from US and Europe affecting freight rates
WITH every major barometre that
measures the maritime industry weakening in the last few months due
to the sluggish global growth, it will just be a matter of time
before the tsunami hits our shores.
Container freight rates for the
Asia-Europe route have fallen due to slower demand from the US and
Agreement (TSA), a research and discussion group of 15 major
container shipping lines, reported a 6.9% year-to-date drop to 3.07
million 40-foot containers in Asia-US cargo volumes over January to
June, compared to the same period a year earlier. In July, the
year-to-date gap widened to 7.5%.
TSA forecast that this year cargo
demand could decline by as much as 8%.
This has affected many
multinational shipping companies’ bottom lines.
According to a recent Bloomberg
report, China Shipping Container Lines Co, China’s second-biggest
shipping line posted a third-quarter loss as the credit crunch
curbed demand for Chinese-made furniture, toys and other goods in
the US and Europe.
It said the loss amounted to
But, declining cargo volumes did
not greatly impact TSA’s 15 carriers, which experienced a 1.8%
decline in liftings during the first half of 2008 due to efficient
management in reducing operational cost.
Even in July and August, when TSA
carriers reported an overall 7% drop in cargo volumes, vessel
utilization remained around 90% across all trade segments.
The TSA group includes APL Ltd,
China Shipping Container Lines, CMA-CGM, COSCO Container Lines Ltd,
Evergreen Line, Hanjin Shipping Co Ltd, Hapag Lloyd AG, Hyundai
Merchant Marine Co Ltd, Kawasaki Kisen, Kaisha Ltd, Mediterranean
Shipping Co, Mitsui O.S.K. Lines, Ltd, Nippon Yusen Kaisha (N.Y.K.
Line), Orient Overseas Container Line Inc, Yangming Marine Transport
Corp and Zim Integrated Shipping Services.
“Clearly we’re in a slow down right
now, but the current freezing up of the global credit system is
unsustainable,” TSA chairman Ronald D Widdows said in a recent
He added that TSA expected to see
an orderly de-leveraging of the financial markets over the next year
that would begin to restore confidence with year-on-year cargo
demand growth resuming in late 2009.
On bulk shipping, the Baltic Dry
Index, a measure of shipping cost for commodities, continued to drop
to 982 points on October 28, the lowest it has ever been in six
years. This is a 91.7% drop from 11,793 points on May 20.
The crash is partly due to Chinese
steel mills having reduced production because of sluggish economic
growth with lower demand from development and automotive industries.
The warmer winter in Europe also
contributed to the lower demand of coal.
The tanker market, particularly the
cost of shipping Middle East crude to Asia, the world’s busiest
route for supertankers, according to Bloomberg, is also softening.
It said the rate for shipping Saudi
Arabian cargoes has fallen for the past 21 sessions, sliding 4.1% to
76.63 Worldscale points on October 27, according to data from the
London-based Baltic Exchange.
Local players with international
exposure, such as Malaysian Bulk Carriers Bhd (Maybulk), Hubline Bhd
and Halim Mazmin Bhd are also not immune to the global trade slump.
Maybulk and Hubline, which operate
bulk carriers, are expected to be affected by low freight rates,
softer demand and looming overcapacity. However, Maybulk’s
diversification into offshore oil and gas support services could
place the company in better prospects during this especially
MISC Bhd, on the other hand, would
feel less of an impact because of its transportation services to the
oil and gas industry, which is still at a healthy level.
Major local ports namely Port Klang,
Johor Port, Penang Port and Bintulu Port would also be affected when
transhipment volume starts declining.
This will then have a domino effect
on our logistics providers as well as domestic shipping operators.
Currently, many terminal operators
are still optimistic in achieving their targeted volumes this year
as Malaysia’s total exports grew by 11% to RM60bil in August versus
the same period last year despite the drop of exports to the US.