How Will Shipping Fair in 2011?

It’s customary at this time of year to take a quick look back over our shoulders at what has gone before and perhaps more importantly to make some sort of predictions as to the year ahead. In the latest in our series of perspectives from the shipping industry, Rob Shelley, CEO of Maritime Cargo Services, tells Tyres & Accessories where he sees shipping volumes and extra-slow-steaming going in 2011 and what this means for anyone importing tyres into the UK.

Despite the much heralded austerity measures by EU governments, freight volumes through European ports are expected to continue to grow in 2011; though possibly not at the double digit rates reported recently for this year at many of Europe’s top ports.

That thorny subject of extra-slow-steaming (ESS) has been discussed before, whereby by sailing at a slower speed, carriers are able to burn less fuel and absorb excess capacity as more ships are needed to maintain the frequency of schedules. But the continuing rise of fuel prices and a surplus of vessel capacity have resulted in carriers increasing ESS programmes again this winter. It’s worth noting, however, that the carriers have to play a delicate balancing game as running at faster speeds often offers them a competitive advantage over rivals.

Global shipping freight rates have been declining now for around the last five months. For instance, rates on Asia to Europe services are at their lowest level this year which is roughly the same level as they were at this time last year; although at that time, of course, they were on the rise. Interestingly, however, a number of container carriers have just announced rate increases and peak season surcharges on some routes from January despite the main peak season coming to an end. The carriers will have to maintain discipline and match supply and demand in order that oversupply – and the rates volatility that so often follows – is avoided. It would only take one shipping line to leave all their vessels in the market to fight for market share and we could see the whole sector thrown into 2009-like rates turmoil. Possibly a short to medium term gain for importers and exporters working with the right freight forwarding partners to help them benefit from the scenario without overexposing them to potential issues down the line.

Ironically, looking at the overall freighting sector, it’s recently been reported that the container ship order book has risen for the first time after 27 consecutive months of decline. Although the order book will not return to the heady levels of 2007 when it reached a peak of 64 per cent of the fleet, its size is expected to remain in the 25-30 per cent range next year.  And, with current new-build prices about 20-30 per cent off the 2007 peak, many shipping lines are taking a fresh look at their future fleets. All of this has led to analysts predicting growth of around 10 per cent in overall shipping volumes for each of the next couple of years with much of it coming in the new, larger capacity vessels. And, of course, this should help deliver the necessary economies of scale that will facilitate lower overall rates. 

Despite the seasonal squeeze, and the short-term expected challenges, the underlying fundamentals for container shipping remain largely favourable in the mid-term with the forging of global supply chains.  And, of course, all of this will depend on a continuing revival in overall international trading conditions in order to absorb and make cost effective these expected capacity increases. And to predict what’s going to happen in that sector I’d need another crystal ball altogether.

Rob Shelley is CEO of Maritime Cargo Services

Related News:

• Extra Slow Steaming is Affecting Transit Times

• Freight Forwarding Pricing Turned Upside Down

• Tyre Freight Rates: Navigating Stormy Waters