Supply and demand … what to expect

Achieving a rate increase is all about supply and demand, a situation that general manager sales and marketing at MOL, Iain McIntosh, has been tracking for some time on the Far East route. As indicated on the accompanying graph, March volumes were up, with indications of a considerable upswing in demand evident from late February. “Whilst there have been many assumptions in this exercise,” said McIntosh, “the fundamentals were clear in that APM downsized two Safari 1 vessels by 50% in late February whilst the ASA consortium voided two complete weeks in late February early March. “Evergreen/Cosco suspended their direct product for five weeks, supplying only westbound cover on their Asia-ECSA service. This had the effect of removing nearly 30% of the capacity from the trade during late February to late March. It is assumed when all main services operate approximately 145 000 tonnes of deadweight are provided per week. And this actually fell to below 100 000 tonnes in the last week of February.” The bad news, says McIntosh, is with a potential softening in demand during April – due to endless public holidays in South Africa – the supply curve returns to normal. “That said, demand does appear to be looking still better than normal so the demand curve may be understated.” If carriers had thought through the process earlier and not committed threemonth rates, more could definitely have been earned during Q1/2012. Another factor in the mix is the migration of manganese ore to containers. “It’s traditionally bulk but the capacity constraint of bulk through Port Elizabeth and Durban is now so great that until bulk solutions are found – only in 2016 – there does appear to be growing structural movement into containers.” Clearly only time will tell.