Container volumes go up, freight rates still under pressure

Domestic and global shipping companies expect growth in volumes for the container segment. However, they are less bullish on growth in freight rates

The container segment has witnessed a revival in trade volumes. However, it continues to remain under pressure in terms of freight rates. This phenomenon of volume growth coupled with pressure on freight rates is evident both in the domestic and global shipping markets.

Singapore's Neptune Orient Lines—the world’s fight-largest shipping company—has announced that it carried 23% more cargo in the four weeks to 13th November over the year-ago period. The shipping line stated that it had carried the equivalent of 2,08,000 40-foot containers (FEUs) on its ships, up from 1,69,700 FEUs a year earlier.

Eivind Kolding, the chief executive of Maersk Line’s container unit told certain sections of the media that container volumes are likely to grow between 3% and 8% in 2010. Mr Kolding has been quoted as saying that the “trends are pointing the right way." Maersk Line is the world’s largest container shipping line.

A similar growth picture is being witnessed closer home in India. S Hajara, chairman and managing director, Shipping Corporation of India (SCI) said, “With the economy having bottomed out, growth prospects appear good. Container (traffic) caters to the cargo trade. If the economy improves, international trade will improve and thus container demand will go up.”

SS Kulkarni, secretary, Indian National Shipowners’ Association (INSA) shares a similar view. “There has been an increase across all segments, but it (the increase) is very modest. If you see the growth on a year-on-year (y-o-y) basis, in the last two years it was almost ranging in double digits to 18%. That growth has slowed down considerably. In India, there is growth, unlike in other countries, where the trend is negative.”

As per latest reports, cargo at major ports increased by 13% y-o-y in November 2009. The cargo traffic for November 2009 was 48.2 million tonnes (MT) compared to 42.5MT for the same period last year. Cargo traffic for November 2009 also grew by 3.4% month-on-month (m-o-m), on the back of a 9.8% m-o-m growth for October 2009. In October 2009, cargo movement at major ports was up by 10% y-o-y, translating into 46.7MT compared to 42.2MT for the same period a year ago. Container traffic also increased by 13.4% y-o-y in November 2009.

Though the container segment has seen a surge in volumes, freight rates are going down. The average revenue per FEU for Neptune Orient Lines was down 28% from a year ago at $2,239/FEU.

“As far as container shipping is concerned, it will continue to be under pressure in terms of rates because there will be a lot of supply pressure in 2010,” added Mr Hajara.

On being questioned on whether the growth in container volumes could be a temporary phenomenon, Mr Hajara said, “As far as volumes are concerned, there is no reason why they should go down. I expect volumes to increase, but rates will continue to be under pressure.”


Inflation trebles to 4.78%; RBI may squeeze money supply

The monthly data, released by the government for the second time, shows that potato prices have surged by a whopping 141% over the past eight months, followed by sugar (37%), pulses (32%) and onion prices have zoomed 20%

India's inflation more than trebled to 4.78% during November on account of rising prices of food items like potato, sugar and pulses, and may prompt the central bank to squeeze money supply to tame price rise, reports PTI.

According to the monthly inflation data released on Monday, the wholesale price-based inflation jumped to nearly 5% from 1.34% in October.

Attributing rising prices to supply-side constraints, Suresh Tendulkar, former chairman of the Prime Minister's Economic Advisory Council (PMEAC), said the Reserve Bank of India (RBI) could take steps to withdraw liquidity to tame rising prices. The apex bank is slated to announce review of its annual credit policy next month.

Food inflation, according to the weekly data announced earlier, had shot up by 19.04% during November, recording the sharpest increase in the decade.

The monthly data, which was released by the government for the second time, shows that potato prices have surged by a whopping 141% during the past eight months, followed by sugar (37%), pulses (32%) and onion prices have zoomed 20%. On the other hand, minerals, edible oils and leather products have become cheaper since March 2009.

The RBI in its monetary policy review in October had revised the inflation forecast to 6.5% by March-end from 5% earlier.

International raw material prices are rising so domestic prices are also seeing a movement upward, Mr Tendulkar said, adding that the government needs to manage supply shortages.

"The RBI may withdraw the liquidity in terms of statutory liquidity ratio (SLR) movement but I don't see any rate changes being done, not till the next quarterly review in January," he said.

The central bank has been increasing money supply for industry to tide over the global financial crisis.

The rising prices are an issue of concern for the government as a worried Congress president Sonia Gandhi had earlier said during the week that “price rise of essential commodities continues to be a matter of highest concern to us.”

Among manufactured products, textiles rose by 1.4%, paper and paper products by 0.1%, while chemical and chemical product prices increased by 0.1%.

Commenting on the price rise, Yes Bank's chief economist Suhubhda Rao said, "A sharper rise in manufacturing clearly indicates that the pricing power is gradually returning as the broad group within manufacturing products have registered month-on-month increase in the index numbers."

Ms Rao added that firming inflation will be on the RBI’s radar where the CRR could be hiked in December by 25-50 basis points.



Abu Dhabi gives Dubai $10 billion to cover debt

Dubai has received $10 billion in financing from fellow emirate Abu Dhabi, which will be used to pay part of the debt held by Dubai World and its property unit Nakheel

The government of Dubai, acting through the Supreme Fiscal Committee (SFC), on Monday said that its neighbour Abu Dhabi had agreed to give $10 billion in emergency funds that will go toward paying debts owed by its Dubai World conglomerate.

Out of the total $10 billion, it would use $4.10 billion to repay Nakheel's Islamic bond maturing on Monday, while the rest will be used to finance Dubai World's obligations through the end of April 2010, the government of Dubai said in a release.

Announcing this, Sheikh Ahmad Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Commitee, said that the UAE central bank, based in Abu Dhabi, is also prepared to support local banks.

He said that the remaining funds would be used for interest payments and working capital of Dubai World through 30 April 2010 on condition that the company successfully negotiates a ‘standstill’ agreement with creditors as earlier announced.

On 25th November, the Dubai government said that the State-run holding company is seeking a 'standstill' agreement on its debt, including the Nakheel unit.

Mr Al Maktoum said that the government of Dubai would announce a comprehensive reorganisation law, a framework that is based on internationally accepted standards for transparency and creditor protection.


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