RLL Container Report - 05 March 2014
From: John Keir, Ross Learmont Ltd
Date: 05 March 2014
Food, glorious food!
What wouldn't we give for
That extra bit more --That's all
that we live for
"“Food, glorious food” from the musical "Oliver"
Brazilian commodities giant Cosan is to merge its supply-chain arm, Rumo Logistica, with America Latina Logistica (ALL) to create Latin America’s largest railway and logistics company valued at USD4.7 Billion. Rumo has vast experience in the highly competitive sugar market and operates a large terminal in the port of Santos with a capacity of 12 million tons per annum. America Latina will contribute to the joint venture 12,000 experienced staff and a rail network totalling 13,000 kilometres in six states, which account for 80% of Brazil`s exports. As football fans are about to discover, Brazil has a poor road network, so the combination of a large rail network and ownership of a large terminal facility should enable Cosan to get its produce to the global market both quickly and more cost-effectively.
In a well-coordinated move, Hamburg Sud is starting to phase into the South American trade its new 9,800 teu vessels. The first of seven such vessels, each equipped with no less than 2.100 reefer plugs, is being deployed on the main box route between the East Coast of South America and Europa. The new vessels replace ships with a capacity of only 7,200 teu and 1,600 reefer plugs. Most of the major European lines charter slots from Hamburg-Sud on this route. Food importers in the Far East are turning away from bulk carriers to containers to transport agricultural cargoes. Traditionally, the transport of agricultural commodities has been the domain of bulk vessels with a capacity of 60,000 to 70,000 tons. However, bulk vessels now face a two-pronged attack. Firstly, Asian importers can use the new container carriers to transport smaller but sizeable volumes more quickly. Secondly, the overall costs of shipping by container is falling as slot capacity increases.
Each day of the week, a large container vessel heads back from America or Europe with half its containers available to transport cargo at a very attractive price. By taking advantage of the available slots on the ever-larger vessels entering service, the importers can spread out the shipments among a number of lines in order to achieve the lowest cost per ton. Containerised cargoes also eliminate the need to call at specialised bulk terminals, which are now fewer in number than they were only a decade ago. Other factors also tend to favour container transports.
Firstly, commodities can be scheduled to arrive at a specific location often on a specific date. Secondly, a problem with one container load can easily be “contained” and will affect only a limited amount of cargo and would not jeopardise the quality and value a whole shipment. Asia is moving from a rice-based diet to more meat and dairy products, which rely on high-protein diets. As a result, a growing number of small business are in the market for shipments of 1,000 to 2,000 tons. Container capacity can easily cope with these volumes and at the same time, the importer can more easily finance these smaller and more regular shipments. The effects are plain for all to see. Since 2006, containerised grain exports from America to Asia have more than doubled to 470,832 teu in the first 10 months of 2013. This equates to a 10% rise in the space of just twelve months. Australian farmers now export 12 to 15% of grain to Asia in shipping containers. The important point to note is that this is not the exception but is rapidly becoming the rule. In 2012, around 12 % of commodities such as oilseeds and grains were transported in containers.
Of course, agriculture is not the only sector to be interested in clean containers to transport its cargoes. The pulp and paper industry started its march towards containerisation many years ago. According to Russia Paper Market Forecast & Opportunities, the Russian paper industry is expected to expand at a steady pace over the next three years and will turn over USD 6.4 Billion by 2017. Northern Russia accounts for over a quarter of annual production because the region is densely forested and can readily supply high volumes of wood fibres to the paper industry. Last year, Arkhangelsk Cellulose & Paper increased its container shipments by 61% to record a total of 53 block trainloads from the White Sea region.
However, if you are not attracted to grain nor inspired by paper, then you can always specialise in cut flowers. This seems to be the “next big thing” in the container sector. The market for cut flowers is worth USD 14 Billion and the main cost element is the airfreight from countries such as Kenya and Colombia to the cities in the Northern Hemisphere. Maersk has come up with a container that will extend the transport life of cut flowers well beyond the current 10 days. This adds a total of 700,000 tons of cut flowers that may be transported far more cheaply by ship or by rail. So, with the 8th of March fast approaching, there is no excuse for any lovelorn young man not to rush out and order a big bunch of roses for that special young lady in his life.
Clearly, the global slot capacity is steadily increasing, as is the potential volume of containerisable cargoes. The next question is: are their sufficient volumes of “foodgrade” or “papergrade” containers to transport grain and paper? In 2013, 2.2 million teu entered the global market. Although this is a significant decrease on the pre-2008 production levels of 3 million teu, Chinese factories could respond quickly to any upturn in demand, while container owners simply postpone plans to weed out older boxes. Box availability should not pose a problem.
John Keir Ross Learmont Ltd
05 March 2014
Copyright © 2014 John Keir