Mumbai, January 14 The sigh of relief heard in the industry at the Baldry’s recent revival of sorts may well be premature, if plummeting container freight rates are any indication. Reports confirm that, for the first time in recorded history, brokers in Singapore are now spot booking boxes from South China at ‘zero freight’, charging minimally for just bunker costs. Rates from North Asia are already below operating cost.
Although some ship owners are putting a brave face on the gloomy news, saying that these are spot rates on a few bookings and that it is better to recover bunker costs and surcharges rather than keeping slots empty, the latest development is unprecedented and reflects the near collapse of trade as the global economic turmoil deepens. Lloyd’s List reported yesterday that some lines are charging customers for ‘bunker adjustment’ costs and, sometimes, ‘terminal handling charges’, with the basic freight rate quoted as “Zero dollars” from South China. The rates of 200 dollars from North Asia are widely regarded as below operating costs, anyway. An industry observer is quoted as saying, “"I've never heard of freight rates going to zero; this is a whole new ball game”.
The UK based newspaper, The Telegraph, quotes Hong Kong based broker Charles de Trenck, “We have seen trade activity fall off a cliff. Asia/ Europe is an unmitigated disaster." Analysts fear that the market for finished goods has been particularly hard hit. Numbers coming in from other Asian economies are no better, with Taiwan and Japan reporting a 42% and 27% fall in exports respectively, and Korea 30 per cent. Ports across the globe continue to report drastically lower volumes on a year on year basis. ING reported a few days ago that US West Coast port activity is already down around 18%. Chinese shipments are down, too. "This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant. In December, the World Bank painted a grim picture of the global economy in 2009, essentially saying that trade would contract to levels not seen in a quarter of a century.
Adding to industry woes, Keppel and Cosco in Singapore are believed to facing cancellations of orders for ships and offshore platforms. A report carried by Bloomberg quotes Serene Lim, a Singapore based analyst at DMG & Partners Securities, “Singapore yards, including Keppel, may continue to face potential cancellations from highly geared rig owners”. Keppel and Cosco shares fell sharply on the news. Amongst the owner’s cancelling orders is India’s Great Eastern, which has apparently terminated orders for two vessels with Cosco. Meanwhile, the Telegraph says, “Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval fleet at anchor”.
It also quotes an analyst supposing “Offering slots for free is akin to an airline giving away spare seats for nothing in the hope of making something from meals and fees.”