India trade thrives on U.S. East Coast

India trade thrives on U.S. East Coast Steady growth in ocean trade provides solace
in a down cycle and hope for more in the future.

By Eric Johnson

         Transpacific: down. Far East/Europe: fading. Transatlantic: stagnant.
      But there's one source of cheerful news for ports, at least those on the U.S. East Coast. Trade between India and East Coast ports has been growing. While it's unspectacular growth, it's still nice to see plus signs next to those percentages.
         So while West Coast ports sweat declining demand from East Asia, ports in New York-New Jersey, Savannah and Virginia all seem set to benefit from more stable sources of volume in South Asia.
      In reality, India has been playing a large role in the fortunes of U.S. East Coast ports for a few years now. In 2007, it was the third-biggest source of imports and second-biggest source of exports for the ports of New York and New Jersey, the East Coast's largest port complex and third-largest in the country.
      Indian volume has also been growing in Savannah, which saw exports to India more than triple in the last fiscal year. The Virginia Port Authority saw years ago that trade with India was growing organically and decided to redouble efforts to lure cargo from a market with lots of potential.
      'Early on, in the late 1990s, our trade with India was growing, and this was happening without a real marketing plan for India,' Tom Capozzi, VPA's senior director of marketing services, told American Shipper earlier this year. 'And it became apparent very quickly that our trade with India wasn't going to taper off. We watched India's growth as a nation, as a manufacturing center, and we watched its business climate change and mature. These things led us to the decision that India was going to be an important trading partner, so we began to build a marketing plan and presence for India.'
        

Bridges

The port sent Capozzi and Executive Director Jerry Bridges to India in August to meet with customers and in October hosted a conference on India/North America trade.
      In September, John Petrino, general manager of trade development at the Georgia Ports Authority, spoke at a shipping conference in Mumbai that 'our growth in 2007 was built predominantly off of the growth of Suez services.'
      There has been 14 percent annual growth of U.S./India container trade from 2001 to 2007, he added, with about 68 percent being handled by U.S. East Coast ports. Of the eight strings that connect the Indian Subcontinent to the U.S. East Coast, all eight call New York-New Jersey and Norfolk, while five call Savannah, and three at Charleston. Additionally, New Orleans and Houston each have one service.
      Of Savannah's 37 weekly services, five are from South Asia, one of which the port is first call in and two of which it is last call out.
      'For imports, you want to be first in and for exports, you want to be last out,' he said. 'We're in a good situation.'
      Dirk Visser, senior shipping consultant with Dutch maritime group Dynamar BV, said the average vessel serving the India/North America trade is 4,300 TEUs. Maersk has 22 percent of that market share in terms of capacity, with 79,000 TEUs of the total 355,000 TEUs of capacity offered in the trade.
      ComPair Data, American Shipper's affiliated global liner services database, puts the nominal weekly capacity in India/North America trade at 23,998 TEUs, with only 6,786, or 28 percent, of that capacity actually allocated to India. compare pegs Maersk/Safmarine's market share at 34 percent, with the 'K' Line-Yang Ming-Hanjin-UASC alliance at 32 percent and the CMA CGM-APL-Hapag-Lloyd-ANL-MacAndrews-MOL-NYK-OOCL consortium at 31 percent.
      In 2007, two-way trade between India and North America equaled nearly 1.1 million loaded TEUs, with Maersk again the leader, carrying 27 percent of the volume.
      To put the volume of India/North America trade into perspective, India/Far East trade saw 3.7 million loaded TEUs in 2007. There are 42 services between the Indian Subcontinent and the Far East, 17 to the Middle East and 20 connecting the Middle East, subcontinent and Far East, resulting in 78 weekly sailings from India in intra-Asia trades.
      And while volumes between India and the Far East are forecast to be triple those between India and North America by 2010, the imbalance of imports and exports from the Far East is set to stay at a wide 73 percent the next two years.
     

