The One Ocean Trade Lane That's Looking Good: Asia-Oceania - Global Trade Magazine
  August 18th, 2016 | Written by

The One Ocean Trade Lane That’s Looking Good: Asia-Oceania

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Sharelines

  • The one bright spot in ocean shipping.
  • Australia's economic situation is not the best.
  • New ocean carrier consortium will serve the trade between Japan, Korea, China, Taiwan, and Australia.

Drewry has been nothing but gloom and doom over the plight of container carriers in recent months. But it has found one bright spot: the north-south trade that serves Asia and Oceania.

What makes this discovery even more remarkable is the fact that the Australia’s financial and economic situations are not the best. But fears over the Australian economy are not reflected in the container market: the southbound Asia-to-Oceania trade is on course to repeat last year’s 10-percent growth.

Last month’s general election in Australia returned the Liberal-National coalition to power, but with a much reduced majority, raising fears of political gridlock. Standard & Poor’s reacted to with a negative outlook on Australia’s AAA credit rating, citing concerns that “fiscal consolidation may be further postponed”.

Weaknesses in the labor market—including stalling wage growth and an over–dependency on part-time jobs—led Australia’s Reserve Bank to cut interest rates this month to a record low of 1.5 percent. Analysts are predicting further reductions before the end of the year.

Despite all this, container volumes into the country from Asia remained very good in the second quarter. Data shows that the trade grew by 10 percent year-on-year and only marginally down from the 10.5-percent rate recorded in the first quarter. Including volumes to New Zealand and the South Pacific islands, second-quarter growth was 9.8 percent.

Carriers have started to increase the slots available to the market for the busier second half of the year. Drewry only counted one missed voyage in July, compared to five in June and 16 in May. The effective capacity in the North Asia-to-Oceania market in July was three percent above the same month last year, while from Southeast Asia the capacity has remained the same.

Beginning in the fourth quarter of this year three carriers, ANL (a subsidiary of CMA CGM), Cosco and OOCL, will create a new A3 consortium that will pool three services in the trade between Japan, Korea, China, Taiwan, and Australia. It is unclear what the effect on capacity will be. Further south, newcomer Pilbara Express Line is reportedly starting a multipurpose service between Singapore and Dampier in Western Australia, using one 400-TEU ship every 18 days.

Ship utilization on the southbound North Asia-to-Oceania route has been steadily improving towards the low 90-percent range thanks to the strong demand and steady capacity, but spot market freight rates have yet to respond. Drewry’s Container Freight Rate Insight reported that the average Shanghai-to-Melbourne spot rate was unchanged since March.

Drewry predicts that container shipments between Asia and Oceania will continue to rise through the second half of 2016. “If carriers can maintain high utilization levels,” the report concluded, “freight rates should start to rise soon.”

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