Union and those in talks with the Gulf Cooperation Council, Peru, Australia and Turkey are implemented Korea's trade volume under FTAs is expected to surge to over half of the total by the first six months of 2011.

China:Major airlines' space resume to normal levels. Airfreight rates have decreased as demand decreased and space problems improved compared to last month. The market condition should improve throughout January and up till the Chinese New Year. Ocean Freight capacity remains in high demand especially in North China due to the capacity cut by carriers in December.

Taiwan: Airfreight space is not as seriously congested as last month. However, space is not yet back to normal. BR & CI had increased 8 times on the rate already. Carriers did not decrease their rates yet even though space demand has decreased. Overall shipment volume in December is expected to decrease 3% compared to the shipment volume in November. It's expected the space congestion will last until Chinese New Year is over.
For ocean freight, participating member lines of AADA (Asia Australia Discussion Agreement) will be implementing a rate restoration program from January 15, 2010 to all their customers in China, Hong Kong and Taiwan.

Hong Kong:Imports seem to be leading growth with an 18% increase year-on-year, whilst exports grew 15.3% and trans-shipment grew by 8.1%. Such vigorous growth is likely to exacerbate the shortage of capacity in the air -freight market. For ocean freight, most lanes space & rates are stable. Carriers have announced a rate increase for shipments to Europe, Mediterranean, S. Africa, S. America and Australia with effect from middle of Jan 2010. Space is expected to be tight before the Chinese New Year.

Indian Subcontinent: Asia seems to be the leading slow recovery. The optimism stems from the fact that the volumes of freight being shipped have increased by 10 per cent in the last three months compared to the previous three months. Shipping Lines have increased freight rated with the heading of General Rate increase, Rate Restoration Increase etc.
Air export and import increased compare to previous months, ocean export has declined to a large extent compared to last month. Ocean Imports are stable. Export shipment's by air is in great form from BLR. Likewise air imports are also coming to BLR on a large volume basis. Export orders are expected to increase in the year 2010.

Market information provided by our trade lane managers:

• Air Freight

NLatest IATA forecast surpasses earlier estimate by almost half the world's airlines will lose $5.6 billion in 2010, nearly 50 percent higher than a forecast of $3.8 billion in September, because of rising fuel prices, the International Air Transport Association said.
The projected 2010 loss is almost half the $11 billion deficit that IATA is forecasting for 2009 as passenger and cargo demand recovers from the recession. "The worst is likely behind us," said IATA director general Giovanni Bisignani. "From 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3 percent," Bisignani said. But "fuel costs are rising and yields are a continuing disaster," he said.
Asia/Pacific carriers will experience the most dramatic recovery with losses falling to $700 million from $3.4 billion this year. North American airlines likely will shrink 2010 losses to $2 billion from $2.9 billion in 2009.
Late December and early January is the traditional soft month for Asia export especially in China. So some of the airlines may offer spot rate, which is subject to market demand.

• Ocean Freight

Capacity remains in high demand because carriers keep reducing the space in December, especially in China North space remains tight and because of carrier huge loss in 2008 and early 2009, all the carriers became more profit oriented and driven, space will only be served to high profit margin containers.
In order to recover the loss, more surcharges will be implemented in the 2010. Furthermore, container carriers demonstrate resolve following peak-season bump
The next few months will be a critical period for container lines because the post-holiday months are traditionally the slowest period of the year for U.S. imports from Asia. Drewry estimates carriers this year will lose a cumulatively $20 billion in their global operations.

• Retailers Forecast Strong Import Growth

Containerized imports at 10 major U.S. ports are expected to rise in three consecutive months starting in February, breaking a 31-month streak of year-to-year declines, the National Retail Federation and IHS Global Insight said in their monthly Port Tracker report.
¡§We¡¦ve been seeing hints of a turnaround in our past few reports but this is starting to look like a clear trend,¡¨ said Jonathan Gold, the NRF¡¦s vice president for supply chain and customs policy. ¡§If retailers are starting to import more merchandise, it¡¦s because they expect to be able to sell more, and that¡¦s a good sign for our industry and the overall economy.¡¨
¡§The second half of 2009 has seen an improvement, with ¡¥less bad¡¦ year-over-year numbers compared with the first half,¡¨ said Paul Bingham, an IHS Global Insight economist. ¡§While improving, import container traffic is projected to be weak through March due to the traditional slow season combined with the weak pace of economic recovery.¡¨

• Pacific Carriers Call for ¡¥Emergency¡¦ Rate Hike

Jan. 15 interim boost of $400 to be followed by $1,000 jump in April.
Shipping lines in the eastbound Pacific will attempt to increase their freight rates by $400 per 40-foot container on Jan. 15 as an interim step toward a larger rate increase to take effect when carriers and their customers negotiate their 2010-11 service contracts next spring.
TSA members also intend to implement a floating bunker charge of $348 per FEU to the West Coast and $689 per FEU to the East and Gulf coasts effective Jan. 1 and lasting for the duration of the first quarter of 2010.
The emergency revenue program¡¦s proposed rate increases for all container sizes are: $320 per 20-foot container, $400 per-FEU, $450 per high-cube FEU and $505 per 45-foot container.

• Westbound rates set to rise Feb. 15

A week after most large trans-Pacific container carriers sought an ¡§emergency¡¨ increase in U.S. import rates; carriers said they will seek higher rates on containerized export shipments of dry cargo from the U.S. to Asia.
The Westbound Transpacific Stabilization Agreement, representing 10 container lines, said its members agreed to recommend a general rate hike on dry cargo, effective Feb. 15, as part of a 2010 rate plan aimed at securing quarterly increases throughout the year.
The proposed February increases would be $100 per 40-foot container and $80 per 20-foot container from the ports of Los Angeles and Long Beach and $150 per 40-footer and $120 per 20-footer for shipments from other U.S. ports and on intermodal moves from inland points.

EMEA Trade

• Rate

Rates will be on the continuous upward trend in Jan 2010.

• Space

Space is very tight due to the winter program, four of the Grand Alliance¡¦s current Asia-Europe services, will be temporarily adjusted into three weekly services.

• GRI

Carriers have announced following rate increase in Jan (per TEU):

	Europe		Mediterranean
MSC	$ 250	1- Jan	$ 250	1- Jan
CSCL	$ 250	1- Jan	$ 250	1- Jan
OOCL	$ 250	1- Jan	$ 250	1- Jan
EMC	$ 300	1- Jan	$ 300	1- Jan
ANL	$ 250	15- Jan	$ 250	15- Jan
APL	$ 225	15- Jan	$ 225	15- Jan
COSCO	$ 300	15- Jan	$ 300	15- Jan
HANJIN	$ 250	15- Jan	$ 250	15- Jan
CMA CGM	$ 250	15- Jan	$ 250	15- Jan
HPAG-LLOYD	$ 250	15- Jan	$ 250	15- Jan
SAFMARINE	$ 250	15- Jan	$ 250	15- Jan

Latin America Trade

• CMA CGM has targeted a USD700/TEU freight rate increase on all reefer cargo shipped out of the East Coast of South America (ECSA) from January 1, 2010. This will be in addition to its special fuel surcharge applied on all reefer cargo from October 16, 2009.
  
  The trade lane from ECSA to northern Europe will be one of the routes most affected. In the first ten months of this year, a total of 220,871TEU of reefer cargo was shipped to northern Europe, which was only 10.7% less than in the same period of 2008, according to the European Liner Affairs Association (ELAA). This compares with a 25% decline in dry cargo, down to 299,095TEU, helping to describe how well the reefer cargo sector held up in 2009.
  
  The ELAA's information on the tradelane from ECSA to the Mediterranean is not so clear for dry cargo, but reefer cargo only fell by 3.3% in the same period, down to 80,849TEU. In the first 10 months of last year, reefer cargo represented 39.9% of the total.
  
  Being in the southern hemisphere, the main shipping season for fruit exported out of ECSA ports is in the first half of the year. Poultry is exported year-round.
  

Australia Trade

• GRI proposed on 15 Jan

Rate increase at US250/TEU effective 15 Jan 2010.

• Melbourne channel deepening completion

The project began in Feb 2008 and finished in Nov. Depth changed from 11.6 M to 14M. In the past, almost 54% of containerships using the port were unable to load to full capacity.

• AANA & NEAX merge again

Carriers are cutting space by combining two consortiums again. Members are OOCL/ ANL/ CSCL/ NYK/ MOL/ K LINE/ Cosco. Rotation: Qingdao / Shanghai / Ningbo / HK / Melb / Syd / Brisbane

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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