Most Recent Articles In Government and Trade
Latest Government and Trade Articles
- TPP’s Path Complicated by Politics
- Cambodia to Raise Monthly Minimum Wage to $140
- TPP Battle Begins as Hillary Clinton Says ‘I’m Not in Favor’
More Articles By
GENEVA — Downward pressure on freight rates for containerized cargo and other seaborne trade is forecast to continue next year, largely due to the oversupply of new vessels, a United Nations report said.
This story first appeared in the January 8, 2013 issue of WWD. Subscribe Today.
But changes in the shipping market, including lower steaming speeds, shifts in trade patterns and growing pressure to lower emissions are likely to impact decisions by companies on where to place production and source goods, concludes the report.
“Shipping capacity supply is going to continue,” said Jan Hoffmann, chief for trade facilitation at the U.N. Conference on Trade and Development and lead author of the study. “The order book has been reduced, but it’s still big. For 2013, there’s still a lot of new capacity coming online, which is beyond the growth in demand. The pressure’s there, so our estimate is there will continue to be an oversupply.”
RELATED STORY: Kingpins Integrates Green Efforts >>
Hoffmann, a transport economist, said in an interview that he expects the growth in the volume of seaborne trade in 2013 to be similar to the levels for this year, but the addition of new capacity to be even greater.
UNCTAD’s “Review of Maritime Transport, 2012” notes that seaborne trade volume, which accounts for about 80 percent of total world trade hauled, is estimated to have expanded 4.3 percent in 2012. In 2011, seaborne trade grew 4 percent to reach a record high of 8.7 billion tons, with the growth spurred by an 8.6 percent increase in container volumes.
The report highlights that container shipping represents about 17 percent of world seaborne trade by volume and 52 percent by value. The UN study estimates that in 2011, the average cost for shipping a 40-foot equivalent unit, or FEU, from Shanghai to the West Coast of the U.S. fell to $1,667 from $2,300 the year before.
With many carriers operating at a loss, cost-saving measures include cutting sailing speeds 13 percent on a number of main lines, and major liner carriers placing their largest container ships in regular services.
Hoffmann indicated the slower steaming times, which can delay arrival of goods by four or more days, have extra inventory, insurance and capital costs for exporters and importers. In the longer term, he argued, slower steaming times, along with higher fuel taxes, and an increase in transport costs, coupled with efforts by suppliers and buyers under increasing pressure from consumers to lower the carbon footprint of goods, could see shifts in sourcing closer to the region, such as from Mexico rather than China for the U.S. market.
China’s policy of moving up the value chain in global manufacturing, the report said, is causing manufacturing operations of low-value goods to relocate to other lower-cost production sites such as Vietnam and Bangladesh.
Some research suggests that relocation is also taking place toward Mexico, it notes.
The importance of better shipping connectivity in sourcing decisions is also stressed in the study. In South Asia, ports in Sri Lanka cater to larger container ships than ports in India, while the 20-foot equivalent, or TEU, capacity from and to Sri Lanka is 1.14 million, compared to 1.06 million deployed in Indian ports, the report noted.
“Shipping connections from Sri Lanka are objectively better than Indian ports and Sri Lanka benefits from cabotage restrictions in India,” Hoffmann said.