Tom Capozzi senior director of marketing services, Virginia Port Authority
'We are not the only port on the U.S. East Coast benefiting from India’s growth. The competition is traditional: what port offers the best economics, service, has room for the growth and most efficient means of getting to the major markets. '

Dynamar is forecasting that the trade imbalance between India and North America will shrink, from 36 percent in 2007 to 7 percent by 2010, meaning exports and imports to and from India will nearly be at parity in two years.
      Perhaps the volume isn't as attractive as the chance of attaining true two-way trade. GPA, for instance, said this summer that it had passed the 1 million-TEU mark for exports for the first time in its history – helped in small part by exports to India, which more than tripled from 5,218 TEUs to 18,335 TEUs in the last fiscal year.
      No doubt growth was aided by a weak dollar for much of the last year, but there's also growing consumption in the markets connecting the U.S. East Coast and South Asia.
      On the flipside, a weakening rupee – it is nearing the 50-per-dollar mark after hovering around 40 per dollar this time last year – should help Indian exports skyrocket. Everything from apparel, textiles, handicrafts, iron, steel, tea and tobacco should be helped. That could offset slowing global demand, especially as compared to countries where the currency hasn't lost on the dollar, namely China.
      In October, ComPair Data reported that capacity between the Indian Subcontinent/Middle East region and North America had dropped 6.2 percent to 24,969 TEUs weekly from an estimated 26,634 TEUs in April. For India, allocated capacity dropped 13 percent to an estimated 6,786 TEUs weekly, from 7,802 TEUs in April.
      'Routing changes implemented in the Asia America South service of CSCL that eliminated calls on the region accounted for most of the decrease,' said the report, available at American Shipper sister publication Namaste (www.americanshipper.com/namaste/PDF/October_Namaste_Report.htm). 'All but two of the carrier groupings remaining in the trade added average weekly capacity by a marginal amount through changes in vessels assigned to the trade. National Shipping Co. of Saudi Arabia made no changes and Evergreen decreased its weekly capacity slightly.'
      A big change in capacity occurred earlier this year when the IDX service operated by Zim-Emirates-Shipping Corp. of India-OOCL-Evergreen Line dropped out due to overcapacity.
      In spite of that, Indian exports to U.S. East Coast ports grew 10 percent in the first half of 2008 over the same period in 2007, Mint reported in September.
      Cargo has grown while space in vessels has become tighter, A. Chopra, senior vice president of container services at the Shipping Corp. of India, told the newspaper.
      'Shippers looking to ship cargo to the U.S. earlier had a choice of shipping lines to choose from,' he said. 'But today, they have to beg shipping lines to get space.'
      With the drop in capacity, freight rates have risen accordingly, from about $1,000 per TEU to nearly double that, Chopra said.
     

'Shippers looking to ship cargo to the U.S. earlier had a choice of shipping lines to choose from. But today, they have to beg shipping lines to get space.'

A. Chopra senior vice president of container services, Shipping Corp. of India

Chopra said that SCI and its partners abandoned the service in part because of little return cargo from the United States, indicating that 60 percent of capacity returned empty.
      In August, OOCL teamed up with Hapag-Lloyd, CMA CGM and NYK to start a replacement service for the IDX, connecting the U.S. East Coast with Mumbai and Mundra.
      With demand on most east/west trade lanes wavering, it would be fanciful to suggest the India/U.S. trade will explode over the next year, but the weakening rupee should significantly stimulate exports to the United States.
      And 2010 could be crucial. Many analysts are predicting a resurgence in volumes by then, and that is the year major container terminals in Cochin and Chennai are due to open. Jawaharlal Nehru will also have been expanded by then. Bigger terminals with deeper draft and more demand just might induce carriers to bring larger ships to India.
      'Once India starts to produce the volumes of cargo that would justify the deployment of post-Panamax vessels on the India/U.S. trade, we are the only port that could handle the largest of these vessels fully loaded,' Capozzi said.
      While Virginia is the only port on the U.S. East Coast with the draft deep enough to handle such vessels, competition is fierce, not just from U.S. ports, but also in Canada.
      'There is a lot of competition,' Capozzi said. 'We are not the only port on the U.S. East Coast benefiting from India's growth. The competition is traditional: what port offers the best economics, service, has room for growth and most efficient means of getting to the major markets.
      'The competition also involves building relationships. We have been in India a lot in the last two years and we've established a marketing presence there. Halifax, Savannah and Charleston have representation in India. Halifax even paid for an Indian business delegation to come to Halifax to tour the area and look at that area as a place to set up their North American distribution.'