TRANSPORT / OCEANAll-in freight rates, U.S.container import trades(January cost per box, including terminal handlingcharges at origin and destination ports)To U.S. East Coast To U.S. West CoastFrom 20-foot 40-foot 20-foot 40-footUnited Kingdom $2,030 $2,820 $3,150 $4,100North Continental Europe (Atlantic France/ $2,320 $3,170 $3,220 $4,330Germany range)Western Mediterranean (Med Spain/Italy range) $2,200 $2,850 $3,090 $4,090South China (Yantian) $3,710 $4,850 $2,350 $3,090Hong Kong $3,400 $4,470 $2,100 $2,790Brazil $2,770 $3,380 $3,770 $4,700Source: Drewry Container <strong>Shipper</strong> Insight (www.drewry.co.uk/csi).ruary, averaging contract and spot prices,according to Drewry’s information. Moresurprisingly, eastbound China rates havealso started to fall in the more capacityconstrainedAsia/U.S. East Coast all-watertrade.• Perception of the supply outlook.There is now a common perception in theindustry that carriers will have too manyslots to fill. The aggregate industry capacitynumbers also back this up, as several majorcarriers are adding more than 20 percentof ship capacity to their fleet this year. Theaverage capacity increase across the carrierindustry this year will be about 15 percent.The distribution of additional capacity bytrade route is hard to predict, but the overalltrend is clear.• Carrier competition. Matson’s reentryin the transpacific trade in Februaryand enhanced competition among othercarriers bidding to secure the cargo volumespreviously controlled by P&O Nedlloyd alsocome into play.There is little doubt, therefore, thatport-to-port import freight rates will fallin the transpacific and other U.S. importtrade routes.Complicating Factors. This year, carrier/shipperrate negotiations will have toaddress complicating factors beyond baseocean rates.First, there is the issue of high fuel costs,both on the maritime side and for inland railor trucking transportation.Drewry believes that shippers will putpressure on carriers to negotiate bunkersurcharges applied by ocean carriers toport-to-port base ocean rates. When themarket was strong, carriers refused to evennegotiate such fuel surcharges, but the markethas shifted. Despite the higher bunkersurcharges, Drewry forecasts that all-infreight rates in service contracts for Asiato-NorthAmerica shipments will decline10 percent overall this year.62 AMERICAN SHIPPER: APRIL 2006For intermodal or door rates, inlandfuel surcharges, such as those imposedby railroads, have become a divisive issuebetween shippers and carriers. Thisboils down to the question: Who shouldbear the risk of the volatility of inland fuelcosts? The ocean carrier is the contractualcustomer of the railroad, but it seeks to passon the inland fuel surcharge to the shipper,as the end-user. The shipper wants stabletransportation costs per unit and resistsany new volatile surcharge. The situationis similar for port drayage and other truckingoperations. Paradoxically, it looks as ifinland transportation costs will continue torise while ocean import rates fall.But shippers are expected to continue toroute a higher proportion of their easternU.S.-bound cargoes via East Coast ports.This means that many will avoid much ofthe rise in intermodal costs (West Coastmini-landbridge costs) and still benefit fromlower port-to-port rates, at least for cargoesbound for the eastern United States.Another complicating factor is that carriershave argued that capacity restrictions onthe inland side will moderate effective system-widecapacity growth in internationalshipping. While the rail capacity issues doraise serious medium-term questions, asreported already in <strong>American</strong> <strong>Shipper</strong>, itremains to be seen whether this argumentwill alter the perception that there are toomany slots on containerships chasing toolittle traffic.<strong>Shipper</strong>s are continuing to experienceincreases in their overall logistics costs fortheir domestic operations, for local distributionand for the North <strong>American</strong> transportationpart of international freight movements.It would appear that international oceantransportation is the only mode where shippers’freight costs are now decreasing.Rate Levels. The table provides sometypical freight rates in import trade routes tothe United States as of January. Additionalfreight rate tables from the Drewry Container<strong>Shipper</strong> Insight quarter 1 report canbe downloaded at www.drewry.co.uk//csi.It is interesting to note that all-in freightrates in January for the inbound trade fromAsia to the U.S. East Coast were more than$1,200 higher