Freight costs stabilising after volatile 2012

The cost of moving tyres and wheels between Asia and major European markets such as the UK should stabilise in 2013 after the wild fluctuations of 2012, according to the CEO of Suffolk based freight forwarding company Maritime Cargo Services, Rob Shelley. As shippers and shipping lines battled hard on this trade route in particular the cost of moving containers varied greatly over the course of the year, “making costing and budgeting in the tyre industry somewhat challenging,” Shelley says. As fewer goods were imported under economic austerity measures towards the end of 2012, shipping lines reduced capacity accordingly. But with global trade expected to creep upwards again in 2013, Shelley expects shipping rates to rise moderately as shippers control their expansion.

Maersk, the world’s biggest carrier, “turned a $600 million loss in Q1 2012 into a profit of half a billion dollars by Q3,” Shelley explains, illustrating the widely fluctuating state of the industry. “But… by the final quarter of the year, continuing austerity drives across Europe forced the shipping lines to once again fight for market share. Facing the prospect of mothballing monster container ships, the carriers opted instead to simply cut or cancel scheduled shipping voyages in an attempt to restore rates by reducing capacity.  The initial signs suggest that the strategy has worked with Asia to North Europe rates climbing comfortably back again. 

“But are cheap rates all that tyre importers and shippers are looking for? Although we all have an immediate need for cost savings and ‘value for money’, most importers would agree that one of the biggest issues in not just the cost but the rollercoaster nature of freight rates which make planning and managing your business so much more complex.

“With overall global trade (not just tyres) expected to expand by four-six per cent in 2013, and the shipping lines keeping capacity under control, experts are predicting a modest rises in freight rates during the year and, hopefully, not the variance we have seen in 2012.

“But, without a doubt, the shipping lines’ operating costs are going to go up and, with little additional revenue coming in, they will have to absorb the costs of more expensive fuel, more costly labour and dearer raw materials on the back of stagnant or declining freight income.”

Slow steaming “beginning to benefit” shippers

The process of “slow steaming” – using slower container ship speeds to reduce fuel consumption greatly – is claimed by some to benefit everyone in the supply chain, although, as Shelley points out, “shippers are the potential supply chain losers.  European importers of Asian goods, for example, face an additional week at sea for their stock with the subsequent added inventory costs, interest, insurance, depreciation and so on.

“However, some major shippers in the FMCG [fast-moving consumer goods] and retail sectors are now saying that, with foresight and astute planning, they are beginning to benefit from slow steaming claiming that increased passage times have improved schedule reliability and, therefore, aided planning and costing.”

Maersk has exemplified this outlook, claiming that its customers are looking at stability and reliability as much as speed as a determining factor when designing their supply chains. Its customers, the shipper says, “are realising monetary benefits” as a result of reliability and frequency of service, “even in a slow steaming scenario”. With shipping costs estimated to make up as much as 10 per cent of the retail price of tyres, Shelley emphasises the role of freight forwarders in making shipping product a smoother proposition.

Specialising in the tyre industry and looking after more than 20 major tyre importers, MCS manages the Customs Clearance and delivery of containers to well over a hundred tyre warehouses and depots throughout the UK and Ireland.

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