Container crunch rattles shipping firms

Freight rates and volumes have spiked but containers are expected to remain in dire shortage until September, Business Times Singapore reported.

“The trade is recovering - very much so. But the issue is, the shipping lines are facing a shortage of containers, and it's getting very critical,” said Tan Chor Kee, deputy managing director of Pacific International Lines (PIL).

The choke in container supply threatens to be a spanner in the recovery of an industry that lost US$15-20 billion worldwide last year as freight rates plunged as much as 30 percent.

Caught offguard by restocking and recovery in volumes in the first quarter of this year, shipping firms are now scrambling for containers, having bought virtually none while selling too many last year.

“Last year, there were no depots for the boxes to sit, so they were sold to the domestic market, to places like worksites, and were taken out of circulation,” said Tan.

Further up the supply chain, container factories have production problems of their own, having severely reduced headcount last year. Some are fully booked until as far as September as shipping lines struggle to increase container capacity in time for the start of the peak season in June.

“We actually think that one of the biggest challenges in the second half of 2010 is going to be equipment because everybody stopped their equipment investment last year,” said Maersk Line chief commercial officer Hanne Sorensen. “It seems now we're going into a situation where we could have quite a shortage, and that's another interesting challenge coming up.”

Freight forwarders too will be feeling the pinch of the shortage.
In February, the Mediterranean Shipping Company began charging US$400 per container as an 'Emergency Empty Equipment' positioning charge for all cargo headed to the US from areas like Russia, Finland and Norway.

As the peak shipping season looms, other lines might follow suit.

Even so, freight rates are largely expected to continue upwards this year, fuelled in part by the Transpacific Stabilisation Agreement's guideline for increases of US$800-1,000 per FEU for US-bound routes.

In fact, average rates per FEU might exceed pre-crisis levels by the end of this year, Tan added. Already, rate restoration appears to be in full swing.

Earlier last week, Maersk Line increased rates by $400/FEU on shipments from India to North Europe and the Mediterranean while CMA CGM announced a string of rate hikes last month.

But this remains tempered by market conditions, the shipping lines argue. “We're not back at 2008 levels yet and maybe we're not going to see it much higher because there's also a balance where we need to go out with realistic prices and not push the market too much,” said Sorensen.

“Probably Far East-Europe is at an acceptable level although not back at 2008 yet.”

Regardless of the sentiment, the immediate logistics crunch of container supply remains, compounded by bad timing. A two-week strike in South Africa last month kept sorely needed containers at its ports for six to seven days.

In addition, the spectre of impending additions to containership capacity hangs over the industry, as liners are expected to gradually bring back more of their idle fleet into operation.
(Source:www.cargonewsasia.com)