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Ocean freight rates and demand remain stubbornly high
(Purchasing Via Thomson Dialog NewsEdge) Trade with China continues to fuel demand for both container and bulk ocean freight heading into the second quarter.
According to a recent Bloomberg
report, China's exports rose 27% last year, while imports climbed 20%, all of which translates into a lot of ocean freight in and out of the country.
"Freight [demand] is climbing so high in China because demand for commodities is not falling despite high prices," says Helen Henton, head of commodity research at Standard Chartered Bank.
Demand for scrap metal to fuel China's steel industry is so strong that in January, the 11 members of the Westbound Transpacific Stabilization Agreement raised rates by $100 for a 40-foot container of scrap metal from the U.S. to Asia and $80 per 20-foot box. And in February it raised rates for miscellaneous cargo and for mixed freight, effective April 1.
Cosco Pacific, Asia's third-largest terminal operator said China's growing trade increased demand for its services. Cosco's terminals handled 17.8 million standard 20-foot containers in the second half of 2006, an increase of 28% from a year earlier, helped by the opening of new facility in southern China.
The demand trends have impacted ocean freight rates, which were at one point in mid-2006 leveling and dropping depending on type of freight. The Baltic Exchange's dry freight index has climbed 33% since September, while both the capesize index tracking ships hauling iron ore and coal and the Baltic's panamax index are both currently at 27-month highs.
"There is no reason [ocean rates] can't go up 20% or conversely down 20%" in the short-term, said James Hall of Galbraith's ship consultancy in London in a recent Reuters
report. Hall says rates could only hit record peaks for a short period before the enormous cost would slow demand.
Domestically, congestion continues to plague the larger West Coast ports. And it appears that marketing by smaller ports on the West Coast is paying off. According to a recent Bloomberg
report, traffic at the Port of San Diego rose 64% between 2002 and 2006 as measured by revenue tonnage, a gauge that takes into account differences in cargo types, weight and dimensions. And traffic at Stockton, Calif. rose 73% in the same period, while about $100 million of private-investment projects are underway with $300 million of additional investment under review.
Copyright 2007 Reed Business Information. All Rights Reserved.
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