[230610.EN.SEA] Transpacific Stabilization Agreement Sees Robust Trade Ahead

THE Transpacific Stabilisation Agreement (TSA), a 14-member quasi-shipping conference, has announced confidence in the current "modest, sustained growth", but also told shippers carriers need high rates and surcharges to cover losses sustained in the downturn.
Carriers need the peak season surcharge "to prepare for service contingencies and to meet schedule and delivery commitments, cover increased operating expenses and increased cost of capital", said the TSA statement.

But TSA also reported a 13 per cent year-on-year increase to 1.27 million FEU in Asia-US trade, citing PIERS data, while adding that the increase over 2009's poor result was still down on the record volumes of first quarter 2008.

Internal reporting by TSA carriers showed a 24.1 per cent year-on-year increase in traffic during the month of May alone to the US west coast and a 30.8 per cent increase in all-water shipments to the east and Gulf coasts via Panama.

TSA also noted that the US National Retail Federation forecasts an average 12.6 per cent year-on-year increase in import shipments for the June-October period, with individual monthly increases touching 15 per cent in June and September.

Said APL president Eng Aik Meng: "Neither shippers nor carriers were certain as to what direction the market would take coming out of the Lunar New Year. Now it appears the worst is behind us.

Despite a reduction in US job creation and retail sales in May, the pipeline of Asian exports to the US is filling rapidly and consumers are more optimistic over job security and household incomes, said Mr Eng

The TSA statement emphasised that, while headlines have focused on "peripheral issues such as European debt and US tax and regulatory developments . . . many of the underlying fundamentals in the US economy are positive: industrial production and durable goods orders are up, trade is expanding and inflation is low".

But revenue for carriers remains a concern after they lost more than US$15 billion in the downturn, said the TSA statement.

Said Hanjin CEO YM Kim: "Lines found themselves on the brink of failure last year, and it was a sobering experience. All carriers have excess capacity and new vessels on order, and that's a net positive as global trade improves. After last year, no carrier is going back to operating vessels under-utilised and at non-compensatory rates."

TSA carriers acknowledged the difficulties shippers have had going into second quarter 2010, with the lack space and container availability in Asia, as a result of the unforeseen surge in cargo volumes.

Paris-based Alphaliner reported vessel capacity of more than 37,000 TEU returning to the transpacific market over April-May, and also that idle global containership capacity is at its lowest level since December 2008.

But TSA said container availability "remains a global challenge", with demand and production having fallen off sharply during 2009. "Where worldwide container manufacturing had averaged some three million TEU annually over 2004-08, it dropped to about 350,000 units in 2009," said the TSA statement.

Said TSA administrator Brian Conrad: "A lot of the container production in China and elsewhere simply shut down last year and has been slow to ramp back up. Competition for owned and leased equipment among the major trade lanes has intensified."

TSA members are APL, "K" Line, CSCL, Maersk, CMA-CGM, Cosco, MSC, NYK, OOCL, Hanjin, Yangming, Hapag-Lloyd, Zim and Hyundai Merchant Marine.

Source : HKSG, 23.06.10.