Tuesday, November 8, 2011

US Imports Down As Ocean Container and Bulk Freight Rates Fall Away

Asian Traffic Declines in Q3
Shipping News Feature

ASIA – US – The figures released by shipping industry analysts this month show a decline in US ocean traffic with the stemming of consumer confidence. Import rates for box traffic have declined up to 25% as the container carriers’ fall back on old habits in a bid to stimulate trade. Bulk freight and oil tanker rates are also showing a decline with Frontline, the world’s largest crude carrier, which paid a dividend in the second quarter of 2008 of $3 per share, forking out just 2 cents in the same period this year.

Despite optimistic analysts predictions that the fall in trade will end and exceed 14 million sea borne TEU’s next year the current level of just over 13 million for this year is still well down against the boom years. The effect on all the major container carriers is inevitable as companies like Maersk, which has invested heavily in ever larger vessels, have to lower rates to sweep up any available traffic in an attempt to attain respectable load levels.

According to Bloomberg which assimilated sixteen analyst estimates Maersk net income is likely to drop around 33% this year whilst NOL could see the $460 million they earned last year become a $228 million loss and their shares have fallen to half their previous level. Bloomberg also points out that, at $15,000 a day, some of the larger oil tankers are operating at around 50% of the rate they need to break even.

US rail borne container traffic for the third quarter has however risen over 6% against last year with the Intermodal Association of North America claiming almost 2 million ocean boxes were moved this term but this increase is presumably to the detriment of the road haulage sector. This rises reproduces similar gains for the railroads as were seen in Q2.

The confident predictions of industry analysts seems to reflect a generally held view that consumer business has bottomed out and that stocks are low and will need replenishing but the Eurozone crisis is affecting global markets and share prices are moving daily in both directions as dealers react to the smallest influences. With vessels already slow steaming to conserve fuel and many new build ships still on the blocks there seems little reason for the experts optimism ( the IMF estimates predict a near 6% growth in world trade next year).

If the situation does deteriorate we may once again see the ‘vessel parks’ around the world accumulate shipping laid up to await better times. Without a surge in the employment market people are liable to remain where they are and tighten their purse strings further which spells a lean spell, particularly for the ocean freight carriers, container, conventional and bulk alike.