Demand for exports from Asia declines- Dr. Parakrama DISSANAYAKE

Though freight rates on the East –West trades increased by about 28% in the first week of January 2012 it is expected to be shortlived with more capacity going on stream, said past Chairman of the Chartered Institute of Logistics and Transport Dr. Parakrama Dissanayake.

The World Container Index benchmark rate between Shanghai and Rotterdam increased by 41% during the first two weeks of January to $ 1335 per Teu.This was primarily due to buoyant volumes on account of Chinese New Year factory closures. This pre Chinese New year spot rate increase isexpected to decline to December 2011 levels unless action is taken by carriers to reduce surplus capacity from the trade.As monitored by China Containerised Freight Index, freight rates to NorthEurope from Asia in December 2011 as against December 2010 declined by 40% and to North America East coast and West coast in December 2011 as against December 2010 contracted by 16 -10% respectively.The Container ship charter prices in December 2011 as against 2010 for ships ranging from 725 Teu to 3500 Teus also declined from 17% to 55%.

Therefore, shipping industry will need a great deal of resilience to meet the challenges in 2012. As reported “The global fleet of 8200 Teu will grow by 25% in 2012 and this will be a severe challenge for the industry to absorb given that we

foresee demand growth only in emerging markets of Latin America, Indian sub Continent, Africa and intra Asia where 8000 Teu ships operate.

Overall global demand for 2012 is forecasted at 5.4%”. According to Drewry, the current supply/demand fundamentals on the key east/west trades are not strong enough for carriers to push through any sustained revenue increases and we already know that some shippers contracts have been signed on the Asia /Europe trade this year for around US$ 1100/- per 40ft. all in – levels that are below breakeven”.

Dr. Dissanayake further said that unless a substantial amount of tonnage is laid up the implications can be severe. He said that idle container vessel tonnage may reach around 7% of the global fleet during the latter

part of this year which may be equivalent to approx. 1.1 million Teus of shipboard capacity. On Air cargo, carriers are looking at cutting services with demand for exports out of Asia declining. Cargoitalia and Jade Cargo grounded operations though there was an indication that Jade Cargo would resume.

As reported. Air India shelved its plans to commence dedicated freighter

services from Asia. Overall as per the Association of Asia Pacific Airlines, carriers saw a traffic decline of 6.5% in November year on year.

In the year 2011 as against 2010 on the Asia Pacific sector traffic contracted by about 5%. The slump Dr. Dissanayake said was primarily due to European Union debt crisis, not so stable USA economy and Japan having to recover.

As per figures released by Hong Kong Air Cargo terminals for December 2011, volumes were down 4.3% year on year and exports declined by 4.9%.

LF