Maritime Market Updates

With a view to speed up the shoe making process Nike and Adidas are expected to embrace 3D printing; using the technology to make multiple prototype versions at a great speed. 3D printing is increasingly becoming a significant complement to the multinationals labour-intensive Asian factories signalling the gradual movement from “off-shoring” to “re-shoring”. 

The footwear makers are already using 3D printers to print and modify prototype plastic soles with studs for American football and running shoes.  Nike’s Oregon headquarters states that 3D printing has accelerated development of its vapour laser talon boot for professional American footballers.  As reported in the Financial Times, the company stated “within six months we were able to go through 12 rounds of prototype iterations that we fully tested and ultimately we were able to make super dramatic improvements to our products”.  

Germany’s Adidas in a statement said: “3D printers have reduced the time it needed to assess a new prototype from four to six weeks to one or two days. Whilst the new technology needs only two people to produce prototypes, in the past it was handled by 12 technicians. As the Economist reported, the digitalisation of manufacturing will transform the way goods are made and change the politics of jobs too. Labour costs are becoming increasingly less important. A $499 first-generation iPad included only about $33 of manufacturing labour of which the final assembly in China accounted for only $8. The need to move back production to rich countries is not only propelled by rising costs in Asia but because companies want to be closer to their customers so that they can respond more faster to changes in demand.

Worldwide container trades contract

As reported by Container Trade Statistics (CTS) during the first quarter of 2013 the global full TEU dropped by 1.4% year on year to 30.5 million TEU which covers both intra regional (deep sea routes) and regional trade. There was a strong 4.8% decline of regional trade. Exports from all continents except for the Far East and Australasia reduced substantially. In particular, the Middle East /Indian Sub Continent (-9%) and Sub Saharan Africa (-11%) witnessed their exports drop by large percentages. Exports from North America were 1.8% lower while from Europe it was only 0.5% down. However, on the imports side the numbers were more mixed with four continents, North America, Australasia, Africa and Latin America, increasing their imports by percentages of between 2.4% and 5.3%, with a decline of 5.8% to Far East recording the most.

Slow steaming pain for shippers to continue

With shipping lines taking delivery of more ultra-large container ships, shippers will continue to face more slow-steaming ships on the major East-West routes from Asia to Europe and US. Large ships will result in surplus capacity, price-war and shipping lines continuing to make losses. According to Drewry, “although slow steaming continues to be a contentious issue with shippers, more is on the way as fuel prices remain stubbornly high and ocean carriers can no longer absorb the bill due to the parlous nature of their finances”. Though bunker prices have declined from last years’ high it has continued to be more than $ 600 per ton during the first four months of the year. As reported by Drewry, at the end of 31 April, ships of over 10,000 TEU units remains to be delivered this year and shipping lines are having difficulties in cascading their 8,000 TEU ships out of Asia /Europe trade lanes to other trades. With other trade lanes not being able to absorb, the only option is more slow-steaming.

Shippers think carriers are nuts

In an interesting article DynaLiners weekly reports that shippers may be thinking carriers are nuts to except cargo at spot rate levels of $ 598/TEU all-in, as per the Shanghai Containerised Freight Index (SCFI) as of 31 May. On the other hand, will the cargo owners be so naïve to believe that such a rate nirvana will last forever? The present spot-rate is as against an all-in spot rate of more than $ 1000 per TEU in early April. In late 2011, battle for market share sent the SCFI to $ 490 per TEU. Sooner or later capacity will be tightened, perhaps the number of carriers will be reduced and the profitable pricing policy will prevail again. Will the Far East / Europe increases ranging between $ 700 to $ 1000 per TEU and $ 400 to $600 on the Trans Pacific Eastbound effective 01 July be the turning point? If it does not, then carriers may decide to increase idling of ships whether it’s peak season or not.

Container shipping line: Another casualty

Dealing a blow to the shipbuilding and shipping conglomerate in Korea, STX Pan Ocean facing an acute cash shortage filed for Court receivership. The company has been facing a liquidity crisis due to mounting debts and losses arising from falling freight rates and oversupply of ships. Trading of STX Pan Ocean was halted on the Seoul Stock Exchange. According to industry data the group has debts amounting to one trillion won which has to be paid back within this year, of which 500 billion won is expected to mature this month. Main creditor Korean Development Bank (KDB) are reviewing plans to inject liquidity into troubled STX Heavy Industries and STX Engine companies which have requested that the creditors provide liquidity in exchange for corporate bonds.

New rail freight service between China and Europe

The new rail service between China, operating from Chengdu in the West of the country, to the city of Lodz in Central Poland made a promising start recently. The weekly service operating between 41 to 52 wagons carrying multi-size containers is operated by W H F Logistics, a Chinese – Polish joint-venture company and the operator is aiming to introduce daily frequencies by the end of 2013. The express block train crosses countries such as, Kazakhstan, Russia and Belarus during its 10,000 km journey and reaches Poland within 15 days. Though the service is slightly expensive than ocean freight, it however, offers shorter transit times than the 30 to 40 days by ship. The choice of Chengdu as the place of departure in China is of significance as it has emerged as the major centre for automobile manufacturing.

India’s Ennore Port seeks fresh bids for container terminal

Following the cancellation of Ennore’s initial tender in September 2012 after a consortium led by a UK based company Eredene Capital withdrew its bid sighting cost escalation and depressed market conditions, Ennore Port Authority has now released a new global tender for the construction and operation of its long awaited container terminal project. Authorities estimate the reconstructed project comprising a 400 metre quay in phase one and a berth length of 330 metres in phase two will require an investment of approximately $ 225 million. The contract will be awarded on a 30-year operating concession offering an annual throughput of 1.4 million 20ft equivalent units when the terminal is fully operational. Ennore, one of India’s 12 state-owned ports handled a cargo throughput of 18 million tons in the fiscal year 2012/13 up from 15 million tons a year earlier.

The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni.  He is also a NORAD /JICA Fellow.