PortCalls

Transpacific carriers seek to hike metal scrap rates

CONTAINER shipping lines operating from the US to Asia have recommended a two-stage increase in freight rates for shipments of metal scrap. Carriers in the Westbound Transpacific Stabilization Agreement (WTSA) have adopted a guideline freight rate increase of US$100 per 40-foot container (FEU) to take effect on December 1, 2003, followed by another increase of $100 per FEU effective April 1, 2004.
WTSA lines said the recommended increases are modest in light of current market conditions. Demand for metal scrap, reused in manufacturing, has grown sharply throughout Asia in recent months. It moves in large volumes, yet is among the lowest-rated commodities in the westbound trade.
WTSA is a voluntary discussion and research forum of 13 major container shipping lines serving the trade from ports and inland points in the US to destinations throughout Asia. Information on all recent and scheduled guideline actions adopted by WTSA can be found on the Agreement's web site, www.wtsacarriers.org.
WTSA members are: American President Lines, Ltd., China Shipping Group, COSCO Container Lines, Ltd., Evergreen Marine Corp. (Taiwan), Ltd., Hanjin Shipping Co., Ltd., Hapag Lloyd Container Linie, Hyundai Merchant Marine Co., Ltd., Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd., Nippon Yusen Kaisha (N.Y.K. Line), Orient Overseas Container Line, Inc., P&O Nedlloyd Ltd./B.V., and Yangming Marine Transport Corp.

Peak season offers mixed prospects

TRANSPORT players are singing different tunes when asked whether the peak season this year is better than last.
Air cargo players are not too happy, many claiming flat growth in cargo volume and sales.
During the peak season - which starts mid July - a 30-40% growth in air cargo volume is normal, according to Global Cargo Carriers, Inc. (GCCI) president Mario Pangan. "But this year, we are not seeing that," he said.
He offers as proof freight forwarders not being as active in negotiating for space. "They know if there is substantial growth in production. If an increase is looming, forwarders usually start preparing the needed space to accommodate cargoes. This is not the case this year," Pangan explained.
And even if semiconductor and electronics companies earlier projected volume increases in the third and fourth quarters, the forecast provides little comfort for the air industry. "There is no guarantee the airlines will benefit because much of the volume is still being carried over sea... even garments," he pointed out.
Pangan is quick to point out that depressed volumes are understandable considering the not-so robust economies of the country's major trading partners, Japan and the US. "They don't seem to be showing any signs of improvement," he said.
Also, the rates are on the low side this year, he said. "There's a lot of capacity but very little freight. So the rates are really depressed."
Pangan said the flow of goods is also erratic. "All of a sudden it goes up making airlines think the peak is already here. So we try to raise the rates. But the next thing you know the traffic has gone down..."
By now, Pangan said there isn't much to be done by the air cargo industry except to remain optimistic. "At this point, exporters are already shipping - or have shipped - goods that will be sold during Christmas," he said.
The majority of commodities transported during peak season are electronic components and perishables.
Cathay Pacific Cargo assistant manager Ramon I. Joson also expressed doubts about a strong peak season this year. According to him, compared with last year, which players dubbed the "peak of peaks", this year offers weaker prospects.
"First, we have to look at the present situation of the national economy. Both imports and exports to the east and west are showing irresolute growth. The demand especially in the Western part of the world is not that big," he explained.
The Philippine economy also follows that of the country's key trading partners'. "If they're not doing well, that reflects on our local operations," he said.
Unlike last year when the US West Coast port lockout coincided with the peak season - thus giving air cargo carriers a bonanza - the peak season this year is just another season in the business cycle.
For Cathay Pacific Cargo, 2003 is a year of recovery. "We have just resumed in September our frozen flights. From the two (flights) that (were) left when SARS broke out, we now have five. So we have yet to recover lost ground."
Lufthansa Cargo Country Sales Manager Darryl Modelo agreed with Joson that the peak season this year is just another course in the business cycle.
"This is the traditional business cycle. I don't really call it a peak season. That is just normal. I think year on year there has been an increase except for 2002," he noted.
Next year holds better prospects, Modelo said, noting that agents from abroad are continuing to secure capacity from carriers in the Philippines.
"You should also look at the capacity available in the market. Some carriers don't get the demand because that's already been divided in capacities available in the market... so the volume that really comes in is what their capacity can carry," Modelo pointed out.
He stressed players should not only regard peak season as the indicator for growth but rather look at the bigger picture. "It's more political than anything else, if you ask me. As a country, the Philippines should make itself more competitive compared with other countries," he commented.

