We are currently experiencing a rather increased level of space demand on Far East Westbound and IPBC West Bound.

These increased demand and impacts are a result of the following 3 main elements:

• Germany & France are moving out of the recession, and with consequently increased consumption.
• The usual pre-rush before CNY.
• The various space/tonnage capping and slow steaming programs imposed by the carriers.
• Changed service patterns for transhipment ports and ports of call.

On the last parts some hard facts:

• Grand Alliance has imposed their winter program and their withdrawal of one entire loop, consequence of same in Q1 2010 is that there will be a reduction in capacity of some 78.000 teus to Europe.
• By end year 2009 it was estimated that some 600 vessels equal to a capacity of 1.600.000 millions teus had been withdrawn from the world trade; a great majority of this capacity was scheduled and was serving Far East and IPBC/ Europe.
• Shipping lines are showing a less interest in the Nordic than in the past unless that lines are able to recover the transport additional for the additional feeder cost in full (on a round trip basis).
• Longer transit time with some lines are a fact now and consequently a higher focus and requirement from customers on the carriers offering a shorter and more effective transit time.
• Shipping lines main focus are on yield and not gaining further market shares and we do expect that lines will do whatever they can to stabilize their rate restorations gained so far during the last 6 months.

All together the Far East and IPBC trade is currently in the favours of the carriers and we do expect that the carries are taking full advantages of the current situation in view of their overall lacking financial results.

Looking a bit ahead and assuming that no sudden major negative changes to the current economical environment and that carriers are not introducing additional tonnage, then Q1 2010 forecast would most likely be:

Continues space problems up CNY.
During CNY a further withdrawal of capacity for ship yard maintains programs by lines in the aim of balance the supply and demand during this interim period
Post CNY we will be back to space problems again.

Rates:
Further GRI expected mid January.
PSS either to be continued and further increased.
Fluctuating CAF/BAF to be introduced by majority of lines.
Costs elements linked to the carriers price setting, but outside their control ( Suez/Aden/THC etc. etc.)  and which are being increased by their suppliers will be on passed in full to the trade.

Conclusion:
Lines will focus on carrying the best yielding cargo.
For clients with space allocated on a monthly basis, but not used, consequently same client will receive less space the following month.

Space is the key word for the time being and will remain so for the remaining of Q1 for additional questions and further elaboration please do not hesitate to contact your local SGL office.

“Your shipment our commitment”