Big drop in container utilisation factor

The annual peak season for SA shipping, usually August and September, will tell the tale of 2009’s profitability for some consolidators hit by a decline in international shipping this year, said Raymond Cutts, sales director for International Liner Agencies. Freight consolidators take up a very significant position within the supply chain and are often discounted in tough times but called upon when capacity difficulties are experienced and freight rates increase through supply and demand. “This year our container count is running in line with that of 2008, however the utilisation factor has dropped significantly, in particular on our Far East trade. For us we have a 40 foot container out of Shanghai for instance, which we used to fill with 65 cubic metres of consol cargo. We are now only achieving 45 to 50 cubic metres. That’s 15 to 20 cubic metres down for us,” said Cutts. “The shipping lines’ aggressive approach to freight rates in the quest for survival is drawing everyone into a downward spiral,” says Cutts. “For the first time South African consolidators are facing negative freight rates and this can be catastrophic. Any consolidator who falls into this trap is doing the importer a disservice as the costs will inevitably be recovered somewhere along the line, usually at destination. “For consolidators who sell container space to freight forwarders, profits can be marginal at the best of times. We do however appreciate forwarders have an obligation to advise their customers on the best shipping options.” That being said certain carriers could be driven out of the business and even the Maersks of this world will find it extremely difficult to survive a prolonged period of operating at these levels, added Cutts. “Containerised carriers have to be questioning how long they can endure, to the point where they can price at a level that will allow them to stay in business. The next few months will see whether volumes pick up and if they do this could lead to carriers introducing general rate restorations, which is good news for all of us,” he said. “ILA however still has a very positive outlook and through our sales focus is pushing hard to gain additional market share on our traditional trades and using this time as an opportunity to invest in the development of a number of new routes.”