Sizeable and sustained uplift in rates essential across all trades, says APL President

APL told a conference in Southern China today that a sustained recovery in the liner shipping sector will require not only strengthening in volumes but must be supported by substantial freight rate rises across all trades.

Delivering a keynote address to the third annual Transpacific Maritime Asia conference in Shenzhen, APL President, Mr. Eng Aik Meng, said that while volumes were exhibiting stability or even small growth in some trades, it was premature to talk of a significant recovery, particularly when rates in some trades remained at historic low levels that do not entirely cover the costs of running ships.

He told the audience of key shipping and logistics industry stakeholders that the major difference between the current downturn and previous ones was the precipitous decline in demand, which would see containerized trade in 2009 post its first contraction in more than two decades.

Despite this note of caution, Mr. Eng stressed that containerized transportation is and will in the long-term remain the backbone of international trade, playing a crucial role in the daily lives of billions of people.

He said it was important that carriers take the opportunity to engage customers in constructive dialogue. we can better understand one another challenges and also to develop strategies to capture business opportunities that are mutually beneficial. Mr. Eng said that, as well as taking steps to ensure their financial sustainability, carriers must continue to innovate and launch new service offerings, despite the highly challenging operating environment.

The reduction and management of costs continued to be of equal priority to shippers and lines, opined Mr. Eng. He said that there is a significant trend towards the conversion of cargo from air to ocean.
Is shippers seek to reduce costs, we are seeing growth of time-definite services for both full and less than container services. Also, due to improved handling and shipping techniques, certain fresh produce and pharmaceuticals are converting to ocean freight, said Mr. Eng.

Asia and China in particular will continue to be central to international trade and global economic growth, said Mr. Eng. But supply chains are transforming. He cited APL-commissioned research by consultant Drewry that pondered whether shifts in Western and Asian consumer behaviors created by the economic downturn would be permanent.

Will future growth be in high or low value products. They have different supply chain requirements. Smart logistics and transportation companies are developing multiple strategies to cater for both segments in the West and in Asia, he said.

Mr. Eng concluded that great opportunities exist for companies to add value to new and transformed supply chains. But to help guide shippers to opportunities in a new world order, transportation and logistics operators must be able to invest in assets and continuous innovation.