Peak season for liners

International shipping lines servicing the transpacific and Europe trades meanwhile are optimistic about this year's peak season. While earlier reports showed the transpacific trade starting at a much slower pace in June compared with last year, container traffic picked up abruptly in August.
September and October bookings, carriers noted, are slowly eating up what is left of capacity in the market.
Maersk Filipinas, Inc. president Kim H. Sorensen said the company is starting to "hit the roof" once again, that is Maersk vessels are sailing full. Still, he said, volumes that can be carried during the peak season are limited - unless carriers decide to inject extra capacity.
Sorensen said this year's peak season did not take the company by surprise as it did last year when the base was low to begin with. "Last year was a very depressed year. When the peak season came, growth therefore showed a steep upward curve."
Maersk had met its third-quarter projections but can no longer exceed that because capacity has been allocated.
"The vessels are not there. There's just no capacity and you can look anywhere in the world right now and you will see that there is no vessel available so it's pretty difficult for the carrier to get that new capacity. Plus, the costs of vessels are growing immensely," he said.
The Danish carrier sees this year's performance as stronger than 2002's.
Sorensen said this Christmas may not be very merry, although the carriers are more hopeful in the next two years.
"Last year, the volumes picked up during the peak season but then again, the rates were still low so a lot of carriers suffered. Based on suppliers' forecasts, we have clear indications that supply and demand will be good for us in 2004 and 2005," he said.
According to him, the company sees high utilization of all vessels and slight increases in rates.
Maersk's key commodities are garments, apparel, food products and electronics.
APL, also a major transpacific carrier, disclosed that since late last year, there have been signs of an improving operating environment for the container shipping industry. The balance between supply and demand continued to be favorable and this has enabled a significant recovery in rates, it added.
"As we moved into the second half of the year, space proved to be even tighter and this is reflected in the increase in average freight rates year-on-year seen in our August 2003 operating performance which showed a 26% increase in average freight rates from $2,176 per forty-foot equivalent unit (FEU) to $2,739 per FEU for August 2003," said APL managing director Teng Kok Ng.
The shipping firm maintained a positive outlook for the Philippine market as with other trades. Performance has improved significantly from last year, particularly in freight rates. "This has been a result of APL's ongoing focus on high-yield cargo and a recovery in freight rates generally," Ng noted.
APL is also experiencing tight space particularly in the Philippines-Europe trade. Commodities moving in this trade include garments, canned produce, furniture, electronic goods/computer hardware and coconut products.
The strong first-half results points to a turnaround in performance from the previous year, NOL - APL's mother company - reported.
"Barring unforeseen circumstances, APL's continued focus on high-yield cargo and greater exposure to long-haul trades should result in significantly better results for the second half of the year," Ng noted.
Meanwhile, Atiko Trans, Inc. vice president and general manager Efren B. Caboteja said while long-haul carriers are experiencing an upsurge in peak season volume especially in the US and Europe trades, there has been a slump in Asia.
"Regional commercial feeders like us suffered losses in the third quarter É (we're still) recovering from the effects of the US-Iraq war, SARS and the Pacific Rim slowdown," he explained.
Compared with last year, the level of growth is lower this year. The company experienced flat growth in August and its third-quarter projections have not been met.
Caboteja said terrorism was a big dampener to shipping this year. "The Bureau of Customs and the ports recorded negative imports for August. The government has accepted that exports can only grow by 3% this year from the earlier estimate of 5%," he noted.

Imports see 8.5% decrease in August to $3.1 billion

MERCHANDISE imports fell 8.5% from a year earlier to US$3.105 billion in August, continuing a mixed trend for the year, the National Statistics Office said last Monday.
Electronics products imports, which accounted for 47.5% of the total for the month, dropped by 14.9% to US$1.475 billion. Most are raw materials for the semiconductor industry, the country's main export product.
The 8.5% import drop for the month followed a 1.3% rise in July. It was the third month this year that imports fell, compared to five months of increased overseas shipments.
Imports for the eight months to August are up 6.1% from a year earlier to US$24.908 billion, while exports are 0.2% higher to US$23.002 billion.
The eight-month trade deficit rose to US$1.905 billion, compared to US$513 million last year.

December | November | October

October 29 l October 27 l October 22 l October 20 l October 15