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The
current commonly held view is that the so-called
"intra-Asian" trade encompasses
container business moving between Saudi
Arabia and New Zealand on an east/west axis,
writes the editor of Container Forecaster,
Neil Dekker. This is confusing to say the
least since any conclusions drawn from a
region of this size can only be rather vague
or diluted.
Many
ocean carriers include for example, the
Mid-East and Australasia within their definition
of the intra-Asia trade, but these routes
are governed by different supply/demand
factors and in Drewry's opinion the trade
between Asia and the Mid-East has become
a major east/west route in its own right.
Drewry
Shipping Consultants has taken available
supply and demand information and given
clarity to analysis of the region. It has
endeavoured to demystify preconceptions
about the market and to explain how the
market works and where it is going.
In
order to strategically analyse the region,
Drewry has identified the specific countries
involved in the trade, determined current
volumes and forecast container growth in
the region through to 2013. By this time,
the trade is expected to reach 50.69 million
TEU from the identified 25.1 million TEU
in 2006 and will continue to increase at
a level a little higher than aggregated
global growth. Specific countries involved
in the analysis include China, Hong Kong,
Taiwan, Japan, South Korea, Singapore, Malaysia,
Indonesia, Philippines, Thailand, Vietnam
and Cambodia.
China
remains the growth engine for the region
and Drewry examines the demand drivers which
include a number of free trade agreements.
But, the environment is changing as China
begins to import more raw materials from
its neighbours and the manufacture of low-cost
items such as footwear and toys are re-located
to Vietnam, Cambodia and Myanmar. These
new supply chain trends will help change
carrier routeings and impact on future port
developments.
The
intra-Asian trade is a complex combination
of regional local business as well as feeder
traffic and often the two become mixed.
Drewry has stripped out this business and
identified the regional traffic on its own,
but at the same time has also analysed the
separate importance and influence of the
huge feeder market.
Individual
trade routes, such as the core China/ASEAN
trade axis are analysed in detail, helping
those involved in the trade to determine
the future trend lines.
India
cannot be totally removed from an analysis
of the region since so many intra-Asian
services are now extended west of Singapore
to encompass this market. In a separate
analysis, Drewry also identifies the size
of the market, the players involved and
the major drivers.
One
of the key trends identified is that global
operators are encroaching more and more
on the intra-Asian trade with larger vessels
in order to fulfil a combination of both
local and feeder requirements. By the same
token, smaller regional players are diversifying
more into other trades and are pulling out
of the least profitable regional trades.
Some of these include the high volume routes
between China, South Korea and Japan where
competition is fierce and freight rates
are generally low once bunker surcharges
and THCs are stripped out.
Profitability
of the intra-Asia trades is a key unknown
as there has been no real visibility on
the development of freight rates in the
region. Drewry has researched freight rate
data on some of the key corridors in 2007
to enable carriers to benchmark against
their competitors and shippers to cost their
supply chain movements. Set against the
continued rise of fuel prices, these are
critical factors for all stakeholders operating
in the region.
Evidence
from last year at least proves that rates
have been less volatile than in the east/west
routes, although on many corridors they
are low. Drewry believes that services on
some of these routes will continue to be
withdrawn as all carriers are driven by
the need to remain profitable. Since the
beginning of 2008, some intra-Asian rates
have increased, although this is partly
due to the stripping out of bunker surcharges
from previous all-in rates.
The
presence of global carriers within the market
has had a disruptive influence on pricing
since their strategic needs are much different
from those of the regional players. In some
trades for example, the need to re-position
empties to areas of deficit may mean that
global operators can charge relatively lower
rates.
The
cascading of much larger and in some cases
ships of Panamax size (about 4,000 TEU)
has also led to over capacity on some routes.
Maersk, MOL and OOCL have all introduced
ships of this size on certain north/south
intra-Asian routes in the last year.
Drewry's
reasearch showed that during 1Q08, the average
size of ships operated by global players
in the intra-Asian markets was 1,388 TEU,
compared to much smaller 998 TEU ships operated
by regional carriers such as KMTC, Wan Hai
and TS Lines. This emphasises how global
ocean carriers have cascaded larger ships
into the trades to cater for both feedering
and regional traffic.
The
net result is that ships will be pulled
from services if profitability falls and
there is always the chance that some smaller
intra-Asian players may disappear. Having
said this, the overall outlook for trade
is bright, but there is definitely a need
for ocean carriers to improve their pricing
strategies.
Drewry's
intra-Asian report, drawn from 15 months
of intense research, will be a vital tool
for parties seeking to determine the size
of the market, the major drivers and supply
chain trends, the huge service structure
and the prevailing freight rate levels.
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