Lines hope for small rates increase

Shipping lines are rather hoping that freight rates will remain at 2011 levels (at least not declining), with some very faint hope that there may be a small increase, according to a cross-section of spokesmen in the industry. FTW quizzed a number of line executives looking for a consensus of thought on the rates issue, and the general trend was that rates were likely to remain stable. For example, Matthew Conroy, Maersk’s trade and marketing manager, said: “In 2012 we expect continued growth for imports into southern Africa. At this stage no new capacity is projected, which should result in rates facing increased pressure particularly towards the middle of the year as we approach the peak season. “With regard to exports from South Africa we anticipate that the demand will remain relatively flat and similar to 2011 due to China’s waning appetite for commodities. Due to this we expect the rate trend for exports to remain relatively flat although due to erratic demand the rates will fluctuate accordingly.” This followed a survey conducted by FTW of readers in the freight industry, which found that 27% expected rates to remain at 2011 levels, 25% expected an increase and 18% a decline. However, very few of the line executives questioned saw much of a chance of any increases, although Jonathan Horn, Safmarine regional executive for Africa, was one of the more optimistic (or hopeful). He told FTW: “We are not seeing a lot of volatility in freight rates at the moment. “However, current levels are not sustainable in the longer term and we certainly would like to see an across-the-board increase in rates. This is important to ensure that we can deliver a reasonable return on investment for our shareholders and thus ensure continued investment in our own infrastructure to ensure a reliable service and experience for our customers.” But the forecasts about rates trends amongst the line commentators seemed to depend somewhat on the trades their lines served. Those with a predominant interest in the SA-Far East trade – where volumes are on a bit of a decline this year, but overtonnaging remains the norm – were the least ambitious. The US and Europe trades, however, were expected to remain relatively stable. An unnamed line executive representing a Far East- SA carrier summarised his feelings on that trade. “Each line seems to be doing its own thing,” he told FTW. “We imposed a general rates restoration (GRR) of US$250 a TEU prior to the Chinese New Year (January 23). But I don’t know what will happen going forward.” He didn’t think that rates would go down, although he did add that “one or two silly lines were playing at costcutting” in an attempt to gain market share. “But,” he said, “what is the point in selling below cost. “My feeling is that rates will stay steady, but they certainly won’t come down as costs are escalating.” Iain McIntosh, marketing manager of Mitsui OSK Line (MOL), was another where pragmatism was mixed with hopefulness. “We are expecting rates to be flat at best,” he told FTW. “But I think, because there is no increase in capacity at the moment, we might hope for some improvement.” Clint Carmichael, who is line manager for NYK Line with SA agents Mitchell Cotts, also displayed mixed hopes. “As per 2011, if not worse,” he said. “We hope the SA trade will be stable. Although, because it is overtonnaged, I certainly can’t see any dramatic increase.”