 |
 |
 |
 |
| Home > Market Overview | |
|
 |
Market Overview
Equipment and space availability issues persisted into early 2009... Q4 2008 and Q1 2009 saw both imports and exports decline after strong gains westbound in the two previous years... Tight credit and exchange rate volatility have constrained export sales... Gradually improving retail demand in the U.S., with help from China stimulus, may help boost commodity and materials exports.
As the global economic downturn deepened in late 2008, the westbound transpacific container market saw a sharp, sudden falloff that has yet to bottom. Westbound cargo volume was up nearly 6.2% in 2008, to 2.47 million FEU, reflecting a sharp falloff in liftings during Q4. During Q1 2009 PIERS lowered its 2009 demand forecast from -7% to -9% . A near halt to U.S. consumer demand in turn shut down hundreds of factories in south China and along the Yangtze River and, with them, demand for U.S. wastepaper, metal scrap, plastic resins, cotton and other exports. A slowing in Asian demand for U.S. agricultural and consumer goods quickly followed. Tight credit added to exporters' difficulties, making export financing of receivables scarce. Fewer Ships, Less Imbalance As of mid-2008, when westbound exports were booming, the transpacific cargo and equipment imbalance had narrowed from a high of 2.8 loaded import containers arriving in the U.S. for every one loaded container shipped back out, to a ratio of around 1.9:1. The reduced imbalance put upward pressure on westbound rates as empty returns became less available, but the problem didn't stop there. Eastbound remains the headhaul leg in the transpacific container market, due to sustained higher volumes, shipment value, time-definite service requirements (except for westbound refrigerated shipments) and revenues. Steadily declining import demand and high fuel costs led carriers to individually begin taking capacity out of the Pacific since the end of the 2008 peak season. Carriers have consolidated service strings, adopted slow steaming strategies to save fuel by running extra vessels on remaining strings, returned chartered ships early and entered into new vessel-sharing arrangements. As of March 2009, more than 480 vessels accounting for 1.4 million TEU - 11% of global container fleet capacity - were laid up in various ports worldwide. Westbound Equipment Limitations That means fewer overall vessel slots and containers in circulation, most notably in the Pacific. As it is, westbound cargo fills a typical vessel in the trade (6,200 TEU for a West Coast service; 4,000 TEU for a ship transiting the Panama Canal) with fewer containers because of the relative weight of commodities like metal scrap, animal hides, forest products, baled cotton and hay, or machinery. Effective capacity of a ship is further reduced by the mix of container sizes onboard, oversized project cargo (machinery, industrial vehicles, etc.), load-bearing constraints on hatches and the deck, balancing the ship, maintaining visibility from the bridge, and load sequencing of priority cargo. Export containers often load in regions of the U.S. far away from where the empty inbound container has unloaded its retail merchandise or auto parts. Given the high costs of inland equipment repositioning by rail or truck, and marginal westbound freight rates, inbound marine containers are most often kept as close to port as possible for a more economical empty return to Asia. Finally, nearly all major container lines in the transpacific market are global carriers, and at any given time various lane segments experience ebb and flow in vessels and equipment depending on cargo demand. Over 2007-08, significant transpacific capacity has shifted, first to Asia-Europe and then more recently to the intra-Asia and North-South trades (Australasia, Latin America) as a result of the U.S. downturn. The westbound transpacific market has been hard hit, owing to both declining demand and the relatively low rates and narrow margins of the westbound commodity mix. At a low point during 2007-08, carriers at times found it economically more favorable to reposition containers empty back to Asia rather than solicit cargo at rates that often contributed only a portion of voyage cost, and then incur cleaning, fumigation, drayage and other costs at destination. |
 |
||
|
|
|||
|
Trust Issues A number of converging productivity, security and environmental policy trends have placed strains on the westbound shipper-carrier relationship in the past year. For example: Tight space and scarce equipment has prompted shippers to make multiple bookings among several carriers to ensure they can get a container and a pickup on schedule. This in turn has prompted carriers to overbook sailings, believing that many of their bookings may be for 'phantom' cargo. Port clean truck programs and the federal Transport Worker Identifaction Credential (TWIC) program have created uncertainties about availability of adequate harbor trucking services. Online 'shipment visibility' through a range of internal and third-party solutions has actually led to increased verification phone call volume in the current environment. U.S. government mandates for electronic filing of detailed export documentation at least 24 hours before vessel loading, and resulting carrier 'no doc-no load' policies, have compounded problems associated with delays in arranging equipment and pickups. Carrier and port terminal detention/demurrage policies, designed to keep container equipment moving and optimally utilized, have narrowed shipper flexibility in terms of shipment pickup and dropoff. Solutions Shippers and carriers have gradually begun addressing equipment availability problems, although there is no immediate quick fix. To the extent that customers are able to plan their bookings well in advance – as much as 8 weeks out – they are able to secure equipment. Year-round shippers and customers with a diversified mix of cargoes in both directions have used those advantages to make more favorable equipment arrangements. Increased use of truck “street turns”, matching trucks that have just dropped off a load to a return load without returning to the port or some other central location, have increased truck and container velocity. A growing number of shippers are moving cargo from their premises by truck or rail cars to the port – or a regional rail hub where empty marine containers naturally collect, such as Chicago or Dallas – for transloading. Ports, ocean carriers, railroads, equipment lessors, commercial real estate interests and other stakeholders continue to study proposals for shorthaul rail shuttle service between ports and central container receiving facilities near inland distribution centers, and other strategies. Shipper-owned container equipment and regional, neutral equipment pools have been proposed, but these generate new questions about liability, how returns would be arranged, and the impacts to tightly-managed carrier networks from a large volume of externally controlled containers in circulation.
On both sides of the contract negotiating table, parties are sharpening their pencils to cut costs and improve utilization, as equipment and cost recovery become the deciding factors in keeping U.S. exports to Asia moving.
|
 |
||
