Maritime market updates

Americas Fiscal Cliff – Will it affect Shipping?

The United States of America as a nation is the largest importer of goods.  US Transpacific and US Trans Atlantic trade routes in terms of freight value is greater than Asia Europe trade lane for container carriers.  With effect from January next year US Federal tax increases and spending cuts equivalent to 5% of GDP will come into force. 

The expiry of former President Bush’s tax cuts will raise taxation by USD 3500 per household.  USA will go over this ‘fiscal cliff’ unless the Republicans and Democrats in Congress agree.  Failure to reach consensus would mean that Americans will face a fiscal restriction of more than USD 600 billion in a single year.  J.P. Morgan an investment banker has reported that 61% of American clients had said the fiscal cliff is affecting creation of jobs.  During the month of August durable goods ordered plunged 13.2%.  Uncertainty in decision making, particularly during the election year is bound to reduce demand for goods which in turn will affect carriage to USA.   To quote The Economist, “as long as politicians in the worlds big three economies continue to dither another global recession is possible.  Judging by politicians’ behavior - the world economies could slow a lot further.  It could even tip into recession in 2013”.

Maersk Line reduces 19 ships on the Asia/Europe trade route

European imports of container goods from Asia declined by 10% year on year in August which followed a slide of 13% in July.  In the Mediterranean sector contraction was more than 20%.  Maersk Shipping Line has terminated its AE5 service which operated eight 6500 Teus vessels and AE9 service having eleven 8000 Teu vessels until early December.  Maersk is on record having reduced capacity by 21% in 2012 on their Asia/Europe network. Capacity reduction would not have an impact on its all important Daily Maersk service which has resulted in the carriers liftings increase significantly.

Asia – Med Freight rates plunge

According to Shanghai Containerised Freight index the average spot rates on the Asia-Mediterranean trade has fallen from a peak to US$ 1892 per Teu on 29th June to US$ 1204 per Teu in October representing a fall of 36.3% in a single quarter.  The decline which has taken place during the peak season is reflected to poor market conditions in the 03rd quarter.

Container Charter prices slide

Container charter prices as reflected in the Hamburg Index, continues to contract.  The difference between August 2012 and against 2011 for 1000 Teu vessel was minus 37%, for a 1600 Teu vessel minus 41%, for a 2000 Teu vessel minus 49% and for 3500 Teu vessel minus 41%.  This is in stark contrast to liner freight rates as measured by China Containerised Freight index which had an overall growth of 28% in August 2012 as against August 2011 with China to North Europe witnessing a growth of 62.9%.

Somalian Piracy – is it in the decline?

The number of Somalian pirate attacks in the year 2012 was 46 as against 222 in the year 2011 and 239 in 2010.  The successful piracy attacks this year has been 09 as against 34 attacks in 2011 and 68 in 2010.  Does this mean that Somalian pirates have been beaten into submission by coalition maritime forces combined with physical protection and armed guards?

Dryad Maritime Director of Intelligence said “Somalia pirates are not out of business, even if times are hard compared to the success of earlier years.  The pirate business has suffered a few setbacks but the threat remains a very real one”.  Recently, pirates attacked an Omani Dhow near the Port of Salalah.  Though recent reports issued by US Navy and International Maritime Bureau indicates that piracy has declined around the horn of Africa, complacency can be the greatest threat and therefore Shipping Lines would continue to be vigilant.  Vessels carrying armed security teams have still not been hijacked and pirates have so far failed in the recent past to attack large merchant vessels.

Singapore to build new Port

Singapore has announced that all Singapore Container Port activities will center round a new location in Tuas that could handle up to 61 million Teus in 10 years time.  This is double of PSA Singapore’s current capacity of 35 million Teus.

Meanwhile PSA Singapore is going ahead with Pasir Panjang phase 3 & 4 development which will cost US$ 3.5 billion and will have a 15 million Teus capacity.  Centralisation of activity in the new Port of Tuas will eliminate inter-terminal trucking between five container terminals which results in additional costs, as well as congestion of roads.

Decline in Ocean Carrier on time arrival performance

As indicated by Seaintel Maritime analysts in the month of August, ocean carrier on time arrival  performance of Liner vessels having peaked at 83% in June has declined to 77% , which is based on 10,000 vessel arrivals during this month.  The decline in on time performance was witnessed across all top 20 carriers with the top 03 performers in August being Maersk Line, Hamburg Sud and APL.  A combination of factors such as poor weather conditions, super slow steaming and port issues caused the reduction in on time performance.

DP World only party interested in single berth at Nhava Sheva

As reported in the DynaLiners – DP World turns out to be the only party interested in new 800,000 Teu single-berth container terminal at Nhava Sheva.  The new 330 metre quay line is located next to DP World’s own Nhava Sheva International Container Terminal which covers 600 metres.  Recently partners PSA and ABG withdrew from the 4 million teu mega container terminal project at the same port.

Maersk withdraws all port calls to Iran

The Danish carrier has stated “this is a pragmatic decision based on an assessment of balancing the benefits of doing limited business in Iran against the risk of damaging business opportunities elsewhere, particularly the US”.  The US in 2011 blacklisted Tide Water Middle East company, the major Iranian Port Operator which manages seven terminals in Iran including the biggest container port Bandar Abbas.  The carrier further said its main business with Iran was transporting food and other goods to the people of Iran and it regretted no longer been able to do so.

Meteorologist and Container Shipping Analyst

An interesting article the Container Shipping Manager state that - Meteorologist and Container Shipping analysts have been proven wrong but yet keep their jobs.  There are indications that the container shipping markets will not re-bounce  until late 2014 which is due to many vessels on order with very little demand growth to fill these vessels.  Very few analysts foresaw the market disaster in 2009 and the dramatic re-bound in the first half of 2010.

(The writer, a Maritime Economist, is a Chartered Fellow – Logistics Transport, Chartered Shipbroker – UK, and a University of Oxford Business Alumni.)