Transpacific rates to stay under pressure, Europe-Mideast, China's rates to rise

FREIGHT rates for the Europe-Middle East and on domestic China routes have been rising on the back of strong growth in cargo volumes, but rates on the transpacific container trade remained weak in the first quarter of 2008, according to a shipping market report by the United Overseas Bank of Singapore, UOBKayHian.

The report said that the CAGR of throughput growth for mainland China's top eight ports reached approximately 23.8 per cent in the past five years. Shanghai and Shenzhen, two of the largest ports in China, handled 26.2 million TEU and 21.1 million TEU, an increase of 20.4 per cent year on year and 14.2 per cent respectively in 2007.

China's port volumes were said to have benefited from growing trade between China and the rest of the world, with container lines experiencing double-digit cargo growth in 2007.

The report said that according to Clarkson, there are 6.6 million TEU or 1,358 new vessels on the worldwide order book currently, accounting for 58.8 per cent of total capacity.

However, it warned that with strong growth in trade volumes from Europe and China, UOB analysts expect freight rates for the Europe-Middle East trade and domestic China routes to rise steadily, while the freight rates (before fuel surcharges) for transpacific carriers will be under pressure this year.

It said throughput growth will slowdown in 2008 as most major ports in China aggressively expand their capacity. Shanghai is expected to handle over 28 million TEU this year and is set to become the largest port in the world by 2010. In 2007, China's total container throughput grew 19.4 per cent over the previous year.

For China's top eight ports, container throughput increased by 15.6 per cent year on year during the first five months of 2008. Looking ahead, the bank expects China's container throughput growth rate to remain in the "mid-teens" in 2008.