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    -113.610
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  • OTRI.USA
    21.500
    -0.060
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  • TSTOPVRPM.CHIATL
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    0.000
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  • TSTOPVRPM.LAXDAL
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    0.060
    1.8%
  • TSTOPVRPM.PHLCHI
    2.150
    0.020
    0.9%
  • TSTOPVRPM.LAXSEA
    3.950
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  • WAIT.USA
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    1.000
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  • ITVI.USA
    15,379.620
    -113.610
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  • OTLT.USA
    2.786
    -0.021
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  • OTRI.USA
    21.500
    -0.060
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  • OTVI.USA
    15,349.750
    -127.770
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  • TSTOPVRPM.ATLPHL
    3.300
    -0.240
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  • TSTOPVRPM.CHIATL
    2.950
    -0.020
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  • TSTOPVRPM.DALLAX
    1.440
    0.000
    0%
  • TSTOPVRPM.LAXDAL
    3.310
    0.060
    1.8%
  • TSTOPVRPM.PHLCHI
    2.150
    0.020
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  • TSTOPVRPM.LAXSEA
    3.950
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  • WAIT.USA
    126.000
    1.000
    0.8%
American Shipper

Analyst: Transpacific freight rates likely to climb

Analyst: Transpacific freight rates likely to climb

Short of a significant collapse in shipping line confidence, shipping rates on the eastbound transpacific routes are likely to increase in 2007, an industry analyst said Monday.

   'In general, shipping supply tends to be overestimated and demand underestimated,' said Julie Lim, the executive director of Asia-Pacific transportation research for Goldman-Sachs (Asia).

   'The global container supply and demand imbalance will be at most 2 percent this year and not as bad as what the market fears,' said Lim, speaking to more than 1,300 attendees at the Trans-Pacific Maritime Conference in Long Beach on Monday.

   In spite of this continued slight imbalance, Lim predicted, freight rates can stabilize as long as shipping lines collectively accept a lower industrial load factor compared to the very high levels of 2004 and 2005. Load factors, despite a comparatively moderate growth last year of 10 percent, remained above 90 percent for a significant portion of last year.

   Specifically addressing transpacific trade, Lim said the U.S. housing slowdown is not playing as significant a part as might be expected, despite the fact that furniture remains the largest single manufactured commodity imported into the United States via the transpacific.

   Lim theorizes that as long as consumers only feel a slight loss in the value of their property, they will continue to purchase low-priced Asian-made furniture, which is still good for the shipping industry.

   Only if an event such as the dot-com bubble bursting, where people actually began losing their jobs, would likely have an impact.

   Lim focused much of her talk on freight rates and where they might be heading in 2007.

   A booming European economy, she said, has led to a large portion of new vessel capacity being deployed to European routes, which has in turn led to a very significant recovery in Europe-to-Asia freight rates since the middle of 2006. This includes a notable lack of weakening in 2006, even during the traditional slack periods of November and December. This and other evidence of rates already rising this year on the Europe/Asia routes leads Lim to conclude that rates in these areas will continue to increase in 2007.

   Regarding China, Lim noted that freight rates during the 2006 down cycle did not fall as much as the 2001 down cycle, and that losses sustained this time around have been relatively contained. This has led to only a small number of Asian companies reporting relatively small losses in 2006. This is in sharp contrast, noted Lim, to the “almost universal bloodbath of 2001.”

   In addition, most of the losses could be attributed to Maersk and Hapag-Lloyd who had to undergo very painful merger adjustments last year, she said.

   The supply and demand outlook for 2006 and 2007 are fairly similar, she added. However, the freight rate dynamics have been extremely different during these two periods. The first part of 2006 saw tremendous volatility in rates for two reasons, according to Lim. Shipping management followed bearish predictions and to maintain market share started to cut freight rates in anticipation of a market collapse. Secondly, the Maersk/P&O Nedloyd and Hapag-Lloyd/CP ships mergers did not go as smoothly as anticipated and led to further freight rate instability.

   Lim pointed out that the second part of 2006, in contrast saw a sequential increase in rates, and remained very stable even through the traditional slack periods late in the year.

   This reflects a very significant change in confidence among the shipping lines, she said.

   'The level of confidence among shipping lines will likely have as much impact on the level of freight rates in 2007 as any real supply and demand fundamentals,' she said.

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