Ocean cargo shippers may get break on spot charter rates

Meanwhile, carriers place new orders for ultra-large container vessels.

By ·

Lars Jensen, CEO and Partner with SeaIntel Maritime Analysis in Copenhagen, notes that one of the most important developments in the past month has been the rapid decline in spot rates – particularly on the Asia-Europe trade lanes.

“The situation is slightly more benign in the Transpacific trade – at least when the magnitude of the rate decline is considered,” he says.  However, in reality we see that the partially successful GRI on the Transpacific was entirely eliminated in just three weeks this past spring.”

According to Jensen, it is clear that both carriers and shippers are facing “troubled times.” Despite rates having fallen by 41% since New Year, carriers are poised to increase capacity from Asia to East Coast South America by more than 20% - seemingly a recipe for continued rate declines.

“Additionally – and in line with our previous expectations – we continue to see carriers place new orders for ultra-large container vessels. It is in this troubled minefield of overcapacity, combined with new fuel efficient vessels that carriers need to make profits in the coming years,” says Jensen.

He adds, ominously: “Cumulatively the carriers have lost almost $7 billion in the past 4 years – and clearly such a trend cannot continue indefinitely.”

Who will then stand to be the winners of what appears
to be a protracted war of attrition? Based on developments in the past decade, the winner(s) will need a solid combination of three factors, say SeaIntel analysts:

1) Access to additional capital;
2) Access to a fleet predominantly made up of new fuel-efficient
vessels; and
3) An operational and organizational setup resulting in the lowest unit costs in the market.

“Looking at 2012 annual accounts, clearly some carriers appear to be off to a better start than others, however this is not a
sprint, it is a marathon – and the winners may not yet have emerged from the pack,” says Jenson.

Meanwhile, business for more bulk and breakbulk carriers may be heating up as China’s demand for coal continues to accelerate.

The influence of U.S. coal exports on seaborne transportation has grown significantly over the past decade. In 2002, the U.S. exported 20.1 million tons by sea, but in 2012 that number had increased to 106.7 million tons. The effect on shipping has multiplied due to the fact that much of the demand growth has come from East Asian countries. With a large part of the U.S. Coal destined for East Asia being shipping out of the US East Coast ports, this will increase the demand for tonnage.

As a consequence, the transportation demand stemming from U.S. coal exports has surged from 84.7 billion ton-miles in 2002 to an estimated 707.3 billion ton-miles in 2012 (835% over the period).

“In comparison, the Chinese coal imports in 2012 accounted for an estimated 697.6 billion ton-miles of demand for seaborne transportation, says Peter Sand, Chief Shipping Analyst at the Copenhagen-based consultancy, BIMCO.

“This means the U.S. coal exports was more important to the dry bulk shipping market than the Chinese coal imports in 2012.”


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Details Key to Cross-border Ease
Ever-changing regulations are making it risky for U.S. companies engaged in cross-border trade...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo