Drewry: Caution about container recovery
Yogi Berra would never be confused with a shipping consultant, but advice from Drewry Shipping Consultants Ltd. Monday echoes the hall of famer's malaprop: 'it ain't over 'til it's over.'
“The latest container trade data suggests we may have entered a real recovery phase but comparisons with the depth of the recession in 2009 must be treated with caution,' the company said in the latest issue of its quarterly Drewry Container Forecaster. 'Until we see consistent month-on-month improvements on the main trades into this year's peak season period, we cannot seriously suggest the current global recession is over and that the container sector can heave a sigh of relief.
“With a major carrier failure thus far averted and container volumes on the upturn, many believe this year will see a return to better times and profitability. But, it is still early days; a large number of post-Panamax vessels are due for delivery this year and most of the all important transpacific rate contracts have still to be signed,” the consultancy said.
Drewry said head-haul volumes on the core east/west trade lanes have improved since late 2009, and it has upgraded its forecast for the head-haul transpacific trade this year from 3.5 percent to 5.4 percent.
But it noted leading indicators continue to send out mixed signals. One of the leading U.S. consumer confidence indices fell sharply in February. In China, the Li & Fung purchasing managers index recorded a decline in new export orders for February compared with January, then picked up in March.
Neil Dekker, editor of Drewry Container Forecaster, said Drewry has “noted robust trade volumes moving on the Asia-to-Australia and Asia-to-East Coast South America routes since the beginning of the year. The charter market has shown signs of improvement, some larger vessels are coming out of layup and a number of new services are being launched in regional and smaller trade lanes — all suggesting more positive signs.
'Healthier traffic flows have, however, helped to give a slightly false impression of the current 'recovery' since, in particular, carriers have constrained capacity on the transpacific trade. This year will be a very tough one for carriers to balance capacity against forecast demand, and should too much tonnage be brought back in or too quickly, it is possible that the freight rate improvements, giving carriers much needed cash injections, could be derailed to some extent.”
Drewry said in recent weeks it has recorded a slight softening by a few percentage points of spot rates in both the transpacific and the Asia/Europe routes.
It said six Asia/Europe strings will be reintroduced during the second quarter indicating an increment of about 9.5 percent in head-haul capacity compared with the first quarter of this year. “It is therefore vital for carriers that the current flows from China continue.”
Drewry said according to Container Forecaster data, “it is likely that shippers will pay considerably more on the head-haul transpacific this year than they did in the last 12 months ' and many will do so in order to secure adequate space provision for this summer. However, it is too early to see exactly how carriers have fared with their negotiations.'
It also said, “Shippers will also be wary of the minutiae of their contracts given that many were effectively 'torn-up' in January with the implementation of unprecedented carrier emergency revenue programs.
“The relationship between carriers and shippers has never been as fractious as it is now with both parties blaming each other over short shipments and so-called 'phantom bookings.' It is clear that shippers will think long and hard before signing new contracts — some will change allegiances, other will seek comfort in using more partners as they try to secure their supply chains in 2010.
'Drewry has for some time emphasized that carriers and shippers need to get closer to each other and that this in itself can only help to engender more rate stability,” Dekker said. “Shippers have been scathing of carriers and — with rollovers so prevalent — not without good reason. Yet many have also offered suggestions for solutions — an olive branch of sorts. Carriers might point out that shippers have enjoyed very low freight rates, but this outright hostility is no longer required.'
Drewry said its new rate forecasts for the east/west trades for 2010 highlight the disconnect between what can only be described as a continuing poor global supply/demand balance. Rates including fuel are projected to increase 32.3 percent year-on-year due mainly to the expected success of carrier general rate increases on the eastbound transpacific, the end of low Asia/Europe rates and the continued rise of fuel surcharges.
But Drewry said its global supply/demand index is at 89, only a marginal improvement over 2009.
'It should not be forgotten that while annual fleet growth last year turned out to be only 5 percent, approximately 500,000 TEU that was not delivered will be operational in 2010,” Dekker said. “Global recovery is still at an embryonic stage and this is why we believe the industry needs to be cautious.' ' Chris Dupin