Executive Briefings

New and Bigger Ships Will Mean Better Deals for Shippers. Or Maybe They Won't.

Want to know why ocean freight rates are on the decline? Look no further than the orderbooks of major carriers. According to Mark Page, director of research with Drewry Shipping Consultants, new containerships on order for 2006 currently equal 51 percent of existing fleet capacity. And while that's less than the 60-percent figure logged in mid-2005, the impact on rates will still be profound. No longer will North American shippers be scrambling for space on ships from Asia throughout the year. They will benefit from expected record levels of deliveries in each of the next four years, Page said at the Trans-Pacific Maritime Conference. And carriers will be forced to offer discounts in order to fill their new and bigger ships. Page expects a 12.6-percent increase in the number of trans-Pacific container slots this year, and a 6.6-percent rise in the number of vessels. Demand will remain strong in 2006, he said, although "there are dark clouds gathering on the horizon." They include Americans' persistently low personal savings rates, a five-year high for interest rates, and a deceleration of growth in the U.S. economy. Some analysts are hinting at the possibility of recession in 2007, caused by high energy prices, U.S. trade and budget deficits, and the controlled slowdown of the Chinese economy.

Offering a somewhat contradictory view was Albert A. Pierce, executive director of the Transpacific Stabilization Agreement. TSA has reported full ships in all-water services from Asia to the U.S. East Coast via the Panama Canal, and utilization rates of 90 to 95 percent in service to the U.S. West Coast. "The long-term prognosis for Asia-U.S. trade is one of sustained growth," Pierce said. He expects vessel capacity to outpace demand by no more than 3 or 4 percentage points in 2006. "Such a ratio is not likely to exert tremendous market-share pressure on carriers to fill ships," he said. Pierce cited a slew of rising costs that carriers must absorb, including congestion, fuel and capital expenses, making further rate increases necessary.

Visit www.drewry.co.uk and tsacarriers.org

Want to know why ocean freight rates are on the decline? Look no further than the orderbooks of major carriers. According to Mark Page, director of research with Drewry Shipping Consultants, new containerships on order for 2006 currently equal 51 percent of existing fleet capacity. And while that's less than the 60-percent figure logged in mid-2005, the impact on rates will still be profound. No longer will North American shippers be scrambling for space on ships from Asia throughout the year. They will benefit from expected record levels of deliveries in each of the next four years, Page said at the Trans-Pacific Maritime Conference. And carriers will be forced to offer discounts in order to fill their new and bigger ships. Page expects a 12.6-percent increase in the number of trans-Pacific container slots this year, and a 6.6-percent rise in the number of vessels. Demand will remain strong in 2006, he said, although "there are dark clouds gathering on the horizon." They include Americans' persistently low personal savings rates, a five-year high for interest rates, and a deceleration of growth in the U.S. economy. Some analysts are hinting at the possibility of recession in 2007, caused by high energy prices, U.S. trade and budget deficits, and the controlled slowdown of the Chinese economy.

Offering a somewhat contradictory view was Albert A. Pierce, executive director of the Transpacific Stabilization Agreement. TSA has reported full ships in all-water services from Asia to the U.S. East Coast via the Panama Canal, and utilization rates of 90 to 95 percent in service to the U.S. West Coast. "The long-term prognosis for Asia-U.S. trade is one of sustained growth," Pierce said. He expects vessel capacity to outpace demand by no more than 3 or 4 percentage points in 2006. "Such a ratio is not likely to exert tremendous market-share pressure on carriers to fill ships," he said. Pierce cited a slew of rising costs that carriers must absorb, including congestion, fuel and capital expenses, making further rate increases necessary.

Visit www.drewry.co.uk and tsacarriers.org