Drewry: Asia-ECNA Trade Line Star Performer in 2014

Full ships eastbound, healthy revenue gains and an improving outlook for the American economy have enabled Asia-East Coast of North America (ECNA) trade lane to be one of the star performers in 2014, according to UK shipping consultant Drewry.

After a month of modest growth in August, headhaul volumes bound for ECNA soared by 16.6% in September against the same month in 2013, followed by a 10.6% increase in October.

The 12-month rolling average growth rate, having hit double digits in September, fell back to 8.9% in October, however; volumes in October 2013 were unusually strong.

“The US economy continues to pick up speed and a surge in business and consumer spending drove the country to an annual growth rate of 3.9% between July and September. Unemployment has fallen to a six-year low of 5.8%, down from 7.2% just a year ago, and 2014 looks set to be the strongest year for hiring since 1999. Admittedly, average wages have not risen in real terms in the last year but the recent sharp fall in energy prices is putting extra money into the pockets of the consumer,” Drewry detailed.

The USEC ports are coping with the extra throughput although chassis provision at the New York/New Jersey terminals poses problems at times.

Drewry data shows that the major East Coast gateway saw import loaded containers from all origins rise year-on-year by 7.0% in September and 6.6% in October.

Year to date, the New York/New Jersey complex has received 5.5% more containerised imports, which compares less favourably with Charleston’s 13% improvement (almost 20% up in October alone), Savannah’s 16% surge (again October alone climbing 22%) and Norfolk’s 9% gain.

Imports handled over the berths at Houston have risen by 16% this year compared to January-October 2013, but data for the last month registered a mere 3% advance, suggesting that in some importers’ minds the Texan gateway is perhaps a little too close for comfort to the broader USWC congested networks to serve as an attractive alternative transit point.

The East Coast ports haven’t been slow in broadcasting the improvements to their key performance indicators at a time when, at Los Angeles/Long Beach, import containers can presently take two weeks to move off the berth and truck drivers face waiting times of as much as eight hours. Container dwell times at New York/New Jersey are down to 4.1 days this year from 6.5 days in 2013, and truck turn times have improved by 11%.

The Virginia Port Authority claims to have reduced gate moves to 63 minutes on average from 85 minutes last year.

The New York/New Jersey Port Authorities have already made significant progress in specifying 23 recommendations to reduce congestion and improve productivity.

Six all-water sailings were voided during the Chinese Golden Week holiday at the start of October with a further two taken out towards the end of the month. Provision dropped further in November on a month-on-month basis to a supply level of 383,000 teu.

Much of that trimming can be attributed to the G6’s decision to merge the SCE and NYE loops into a combined operation in identical fashion to last winter. The CKYH partners, who suspended a loop for the slack season last year, do not appear to be taking similar action.

“For the new 2M and Ocean Three alliances, both of whom aim to launch themselves in January, the focus will now be more concentrated on ensuring a smooth transition to their respective new services. It may, however, not be until the start of the second quarter before all those new products are fully tonnaged,” Drewry said.

Rates in September peaked at USD 4,450 and had only dropped back to USD 4,050 by the start of December. The current USD2,300 differential between USWC and USEC spot rates is almost twice the historical norm.

Whereas USWC market rates are barely USD 200 above the average value of a BCO contract rate, those to the East Coast presently command a USD 1,200 premium over the average USEC BCO level of USD2,850.

More significantly, current spot rates are over USD1,000 – or 25% – higher than they were a year ago. Scarcely any other trade lane can boast such credentials, Drewry said.

The carriers announced a rate increase for 15 December and there is possibly another in the pipeline in January for the start of the pre-Chinese New Year peak season, but it may be optimistic to think spot rates will actually rise above USD 4,500. On the other hand, the lines’ declared target to get East Coast BCO rates up to USD3,500 in May 2015 may not prove to be as unrealistic as once thought.

“Once congestion eases in the USWC ports, it is inevitable some traffic will revert back to a western seaboard routing given the longer transit and additional cost of an East Coast passage. But future prospects for the East Coast ports seem promising,” Drewry believes.

Source: Drewry