Rates under pressure in depressed market

As seafreight rates on the world’s main east-west trades slump to rock bottom because of a capacity oversupply largely caused by an influx of megaships allied to a nearmoribund growth in demand, rates on the SA trades are also under pressure. Certainly we have been seeing much bigger ships flooding into the SA ports as the lines cascade former eastwest vessels onto north-south trades. And seafreight demand growth in both imports and exports is rather feeble as the world struggles to haul itself out of its seven-year economic slump. Rates for Europe have been “fairly stable” over the past year, but according to Ron Frick, MD of DAL Agency: “Stable. But at the very bottom of the barrel.” Glenn Delve, marketing director of MSC, said those for the Far East traffic in-bound to SA were again fairly stable, but the outbound rates to the East were a different story. “As industry still struggles to right itself from the recession, global commodity demand is at a low ebb. The world economy is not looking too great yet, and the fact that SA has its own problems is certainly not helping.” However, he pointed to rates for both imports and exports on the US trade as “stable”, and those for South America as “stable and not under pressure at the moment”. The Southern Africa Europe Container Service (Saecs) is finding its vessel utilisation on the southbound leg really good, according to DAL’s Frick. “Because of this factor and no big movement in rates, there is no need for aggressive marketing at the moment,” he added. However, he pointed out that the Europe-SA rates had progressively reduced over the past three years and were already very low. “But they’ve stabilised at the bottom of the barrel for the last 12 months.” Looking at the Indian subcontinent trade, Frick reckoned that it was inundated with a large number of competing lines and the rates were highly competitive. “It’s a real bun fight on that service,” he said. “Original equipment manufacturers (OEMs) in the vehicle trade are coming in, but it’s mainly consumer goods. At this end the consumers are not buying what they used to because they’re caught in the debt trap, so TVs and the like are not selling much.” Pointing to proof of this, Frick noted that traditionally the Asian trade, including the sub-continent, used to bring in double the volume of containers coming into SA than from Europe. “But that ratio has definitely dropped because of people buying less,” he added. “Europe, though, is a more mature market. And it is much less of a consumer goods source. About 60% of the inbound business from Europe is cars, trucks and components.” The net effect of all this, Frick added, was that exports from SA were down 0.5% last year, but imports by about 6%. Another line executive on the Far East trade provided a yearon- year comparison. “The rates on imports started dropping in April to August last year,” he told FTW, “and then started to increase again in September-October- November. And it seems to be a similar trend this year – with rates dropping and lines undercutting to fill their space.” One line, according to our source, had cut its inbound rates by 17.5% in the last three weeks. “All you need is one line to mess things up, and it may affect all the other lines trying to match those cut prices just to retain their business,” he said. Exports he described as “not as good as they should be”. “There is cargo there, but not sufficient for everybody to fill their slots. And it’s up and down – one week full and the next 80%-90%.” INSERT & CAPTION Rates for Europe have been fairly stable — but at the very bottom of the barrel. – Ron Frick