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  28th July 2008 - STAR MARITIME

Container shippers stay afloat on Mideast route

IS there any silver lining for container shipping amidst the current global economic slowdown and high fuel price?

Well, apparently there are some opportunities in store for selective trades within the volatile market.

One of the trades is the Middle East shipping route, which so far has seen growth and stability in its freight rates over the past year.

This is due to escalating oil prices that propel the regions' oil-producing countries with their petrodollars to speed up their infrastructure developments, which buoys import demand.

The crude oil price stood at US$126.59 per barrel as at 5pm last Wednesday.

The base freight rate to the Middle East via Malaysia seems to be stabilising at an average US$700 per TEU (20ft equivalent unit) since last year.

Many of the industry sources agree that the stable freight rates were on its uptrend. The freight movement is expected to last for another two to three years on demand for raw materials for the Middle East's massive construction projects.

The Mediterranean freight rate via Malaysia is also doing quite well, with rising demand from CIS countries Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine.

The freight rate is now hovering around US$900 to US$1,000 per TEU. All the freight rates given exclude the additional fuel surcharges.

Higher fuel charges also benefited the industry with the shift of cargo from more expensive air transportation to container shipping, which is the cheapest mode of transport to carry goods.

This is evident in the lower cargo volume of major air cargo companies since the fourth quarter of last year.

Meanwhile, the freight rate for the Far East-Europe trade, which grew 20% in 2007, has been on a downtrend since last year.

This is partly due to the European Union (EU) abolishing the antitrust exemption for agreements in which competitors set common rates for scheduled shipping by October.

It covers shipping into or from the 27-nation EU.

Moreover, the summer season in Europe depicts lower demand for imported goods.

While the Far East-Europe route is expected to see flat freight rate for the remaining months of this year, it is expected to slowly recover after that.

The rebound is likely to be after the Olympics, as China would continue its normal export pace to Europe then.

Meanwhile, the positive outlook on container shipping is also shared by major container shipping lines, which have continued to expand their fleet, as they believed in the cyclical trend of the shipping industry.

Maersk Line, the world's largest container shipping firm, expects container shipping to grow 7% to 8% globally this year. The company, has since June ordered 34 new ships for delivery by 2012.

Early this month, United Arab Shipping Co SAG ordered nine 13,100-TEU capacity container ships valued at US$1.5bil.


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