Mon, Oct 21, 2013 - Page 13 News List

Slowing demand could hit freight rates, reports say

MIXED MESSAGE:One brokerage house said that although demand in the container shipping industry may improve, oversupply will remain

By Amy Su  /  Staff reporter

Slowing seasonal demand may prevent global container shippers from raising freight rates this quarter, according to the latest reports issued by brokerage houses.

The Transpacific Stabilization Agreement (TSA) announced last week that its member carriers are recommending a guideline of US$400 per forty-foot equivalent unit (FEU) general rate increase covering all origins and destinations, effective from Nov. 15.

However, the end of strong seasonal demand may raise uncertainties on major global container shippers’ plans to increase freight rates, SinoPac Securities Investment Service (永豐證券投資顧問) said in a research report.

“The newly added transport capacity in the second half of this year has been increasing from the same period last year,” the report said. “Even if carriers reduce shipping container numbers in the fourth quarter, it may be challenging for them to boost freight rates [under current conditions].”

Capital Securities Corp (群益證券) shared SinoPac Securities’ thoughts, saying that even if major global container shippers successfully boost freight rates later this quarter, the level of increase may not be significant.

That current freight rates are already close to the break-even point may boost the possibility of shippers raising rates, but sharp volatility is unlikely this quarter, Capital Securities said in its report.

Although supply and demand conditions in the global container shipping industry may see some improvements next year, the oversupply issue will remain, Capital Securities said.

Demand in the container shipping industry is expected to rise by 5.4 percent next year, with newly added transport capacity expected to see 7.1 percent growth, the brokerage house said, citing data from a market research institute.

Evergreen Marine Corp (長榮海運), the nation’s largest container shipper, saw consolidated revenue rise 2.07 percent to NT$105.85 billion (US$3.59 billion) in the first nine months, statistics showed

In contrast, Yang Ming Marine Transport Corp (陽明海運) and Wan Hai Lines Ltd (萬海航運) both saw consolidated sales in the first nine months fall from the previous year.

Cumulative sales for Yang Ming — the nation’s second-largest container shipping company — totaled NT$89.45 billion in the first three quarters, down 8.69 percent from the previous year, while those for Wan Hai showed a year-on-year decrease of 5.95 percent to NT$44.48 billion during the period, data showed.

Both SinoPac Securities and Capital Securities expect Wan Hai, which focuses on intra-Asian lines, to generate the highest earnings per share this year among the three major players in Taiwan, with Yang Ming expected to experience another loss-making year.

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