TSA lines warn of Asian port congestion, full ships

TSA lines warn of Asian port congestion, full ships    Container carriers serving the Asia-to-U.S. container trade are warning of a “potentially difficult peak season through October, with spillover effects likely heading into 2008” because of crowded ships and port congestion in Asia.
   The Transpacific Stabilization Agreement, a discussion group of 14 carriers involved in the eastbound transpacific trade, said its members are experiencing “consistently high ship utilization numbers since May and going forward through the summer; higher monthly volume and utilization totals relative to 2006.”
   TSA also reported “increased congestion at Asian ports ' notably Shanghai, Hong Kong, Singapore and Colombo — due to booming intra-Asia and Asia-Europe trade growth.”
   “While trade growth has moderated in line with expectations, U.S. importers face supply chain congestion challenges that get progressively complex to manage moving into the peak shipping season,” the group said in a statement.
   TSA said the first quarter was “slower than expected” and that 2007 cargo demand had been expected to increase only 7 percent to 8 percent over the prior year. But TSA said shipments have rebounded to higher levels in recent months.
   In June, TSA carriers lifted more than 740,000 TEUs, up 16 percent from June 2006. Average vessel utilization in June was 95.6 percent compared to 92.4 percent in June 2006.
   While TSA said “some of the gain in traffic may have related to July 1 changes in Chinese export subsidies, the overall trend suggests a resumption of strong cargo growth.
   “TSA lines are currently averaging 95 percent vessel utilization or higher from Asia on all route segments, with ships running essentially full on the highest volume North and South China service strings,” it said. “Forward bookings suggest that the trend will continue into August, and retailers forecasts record eastbound transpacific volumes by October.”
   TSA noted that “demand for all-water service to the U.S. East Coast via the Panama Canal continues to outpace demand via the U.S. West Coast, as customers build in supply chain flexibility to manage the risk of 2008 West Coast labor disruptions and cope with inland rail capacity challenges.”
   The group noted that TSA lines are expected to add 140,000 TEUs in East Coast all-water capacity during 2007.
   The main concern for container lines in 2007 and 2008 is not a weaker market but supply chain disruptions, said Ron Widdows, chief executive of APL who serves as chairman of TSA. Those disruption could come from Asia port congestion, labor slowdowns, truck and inland rail cost increases, and capacity availability.
   “The Asia-U.S. supply chain infrastructure is essentially operating at capacity right now,” Widdows explained. “Cargo is flowing reasonably smoothly in the U.S. at the moment, even as Asia experiences real challenges. There isn’t a lot of margin for error in the system.”
   He said a proposed Los Angeles-Long Beach port trucking initiative has caused concern over the future cost and supply of harbor drayage.
   And he notes that with bunker fuel cost hovering in the $400-per-ton range, fuel cost will become an even greater factor in ocean carrier economics in the next year.
   TSA lines said they expect their aggregate nominal capacity to grow 9.7 percent through 2007, in line with forecast overall demand growth. But the group noted that sharp spikes in traffic during August and October peak periods could put pressure on space during weekly periods.
   The 14 TSA members are: APL, CMA-CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping, Hapag-Lloyd, Hyundai, 'K' Line, Mediterranean Shipping Co., Mitsui O.S.K. Lines, NYK Line, OOCL, Yang Ming and Zim Integrated Shipping Services.