Far East carriers on SA route more fortunate than Europe counterparts

How low can you go? Not much lower than the Asia- Europe route where freight rates are reportedly down to zero dollars with lines merely charging bunkers and other surcharges on top. Container volumes in the port of Singapore plunged 14% year-on-year in December 2008, an indication of the impact of the global financial crisis. Carriers on the SA–Far East route are however more fortunate than their Asia- Europe trade counterparts, although rates have softened considerably on this route as well. A recent Lloyd’s List report quotes industry sources in Singapore pointing to a growing number of boxes being shipped from South China to Europe at a freight rate of $0.00 plus bunker adjustment factor. According to a local industry source, this is fairly standard practice. “Shippers on that trade are paying zero dollars or free of freight because it’s only a one-way trade – when the market hits such a low ebb shipping lines need to get containers back and need to find some revenue-earning repositioning fee.” The carrier offers the space free of freight but the shipper pays the terminal handling charge, load and discharge and bunkers, which means the line is still earning some revenue. On the SA trade this has never happened, according to our source. “We’re very low at the moment, but we have been lower,” he said. “You’re seeing shipping lines quoting on an ad hoc basis rather than contracts.” And because of the altered trade conditions, there appears to be limited need to reposition empty containers. “Depots in the east are full – they can’t accommodate any more containers, so the depot situation is very tight because shipping lines are not repositioning.” But despite the doom and gloom, this source told FTW they had already received good freight offers for the second quarter, an indication that things were beginning to ease up. “It’s all to do with credit. There are shipments not materialising. You’ll get the booking and then find the banks can’t confirm the letter of credit. It’s not that there’s no cargo but rather that the buyers are having problems getting LCs.”