Far East capacity shortfall bodes ill for rates

Joy Orlek THE CHRONIC shortage of seafreight capacity from the Far East is raising growing concern among shippers and shipping lines as the peak May to November season approaches. It’s a simple case of available slots not growing as fast as volumes and has been a problem for the past 18 months according to Mitsui OSK Lines’ Alex Hill. There are several contributing factors. Lines operating pendulum services to West Africa and South America are reserving their slots for cargo that attracts higher freight rates which means less capacity for SA-bound cargo. And the shortage of slots is unlikely to change as the tonnage shortfall persists. Most lines have ships on order to 2008 and until the industry feels the domino effect of larger ships moving into the market, there is unlikely to be spare tonnage available. Safcor Panalpina has warned its clients to expect shipping delays on the route with pre-booked cargo being shut out and low rated cargo being displaced in favour of more profitable traffic. “Under these circumstances clients cannot depend on Just In Time movements of time critical cargo, and must provide for delays in their logistics planning,” a spokesman said. An additional factor is the worldwide steel supply shortage which is not only affecting shipbuilding yards but also the supply of containers, which could ultimately impact on rates. And according to one source, rates are likely to rise further if demand continues to outstrip supply. “Shippers can no longer expect guaranteed bookings. It’s now on a first come first served basis. “And market conditions could well reflect in further rate increases, particularly in the form of a peak season surcharge,” he said.