On a cheap boat to China

16 March 2009

16 March 2009 | Jake Kanter

The dramatic fall in container volumes will push down shipping costs by as much as 50 per cent, experts say.

Philip Damas, director at consultancy Drewry Supply Chain Advisors, said container volumes had fallen by around 20 per cent. Reduced consignments from China were of particular note, he said, and resulted from buyers in the West cutting back on consumer purchases during the downturn.

"The capacity of ships has gone up some 12 per cent because of a huge supply and demand gap," said Damas. "Prices are falling by as much as 50 per cent. It has never been so cheap to ship from China."

Ian Lush, marketing director at logistics insurance and risk management firm TT Club, said increased competition to fill containers would create a downward pressure on shipping prices.The world's largest container shipper, AP Møller-Maersk, this month said its transported volumes for January were down 20 per cent compared with the same time last year. The Danish firm described the slump as "unprecedented".

Nils Andersen, the company's group chief executive officer, said: "The difficult trading conditions we have been facing since the start of 2009 will put severe pressure on our business."

The lower rates could prove to be a boon for buyers, who often use ships to transport goods. China is a sourcing hotspot.

However, Damas warned buyers to take a long-term view rather than just considering the short-term benefits of low prices.

He said the low rates could force shippers out of business, and advised purchasers to work with more financially stable shipping companies and ensure they have a back-up plan.

"[Businesses] shouldn't jump at short-term gains," he said. "You must have a trade-off between reduced costs and maintained supply of services."

SMmar2009

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