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Trans Global Logistics Monthly Market Update
February 2010 (Asian Edition)
Global airfreight traffic increased by nearly a quarter in December from a year ago and is set to grow further in the coming months according to IATA. But airlines are cautious about the early signs of recovery and gradually increasing their capacity in the marketplace, to help them manage better yields as the economy recovers.
In January, the airfreight demand out of Asia picked up gradually and another peak of airfreight demand is expected as the Lunar New Year approaches. Airlines are still sticking to the high yield strategy to protect their revenue and margin in 2010.
The outlook for the liner shipping market has improved considerably over the past year as both volume and rate increases appear to be resilient, according to Alphaliner. The rate of recovery is much faster than expected; carriers¡¦ optimism has been boosted by a stronger-than-expected surge in cargo demand in the pre-Lunar New Year period to mid-February.
The number of idled container ships registered its first significant decline in more than a year in January, with almost 50 vessels returning to service over the past month as ocean carriers responded to stronger demand and rising freight rates. Ocean container spot freight rates on the key export trades out of China to Europe and the U.S. east and west coasts soared by an average of 24 percent in the past three months. The steep rise in rates resulted from successive rounds of rate increases imposed by ocean carriers since October and the extension of the peak season surcharge until February. "It remains to be seen if the rates are sustainable as the Lunar New Year holidays in China in mid-February could lead to some weakening in freight rates," Alphaliner said.
TGL Charter Flights
To cope with the surge in airfreight demand before the Chinese New Year, and to ensure that our customers have dependable lift to meet their urgent logistics needs, TGL continued the program it started last year to use charter flights to compliment its commercial carrier capacity, and successfully chartered two B747-200F freighters for supplemental capacity from Shanghai to USA in February (3rd & 11th).
In March, TGL has already reserved 4 additional charters (7th, 14th, 21st, 28th) from HKG to USA, and depending on the market situation, charters from Shanghai to USA will also be considered. For customers having urgent large air shipments into North America and Europe, TGL¡¦s charter flight service is an available option. If you would like further information on our charter flight services, please contact your local Trans Global Logistics representative.
Here are some highlights reported from our service network:
USA: Air cargo rates, which stabilized and even increased on premium service in the fourth quarter, softened in January, but haven't gone into the free fall they experienced a year earlier. FSC rates have fluctuated a little bit, but remain flat from last month. The U.S. economy grew at its fastest pace in six years in the fourth quarter, expanding 5.7 percent as companies scaled back their attempts to cut inventories, the U.S. Commerce Department said Friday. The department Bureau of Economic Analysis said an 18.1 percent gain in exports also helped push GDP upward, along with stronger business investment in equipment and software.
South Korea: South Korea¡¦s exports rose in January at the fastest pace in more than 20 years as the recovery of the global economy spurred demand for the nation's cars, television sets and mobile phones. Exports to China surged 88.5 percent in the first 20 days of January. Shipments to the U.S. rose 12.4 percent and those to European Union nations gained 27.7 percent over the same period.
China: Space is tight for ocean freight before Chinese New Year, especially Europe, because carriers are cutting space. Carriers had announced a GRI of USD 150/teu for this lane. Hard to get space form carriers because of limited capacity. Will have another peak before Chinese New Year. Most carriers have already increased rates in Jan and will stay on such increment in Feb before the CNY. Airfreight space for most airlines have resumed to the normal level, only need to secure space about 3 days in advance. Airfreight rates have decreased for US and Europe lanes.
Taiwan: Taiwan's export and import values in January both hit the highest levels in 16 months, according to statistics released by the Ministry of Finance (MOF) on February 8. President Ma Ying-jeou's administration aims to sign a trade accord, known as the Economic Cooperation Framework Agreement, with the mainland in May that would lower import duties on Taiwanese goods to China.
Hong Kong:Ocean freight space is tight before Chinese New Year, especially Europe and USA due to the capacity cuts by carriers. Most carriers have already increased rates in Jan and will stay on such increment in Feb before the CNY. Airlines are seeing higher utilization and such airlines have increased rates to maximize their profits. As airfreight demand is increasing, there is a shortage of airfreight capacity; airlines are now slowly increasing or restoring flight frequencies that had been suspended.
Indian Subcontinent: Export began to recover in December 2009 and January also has the positive growth compared to the same month last year. The same trend is expected to continue during the month of February 2010. Shipment's by AIR as well as OCEAN has picked up well compared to last year. Compared to last month, ICD & CWC recorded volumes of Shipments (LCL & FCL) have increased to some extent. Space is available for all ocean carriers. However demand for containers is still high.
Union Minister for Commerce and Industry, Mr. Anand Sharma has announced a series of new Incentives for Exporters on January 12, 2010. As many as 112 products have been added to FPS (Focus Products Scheme) at the 8 digit level, eligible for benefits at 2% on FOB Value, the major sectors include Engineering, Electronics, Rubber, Chemicals, Plastics, carton Boxes and Egg powder. 113 new products at the 8 digit level have been given higher benefits at 5% of the FOB Value, major sectors being tools, agriculture and horticulture machinery, sewing machines and parts, liquid pumps etc.
Market information provided by our trade lane managers: North America Trade
The high demand of air freight in January is due to the launching of some ECG (Electronic Consumer Goods) after the CES in Las Vegas and the other reason is because of the high demand for ocean freight space in the market after carriers keep cutting space allotment in the market in order to maintain the demand and price. Under such circumstance, the airlines are still sticking to the high yield strategy to protect their revenue and margin in 2010.
According to IATA, optimism is returning to the industry as the purchasing managers survey indicators reached a 44-month high in December pointing to increased freight volumes in the coming months.
