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
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
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
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
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
It covers shipping into or from the
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
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.