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The primary contributor has been the narrowing deficit in trade in goods which has shrunk by 2.2% of GDP. American manufacturers seem to have stopped losing market share at home turf. The domestic car sales held by car manufacturers in America, though had declined from above 85% in the mid 1990s to around 65% during the recession has once again increased up to 73%.
The increase in cost of labour in China and a lower dollar has weakened the case of starting up American manufacturing offshore. As suggested by Whirlpool the reason for bringing production of various appliances back from China, Germany and Mexico is improved productivity in America and higher transportation cost.
Acting on a complaint by Whirlpool, the federal government has imposed anti-dumping duties on washing machines from South Korea. Besides the above, North America’s Free Trade Agreement (NAFTA) may take off again.
A recent poll shows that people of the United States prefer the idea of Free Trade with Canada and Mexico than with China, India or European Union. The aim is to develop a “Factory North America” to rival “Factory Asia”. In the final analysis, a reduction in America’s imports due to manufacturing being set up in the United States of America is obviously a concern for shipping.
Growing protectionism
The European Union has produced a report highlighting a “worrying increase in the adoption of certain highly trade disruptive measures”. Interestingly, the emerging markets appear to be the worst culprits with Brazil, Argentina and India cited in the report’s conclusions.
Over the last few months, three highly regarded institutions have highlighted the increasing growth of protectionism in the global economy. The World Trade Organisation Director General, Roberto Azevedo outlined that the WTO would downgrade world trade growth estimates for 2013 from 3.0% to 2.5%. In addition, 2014 estimates would be cut from 5% to 4.5%.
The International Air Transport Association (IATA) argued that almost 500 protectionist measures were taken in 2012 alone. Furthermore, data from the IATA clearly demonstrates that airplane’s cargo and passenger revenue has diverged since the recovery took place.
Cargo revenue is particularly susceptible to protectionism. The immediate consequences can be seen in air cargo and transportation companies with FedEx undergoing a remarkable transformation in profitability in receipt years.
International piracy at its lowest
According to the International Maritime Bureau (IMB), during 2013, international piracy reached a six-year low with 264 ships being attacked, compared to 297 the year before. Pirates boarded 202 vessels, while 12 were hijacked and 22 were fired upon. In the Gulf of Aden and off the coast of Somalia, piracy reduced by 80% to 15 attacks. In West Africa, piracy attacks went down to 51 from 58 the year earlier, 49 people were taken hostage and 36 were kidnapped. Another hotspot is the Indonesian archipelago, which accounts for almost 50% of all vessels boarded. However, a large number of those are what is referred to as low-level opportunistic theft, not to be compared to the more serious incidents off Africa.
Liner shipping woes to continue
There was consensus at the Intermodal Europe 2013 conference held in Hamburg last month that container shipping lines should brace themselves for up to three years of significant over capacity and falling freight rates.
Mike Garratt, Managing Director of MDS Transmodal, said: “There is a sense of inevitability in this industry that over the next year a new order is going to come about.” Garratt stressed: “Carriers not investing in big ships to reduce their unit costs risk their very survival as smaller tonnage is losing its’ operational viability rapidly. It is noteworthy how large orders outside of the main alliances have picked up with China shipping Container Lines and UASC confirming 18,000 TEU+ ship series this year.”
He added: “Levels of oversupply will rise further with TEU slot capacity expected to increase at least 23% by 2015 and demand rising by only 17%. This will keep freight rates down and make it difficult for carriers to earn profits.”
All observers at the conference agreed that super post-Panamax ships would account for a much larger slice of the fleet deployed and that the new Panama Canal would have a significant impact on service structures.
Indian container port volumes down
From April-December 2013 containers handled by 11 Indian major ports dropped by 4% to 5.3 million TEU. This is as against 5.77 million and 5.84 million TEUs handled in 2012 and 2011 respectively during the corresponding period.
Only four mid-size ports escaped the down turn, Cochin, New Mangalore, Tuticorin and Visakhapatnam. Kandla was heavily affected by the termination of its’ stevedoring contract with ABG and PSA, while the commissioning of the new offshore container terminal at Mumbai (old port) has been postponed several times, affecting its’ competitive position.
South East India’s Vizhinjam, will it take off?
Vizhinjam International Seaports has floated a global tender inviting request for qualification for the operations of its’ proposed deepwater container transhipment terminal at the Indian port of the same name (Kerala state, at the South East tip of the continent). The bidding process is planned to be completed in April 2014. Previous attempts to find an operator failed with the only offer from the single bidder being considered too low.
Even if the Vizhinjam International Seaports manages to find an operator for its’ planned container facilities, it is not sure whether it can be operated as a transhipment terminal. The Indian Director General of Shipping has decided not to exempt any more ports from cabotage rules as the relaxation for Cochin’s Vallarpadam port did not boost transhipment volumes. In fact, the conditions of the temporary exemption are so strict that it is easier and cheaper for carriers to route their boxes via other transhipment hubs.
Hong Kong to lose 3rd busiest container port status
According to data published, Hong Kong is on course to lose its status as the world’s third busiest container port having handled 22.3 million TEU in 2013 which is a contraction of 3.6%. Throughput at the main Kwai Tsing container Terminals, operated by Hutchison Port Holdings, Cosco Pacific, DP World and Modern Terminals, dipped 2% to 17.1 million TEU.
Volumes at the rest of Hong Kong’s terminals slumped 8.4% to 5.2 million TEU.
Hong Kong is set to be overtaken by neighbouring Shenzhen as the world’s third largest container port, a status that it has held since 2007. The former British colony was once the world’s top container port but was outrun by Singapore in 2005 and by Shanghai in 2007. Annual throughput data for Shenzhen port is due to be released shortly.
Growing share of 40ft high cube
A recent issue of Drewry Maritime Research’s container Insight Weekly highlighted the growing share of 40ft high cube (9ft 6in high) containers in the global maritime container fleet and claimed that the phenomenon is causing problems for carriers and forecasters alike.
Drewry predicts that the proportion of 40ft high cube in the global fleet will exceed 50% by the end of this year for the first time, up from 49% (15.4 million TEU) in 2012.
Although much of the growth in demand for 40ft HC containers has come from reefer shippers, with almost 92% of all refrigerated cargo being shipped in the equipment last year, it only took that sector’s volume up to two million TEU. Dry cargo still accounted for the vast majority.
The popularity of 40ft HCs is easy to understand, Drewry says. Being around 13% larger than standard 40ft boxes, shippers can load that amount of extra cargo at little to no extra freight cost. Moreover, inland transport is usually charged on a per container basis for light cargo, so there are also no extra haulage costs.
But Matthew Beddow, Manager of Container Insight Weekly, said the growing popularity of the 40ft HCs has two significant implications. “The first is that the increasing need to stow 9ft 6in containers below deck, which results in loss of cargo space for shipping lines, is reaching a critical junction,” Beddow said.
“Whereas nearly all the equipment has been stowed on deck so far, this cannot continue much longer, bearing in mind that just over 50% of a ship’s cellular capacity is located on deck. When under-deck stowage is required, as much as 7ft (2.1 million) can be lost between the top of the last tier of a stack and the main deck as ship holds are usually designed for 8ft 6in boxes,” he said.
[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 Fellow of NORAD/JICA and Harvard Business School (EEP).]
