Cosco sees box rate fears unfounded
Fears that a substantial gap between supply and demand in the container shipping industry would lead to a collapse in freight rates are unfounded, according to a senior Cosco Container Lines executive, who said that the effective gap would be only 1-2 per cent.
Steady as she goes: The liner industry, which grew total capacity by over 16 per cent in 2006, will expand by at least 14 per cent this year and next, 2-4 per cent more than the expected demand
The liner industry, which grew its total capacity by over 16 per cent in 2006, will expand by at least 14 per cent this year and next, 2-4 per cent more than expected demand, according to estimates.
But a number of factors will limit the ability of lines to fully maximise this capacity growth which will result in a lower effective gain, said Cosco Container Lines managing director Sun Jiakang at this week's Sea Asia conference.
'A 1-2 per cent oversupply situation should not lead to a major collapse in freight rates,' said Dr Sun.
Among the constraints are bottlenecks in the supply chain resulting from overwhelmed port and inland infrastructure around the world. Another is that liner voyages have become longer - because of global trade patterns and the move to larger vessel sizes - which forces lines to deploy more vessels on a given trade lane in order to ensure frequency.
More rational attitudes among carriers is another key factor, according to Dr Sun, who said that service quality is becoming an important focus of carriers again.
Some carriers have also responded to the supply-demand imbalance by withdrawing capacity on some trades.
Dynamic Asian economic growth which has seen container throughput in the region's ports grow 15 per cent in the last five years, higher than the global average of 10 per cent. Asia now comprises 60 per cent of global throughput.
These flourishing Asian markets include the powerhouse Chinese economy which has seen its container volumes grow 28 per cent in only a few short years while India is poised to be the next regional economic giant.
Vietnam is also in line to be the next rising star, according to Dr Sun, with container volumes growing 19 per cent in the last 10 years, and trade growth expected to gather momentum as the country fully integrates under World Trade Organization (WTO) rules.
Vietnam's container trade growth has substantially outpaced that of Malaysia, Indonesia, Thailand and others, he said. The Middle East is also growing rapidly, he noted, pointing to Dubai's throughput which has grown 20 per cent in recent years. Gulf countries will spend more than US$500 billion over the next five years on infrastructure, he said.
Steady as she goes: The liner industry, which grew total capacity by over 16 per cent in 2006, will expand by at least 14 per cent this year and next, 2-4 per cent more than the expected demand
The liner industry, which grew its total capacity by over 16 per cent in 2006, will expand by at least 14 per cent this year and next, 2-4 per cent more than expected demand, according to estimates.
But a number of factors will limit the ability of lines to fully maximise this capacity growth which will result in a lower effective gain, said Cosco Container Lines managing director Sun Jiakang at this week's Sea Asia conference.
'A 1-2 per cent oversupply situation should not lead to a major collapse in freight rates,' said Dr Sun.
Among the constraints are bottlenecks in the supply chain resulting from overwhelmed port and inland infrastructure around the world. Another is that liner voyages have become longer - because of global trade patterns and the move to larger vessel sizes - which forces lines to deploy more vessels on a given trade lane in order to ensure frequency.
More rational attitudes among carriers is another key factor, according to Dr Sun, who said that service quality is becoming an important focus of carriers again.
Some carriers have also responded to the supply-demand imbalance by withdrawing capacity on some trades.
Dynamic Asian economic growth which has seen container throughput in the region's ports grow 15 per cent in the last five years, higher than the global average of 10 per cent. Asia now comprises 60 per cent of global throughput.
These flourishing Asian markets include the powerhouse Chinese economy which has seen its container volumes grow 28 per cent in only a few short years while India is poised to be the next regional economic giant.
Vietnam is also in line to be the next rising star, according to Dr Sun, with container volumes growing 19 per cent in the last 10 years, and trade growth expected to gather momentum as the country fully integrates under World Trade Organization (WTO) rules.
Vietnam's container trade growth has substantially outpaced that of Malaysia, Indonesia, Thailand and others, he said. The Middle East is also growing rapidly, he noted, pointing to Dubai's throughput which has grown 20 per cent in recent years. Gulf countries will spend more than US$500 billion over the next five years on infrastructure, he said.