per 40-foot container than tothe U.S. West Coast, according to Drewry’soriginal data. This wide differential reflectsthe popularity of all-water transpacific EastCoast services. Drewry understands thatsome shippers are getting Asia-to-U.S. EastCoast rates as low as $3,400 per 40-foot box,which compares with Drewry’s representativeHong Kong-to-U.S. East Coast rate of$4,470 per box. (The Drewry freight ratescome from forwarders, who include someremuneration for their services, and can behigher than the rates secured by major directshippers from carriers.)Freight rates from Europe to the U.S.East Coast were, as expected, very high inJanuary, at about $2,800-3,200 per 40-footcontainer. The transatlantic import markethas experienced tight capacity that allowedcarriers to raise westbound rates.Where does this leave U.S. export containerfreight rates?Exports are a very different story fromimports when it comes to freight rates. In thetransatlantic trade, export container freightrates in January were low — the oppositeof import rates. In the transpacific, freightrates from the U.S. West Coast to SouthChina and Hong Kong hovered at about$1,000-1,100 per 40-foot box in January,also a fraction of import rates.Because westbound transpacific freightrates are already priced by carriers usingmarginal pricing rather than full-cost pricing,it looks unlikely that they will see anydecreases. Major westbound-moving commodities,like wastepaper, are also unableto bear higher freight rates. In effect, theestablished pattern now is that freight ratesin the U.S. import trades are subsidizing thecomparatively lower export rates, becauseof the huge imbalance between importsand exports.This rate advantage, together with theweak dollar policy of the Bush administration,must have helped the recent revivalof U.S. containerized exports. Now, lowerimport freight rates could also help reducethe freight expense and the landed cost ofimported goods.Philip Damas isresearch director atDrewry Shipping Consultantsin London.He can be reachedat damas@drewry.co.uk, or at +44 207538 0191.
HRMA International Trade SymposiumMay 4–5, 2006 Norfolk Marriott WatersideStart looking East! A wave of change for shippers andmaritime professionals is now upon us.The Hampton Roads Maritime Association and<strong>American</strong> <strong>Shipper</strong> invite you to attend one of this year’smost important and informative conferences.Morning Keynote Speaker:• Frank Baragona, president, CMA-CGM (America) Inc.HRMA’s third annual conference offers two full days ofevents, including speakers and panels from some of themost respected shipper and maritime industry organizationsin the country.Terminal to Distribution Center – What do <strong>Shipper</strong>s Want?• Christopher Gillis, editor, <strong>American</strong> <strong>Shipper</strong> Magazine (Panel Moderator)• Ray Burgett, director of international logistics and transportation, Pier 1 Imports• Michael McClellan, vice president, automotive and intermodal marketing, Norfolk Southern Corporation• Steve Rubin, vice president, liner operations, “K” Line America, Inc.• Clark Brown, president, Bridge Terminal Transport, Inc.• Chris Easter, vice president of global operations, <strong>American</strong> Port ServicesTrans-Atlantic Realignment and its Impact on <strong>Shipper</strong>s• James Newsome III, senior vice president, Hapag Lloyd (America) Inc. (Panel Moderator)• Andrew Abbott, president and CEO, Atlantic Container Line• Thomas Capozzi, senior managing director of marketing services, Virginia Port Authority• Stefan Weber, director ocean freight, route management Europe, Kuehne + Nagel, Inc.Emerging India-South Asian Market• Bill Ralph, senior advisor, R.K. Johns & Associates (Panel Head)• Mike Hoyt, vice president of transportation, Target• Peter Keller, executive vice president/COO, N.Y.K. Line, N.A.• Tommy Stramer, president, Zim North AmericaLunch Keynote Speaker:• Jack Gross, vice president and general manager, international, Schnieder National, Inc.86th Annual Banquet Keynote Speaker:• J. Russell Bruner, president and CEO, Maersk, Inc.PLATINUMSPONSORHotel information: Norfolk Marriott Waterside, 235 East Main Street, Norfolk, VA 23510 USA. Tel:(800) 874-0264. Don’t delay. Reserve your room by April 3 to receive the conference discount.Mention the HRMA conference when reserving your room to receive the discount.For more information on the conference, discussion and panel topics, and other activities,visit: www.PortofHamptonRoads.com/symposium/GOLDSPONSOR
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