Friday, January 1, 2010

HSG Outlook On Shipping Road Rail Air And Sea Freight Transport For The New Year

Piracy and Oversupply Plague the Trade Routes whilst Trucking Consolidates
Shipping News Feature

WORLD WIDE – 2010 sees the annual piracy map published by the International Maritime Bureau start as always with a clean sheet. Everyone in the shipping world however knows that before long the first yellow and red flags indicating attempts and successes for the fastest growing sector of our business. A look at the past five years’ maps gives the clearest possible indication of how the crime of piracy has not only burgeoned, but been exported across the world. Every type of vessel is a target now, from the humblest fishing boat, through tankers, container ships and bulk carriers to cruise liners.

Five years ago attacks were mostly confined to an area those in the West have always considered the hub of the “industry”, the South China Sea and the coasts of Indonesia, but, just as shipbuilding and ship owning have tended to move to the East, so piracy has spread Westward and the name of Somalia will remain synonymous with the evil trade for many years to come.

It will require a concerted effort from all concerned nations to retrieve the situation. History teaches us there are only two satisfactory ways to deal with freebooters, wipe them out or engage their loyalty. One suspects that the cost of turning round the economies of countries like Somalia will dissuade nations from taking the latter option despite vows to assist. Only a reversal of the areas economic decline will stop the trade in this way. The mother of piracy is desperation and its father is greed, now the trade has a stronghold it will be very difficult to halt with financial incentives alone and the criminals are becoming better organised and supplied as they reap the rewards of their crimes.

Unless then Somalia goes the way of Port Royal and slides gracefully into the sea it looks as if 2010 must be the year of full blooded armed response to the problem. Coverage by the anti piracy flotilla from the EU’s Navfor is not sufficiently funded to allow blanket coverage to ensure the safety of all vessels, nor does the coverage from other nations stretch far enough to protect all ships in an area like the Gulf of Aden. The St. James, the chemical bulk carrier seized on Monday was on an unescorted run through what is considered to be a safe transit corridor well away from the coast. The strike zone has extended as 2009 progressed with the acquisition of modern equipment by the pirates and, once aboard a vessel, the threat to the lives of the ships crew and passengers dissuades any rescue attempts.

So the pirates continue to operate almost at will with the most unlikely candidates now apparently willing to stump up the ransom money. It is rumoured that the De Xin Hai, a COSCO owned coal carrier was released this week after a cash ransom was dropped onto her decks by a Chinese Government sponsored helicopter. The ship was released with all 25 crew safe following her capture in October. It simply makes economic and moral sense to the victims when, as with this case the cost of the ship and cargo (this time 76,000 tonnes of coal bound for India from South Africa) are added to the price in human terms.

It seems then that the situation will continue into 2010 with more violence from the potential victims probably leading to an escalation of the severity of attacks until something gives. It is to be hoped that the nations of the world will realise that the wishes of individual states, as with climate change, are subservient to the good of all, and a properly calculated show of strength coupled with a reinforcement of the powers to stop and arrest, possibly using a transit licence for the danger areas with attack ships subject to seizure and their crews to imprisonment, may prove to be the only effective solution to remove this scourge from the seas.

The other huge issue concerning all shipping executives this coming year will undoubtedly be the vast oversupply of vessel space currently plaguing the industry. Although many believe cargo levels are set to rise steadily for the next twelve months, hardly anyone thinks they will boom as they did a year or so ago. With many new builds still on the blocks and shipyards awaiting deferred payments, indicators such as the Bulk Dry Index are unlikely to return to the heady heights of 2008 in the foreseeable future. Steady growth is the best that can realistically be hoped for from the comparatively weak position which we see at the commencement of this New Year.

Ports too offer some cause for concern, the financial situation in Dubai has shaken many observers who looked to the Emirate as the next big thing. With DP World having planned the development and expansion of many facilities worldwide the competition for cargo traffic at ports and airports will probably never have been more intense than we shall see over the next twelve months.

More rationalisation is required amongst all sectors of the industry then, including air freight carriers, whilst we should not forget the road haulage companies. In the US this week alone we have witnessed the demise of Arrow Trucking Inc, slated yesterday by the Department of Transportation’s Federal Motor Carrier Safety Administration in Washington, D.C. for the shabby way they have abandoned vehicles and drivers, and Carlen Transport who it seems took a much more orderly and professional course of action. YRC Worldwide may have escaped bankruptcy procedures through the goodwill of their labour force and the support of their creditors but nobody doubts that it is only a matter of time before the bigger players in the market increase their efficiency and rationalise their operations or at least one may go to the wall. Look for more tie ups in this sector possibly against companies who heretofore have had no time for each other.

So, a gloomy outlook then, but with the prospect that in many areas of the shipping industry, we may have already hit rock bottom. There are bright spots to consider although they usually come with an associated cost. Chinese coal and iron ore imports have risen steadily recently but this at a time when the country is being cited for its lack of environmental credibility. China is now fuelling much of its own demand for goods, whereas previously it imported, manufactured and exported the produced goods, many items over the next year will end up on Chinese roads or in Chinese homes rather than in containers or on deck bound for shipment abroad.

India too is developing rapidly, having long lagged behind the West in terms of infrastructure, now we see ambitious plans for freight corridors and multi modal facilities right across the subcontinent. Provided investment can be found there are opportunities to change the face of India forever. Here more than ever rail freight can help modernise the nation whilst it continues its slow progress to strip tonnage from road operators elsewhere in the world.

Africa remains as one of the last under developed and under utilised continents. Opportunities for the enterprising freight professional there are boundless, but only if he or she can overcome the huge deficiencies, disparities between states, and logistics problems that face any with ambitions in that part of the world. And don’t overlook those pirates.