Sucheta Dalal :Container volumes go up freight rates still under pressure
Sucheta Dalal

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Container volumes go up, freight rates still under pressure  

December 14, 2009


The container segment has witnessed a revival in trade volumes. However, it continues to remain under pressure in terms of freight rates. This phenomenon of volume growth coupled with pressure on freight rates is evident both in the domestic and global shipping markets.
Singapore's Neptune Orient Lines—the world’s fight-largest shipping company—has announced that it carried 23% more cargo in the four weeks to 13th November over the year-ago period. The shipping line stated that it had carried the equivalent of 2,08,000 40-foot containers (FEUs) on its ships, up from 1,69,700 FEUs a year earlier.
Eivind Kolding, the chief executive of Maersk Line’s container unit told certain sections of the media that container volumes are likely to grow between 3% and 8% in 2010. Mr Kolding has been quoted as saying that the “trends are pointing the right way." Maersk Line is the world’s largest container shipping line.
A similar growth picture is being witnessed closer home in India. S Hajara, chairman and managing director, Shipping Corporation of India (SCI) said, “With the economy having bottomed out, growth prospects appear good. Container (traffic) caters to the cargo trade. If the economy improves, international trade will improve and thus container demand will go up.”
SS Kulkarni, secretary, Indian National Shipowners’ Association (INSA) shares a similar view. “There has been an increase across all segments, but it (the increase) is very modest. If you see the growth on a year-on-year (y-o-y) basis, in the last two years it was almost ranging in double digits to 18%. That growth has slowed down considerably. In India, there is growth, unlike in other countries, where the trend is negative.”
As per latest reports, cargo at major ports increased by 13% y-o-y in November 2009. The cargo traffic for November 2009 was 48.2 million tonnes (MT) compared to 42.5MT for the same period last year. Cargo traffic for November 2009 also grew by 3.4% month-on-month (m-o-m), on the back of a 9.8% m-o-m growth for October 2009. In October 2009, cargo movement at major ports was up by 10% y-o-y, translating into 46.7MT compared to 42.2MT for the same period a year ago. Container traffic also increased by 13.4% y-o-y in November 2009.
Though the container segment has seen a surge in volumes, freight rates are going down. The average revenue per FEU for Neptune Orient Lines was down 28% from a year ago at $2,239/FEU.
“As far as container shipping is concerned, it will continue to be under pressure in terms of rates because there will be a lot of supply pressure in 2010,” added Mr Hajara.
On being questioned on whether the growth in container volumes could be a temporary phenomenon, Mr Hajara said, “As far as volumes are concerned, there is no reason why they should go down. I expect volumes to increase, but rates will continue to be under pressure.”
Amritha Pillay

-- Sucheta Dalal