In terms of demand, 2009 goes down into the history books as the worst year the industry has ever seen and has permanently lost 2.5 years of growth in passenger markets and 3.5 years of growth in the freight business.
Ocean Freight capacity remains extremely high in demand because carriers have not changed their profit driven strategy to reduce space in January in Asia to increase their profit and yield.
Some carriers has serious roll over even if booking has been accepted 2 weeks advance. The average spot rate on Feb. 8 was $2,012, the same as in the previous week, but 41.2 percent higher than the spot rate in the sixth week of 2009.
The 15 carriers that belong to the Transpacific Stabilization Agreement had implemented a $400 per FEU emergency increase in rates under their annual contracts with shippers, but they have been able to increase spot rates by more than double the TSA¡¦s guideline as shippers scrambled to find scarce vessel space.
- Mediterranean Shipping Co. announced a broad set of rate increases on North American exports
With carriers increasing rates on major trade lanes on an almost daily basis, one of the TSA members, Mediterranean Shipping Co. on Jan 26 announced a broad set of rate increases on North American exports on both the trans-Atlantic and the trans-Pacific trade lanes as of March 1.
On the trans-Atlantic, the Geneva-based carrier said it will increase rates on exports from Canada to Northern Europe and the UK, including Scandinavia and the Baltic countries, by $200 per 20-foot container and $350 per 40-foot container.
On exports from Canada to the Western Mediterranean, MSC is increasing rates by $200 per TEU and $350 per FEU.
Rates on exports from the U.S. to Northern Europe and the UK, including Scandinavia and the Baltic region, will increase by $150 per TEU and $250 per FEU. Rates on exports to the Western Mediterranean are going up by the same amounts.
On the westbound trans-Pacific, MSC will also increase rates on all export cargo except reefers on March 1.
Port-to-port exports will increase by $150 per FEU and $100 per TEU.
Exports originating from intermodal points moving through a U.S. West Coast port will go up by $200 per FEU and $150 per TEU.
Port-to- port exports from U.S. East and Gulf Coast ports to Asian ports will increase by $150 per FEU and $100 per TEU.
Exports originating from intermodal points that move through U.S. East of Gulf Coast ports will increase by $200 per FEU and $150 per TEU.
The rate increase on port-to-port reefer shipments from U.S. West Coast cargo is $250 per FEU and $185 per TEU.
Rates on reefer exports originating from intermodal points and moving through U.S. West Coast ports will increase by $250 per FEU and $185 per TEU.
The rate increase on reefer exports to Asia from or through U.S. East and Gulf Coast ports will be $250 per FEU and $185 per TEU. Finally, the rates on export reefers originating from intermodal points and moving through U.S. East and Gulf coast ports will go up by $250 per FEU and $185 per TEU, also on March 1.
EMEA Trade
Steep rate increases in January due to carriers taking aggressive approach on GRI implementation and also bunker charge has increased by around USD100/40¡¦.
January all-in rate is increased by USD 500-800/40¡¦ compared to December.
Current FAK rate (all-in) is USD 3300 ¡V 3700/40¡¦ to base ports.
Very limited due to the winter program.
As the space demand continues to rise, majority of the carriers have added the PSS into the ocean freight to maintain their revenue in the long-term.
Some call it Peak Season Surcharge (PSS); some call it Emergency Space Surcharge (ESS); some call it Equipment Positioning Surcharge (EPS); but it all boils down to carriers trying to maximize their revenue in the cargo rush.
Latin America Trade
- Maersk adds N.Y.-N.J. to Central America string
Maersk Line will add a ship to its South Atlantic Express Service between the U.S. East Coast and Central America and include a direct call in the Port of New York and New Jersey, beginning Feb. 13.
Brian Moore, director of apparel sales for Maersk, said the change should be appealing to companies in the clothing business, both because of the new stop in New York and because of continuing calls in both Wilmington, North Carolina and Savannah, where many retail distribution centers are located. The new rotation of the service will be New York; Norfolk; Wilmington, N.C.; Miami; Puerto Cortes, Honduras; Santo Tomas, Guatemala; Miami; Savannah; Wilmington; Norfolk; and New York.
- Latin America economy is expected to recover for 2010 before most industrial nations
The United Nations¡¦ Economic Commission for Latin America and the Caribbean (ECLAC) predicted economic recovery for the region this upcoming year. The report released, predicts 4.1 percent overall growth for Latin America before most developed countries begin recovering from the devastating global crisis.
According to the projections from the ECLAC report, Brazil is poised to lead the pack with a gross domestic product (GDP) of 5.5 percent in 2010. Peru and Uruguay will have 5 percent each; Bolivia, Chile and Panama will see 4.5 percent. In contrast, Argentina and Suriname will see 4 percent GDP while Mexico, Costa Rica and Dominican Republic will have 3.5 percent and Ecuador will post 3 percent GDP growth.
Australia Trade
- Kuehne + Nagel wins Woolworths 3 years supply chain management contract to manage freight from Europe, Africa, Middle East, South East Asia, USA & Oceania.
- Maersk & AAUS group (Ham SUD/ Hapag Lloyd / Hyundai / APL / Evergreen) will exchange slots around end of Feb.
Maersk Boomerang service will revise port rotation (new route name as South China-Australia Yo Yo Service) which restores calls to Brisbane and calls both Shanghai terminals at Weigaoqiao & Yangshan but skip calls to Nagoya / Chiwan / HK & Kaohsiung.
AAUS group will revise port rotation to Melbourne / Sydney / Brisbane / Kaohsiung / Chiwan / HK / Melbourne.
- GRI on 15 Jan at US250/TEU failed.
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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Email: TGL_MKT@tglogistics.net
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