WITH spring freight bookings on the rise and positive economic signals coming from both Asia and the US for the first time in many months, transpacific container lines say they are gearing up for another year of strong Asia-US trade growth in 2004-05.
Carriers in the Transpacific Stabilization Agreement (TSA) discussion forum are forecasting that a combination of continuing trends -increased manufacturing investment in China; gradual but steady signs of economic growth in Japan; record low business inventories in the US; and sustained consumer spending in the US fueled by lower-cost imports – will likely result in higher than average cargo demand growth for 2004 and 2005.
Drewry Shipping Consultants predicts total world container traffic of 87.1 million 20-foot containers (TEU) for all of 2003, growing 8.4% in 2004 to 94.4 million TEU, and then another 10.2% in 2005 to 104 million TEU. Those averages suggest stronger growth in the Asia-US market, where China GDP growth is forecast at nearly 8% in 2004, and where economies throughout Asia (except Japan) are expected to grow by 6%. Japan, which has seen consistent economic growth of 1% or less in recent years, is expected to see 2% GDP growth in the coming year.
Removal of apparel quotas at the end of 2004 is expected to produce a high volume of shipments early in 2004 under the current system, and a shift in sourcing to Asia from other countries as quotas are lifted. As a result, TSA carriers now forecast 10-12% average eastbound transpacific cargo growth during 2004-05. From a supply standpoint, TSA lines cited a recent BRS Alphaliner forecast for worldwide containership capacity growth of 9.5% in 2004 and 11% in 2005, from the current base of 6.6 million TEU. Here, transpacific averages appear comparable, since new ships of 7,000-TEU capacity or greater will be more evenly deployed among the transpacific and other markets.
Several key operating factors indicate that actual supply numbers may be lower than those forecast. Among them growth in all-water U.S. East Coast service via the Panama Canal, using smaller ships; increased time at sea and expanded port calls for larger ships; harbor channel depth at each port; cargo weight limitations; stowage considerations relating to hazardous and heavy cargo or loading and unloading priority; and changes in stowage configuration for high-cube or 45-foot containers, and odd-size cargoes. The likely result: Cargo demand will keep pace with “effective” capacity and produce continued tight space in the coming year, particularly on peak season sailings. Given that scenario, along with dramatically rising operating costs and rate levels still recovering from steep declines in 2001-02, TSA carriers reaffirmed their support for planned May 1, 2004 eastbound transpacific rate increases of US$450 per 40-foot container (FEU) to US West Coast destinations and $600 per FEU to US East Coast and inland point locations.
Also scheduled is a $400 per FEU peak season surcharge on shipments moving during the period from June 15 through October 31, 2004. “The market is bearing out our earlier predictions,” said TSA Executive Director Albert A. Pierce. “From all indications, the coming year will see a robust trade for US importers and retailers and for the carriers handling their transportation and logistics. The announced rate program reflects that environment, after a difficult period for much of the last four years.” Containerisation International’s freight rate index suggests that while third quarter 2003 eastbound transpacific rates were up from the third quarter 2002, they were still no higher than in third quarter 2000. At the same time, a number of key transport costs in the trade have increased sharply. All-water US East Coast services, for example, require a nine-ship rotation, compared to a five-ship intermodal service via the West Coast. Charter rates and purchase prices for most smaller container ships have doubled in the past year. Feeder ship, intermodal rail and truck, information system, staffing and other administrative costs have also risen steadily.
TSA is a voluntary discussion of 14 major container shipping lines serving the trade from Asia to ports and inland points in the US. Members are APL, CMA-CGM, COSCO, Evergreen, Hanjin, Hapag Lloyd, Hyundai Merchant Marine, K Line, Maersk Sealand, MOL, NYK Line, OOCL, P&O Nedlloyd, and Yangming.