By  on December 19, 2011

GENEVA — The excess capacity in global container ships, exacerbated by record deliveries of new vessel tonnage combined with the slowdown in the recovery of world trade, is expected to continue to put a downward pressure on freight rates, a United Nations report said.

“This is not good news for ship owners, but it’s good news for shippers of goods,” said Jan Hoffmann, chief for trade facilitation at the U.N. Conference on Trade & Development and lead author of the study.

Most manufactured goods, including textiles and apparel, are shipped in containers by ocean container ships. In 2008, prior to the global economic downturn, it was expensive to transport goods, and exporters and importers faced long waiting times and congestion in ports because of the strong world economy, Hoffmann said.

But today it’s the other way around — no shortages in capacity and freight levels are low, Hoffmann said in an interview.

At present, freight prices are down 25 percent compared with the pre-crisis period in early 2008. Hoffman noted that at the height of the crisis, in 2009, they were down by more than 50 percent from pre-crisis levels.

Simon Bennett, director for external relations at the International Chamber of Shipping, told a U.N. meeting on trade and trade facilitation here on Dec. 7 that “there are too few cargoes chasing too many ships....Freight rates have plummeted, and many shipping companies are now struggling to meet the interest payments on their capital costs and are operating their ships at a loss.”

“Shipping markets are notoriously volatile,” said Bennett, noting that at some point “the supply-demand balance will be restored” and freight rates will return to sustainable levels.

The ICS consists of national shipowners’ associations from 36 countries from Asia, the Americas, Africa and Europe.

Hoffmann said November 2011 freight rates from Shanghai to the U.S.’ West Coast were around $1,500 and to the East Coast were $2,900 per 40-foot equivalent unit, or FEU.

UNCTAD’s “Review of Maritime Transport, 2011,” said that even though 39 percent of new building orders for container vessels were not delivered in 2010, “the global fleet of container ships increased by 14.7 million dead weight tonnage, or dwt, to reach 184 million dwt, approximately 13.2 percent of the total world fleet.”

But the study asserts that the vessels on order “will be built, but their delivery will be delayed.” Overall, the world merchant fleet last year expanded 8.6 percent to a record 1.4 million dwt, and seaborne trade grew 7 percent to 8.4 billion dwt. Last year, container trade volume was estimated at 140 million TEUs, up 12.9 percent from 124 million TEUs recorded in 2009, and accounted for 17 percent of world seaborne trade volume.

Lower freight rates, new excess capacity and continued low demand, the report notes, has led some container liner operators to absorb capacity by reducing vessel speed and taking longer routes, or laying up vessels.

The oversupply in tonnage in the container sector, the result of orders placed before the economic crisis, and upcoming record-sized new buildings pose “a further challenge to owners, who will need cargo to fill their ships,” the UN report said.

Looking at overall trends in global seaborne trade, it said that between 1970 and 2010, developing countries share in the volume of seaborne imports jumped to 56 percent from 18 percent. The report said freight cost as a percentage of the value of imports in the last three decades has fallen in all regions and points out, for example, that from 2000 to 2009, freight accounted for an average of 7.4 percent of the value of imports for developing Asian nations, down from 8.4 percent in the previous decade.

Similarly, for rich industrialized nations freight costs accounted for 6.4 percent of import costs from 2000 to 2009 compared to 7.3 percent in the previous decades. Better ports and greater efficiency through economies of scale account for the advantage in the cost of doing trade by rich nations, Hoffman said, but noted dynamic emerging Asian nations are rapidly narrowing this gap. Transport costs are key determinants of a country’s trade competitiveness, notes the report, and adds excessive shipping costs are considered “a major barrier to trade, often surpassing the cost of customs duties.”

To access this article, click here to subscribe or to log in.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus