Shipping rates hit zero as trade sinks - Telegraph Page 1 of 2

Shipping rates hit zero as trade sinks

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time
since records began, underscoring the dramatic collapse in trade since the world economy
buckled in October.

By Ambrose Evans-Pritchard, International Business Editor

Last Updated: 3:39PM GMT 14 Jan 2009

"They have already hit zero," said

Charles de Trenck, a broker at
Transport Trackers in Hong Kong.
"We have seen trade activity fall
off a cliff. Asia-Europe is an
unmitigated disaster."

Shipping journal Lloyd's List said

brokers in Singapore are now
waiving fees for containers
travelling from South China,
charging only for the minimal
"bunker" costs. Container fees
from North Asia have dropped
$200, taking them below
operating cost.

Industry sources said they have The cost of shipping goods from Asia to Europe has tumbled

never seen rates fall so low. "This is a whole new ball game," said one trader.

The Baltic Dry Index (BDI) which measures freight rates for bulk commodities such as iron ore and grains crashed
several months ago, falling 96pc. The BDI – though a useful early-warning index – is highly volatile and
exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has
spread to core trade of finished industrial goods, the lifeblood of the world economy.

Trade data from Asia's export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and
European markets.

Korea's exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc
in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in
shipments, led by steel, electronics and textiles.

A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long
Beach and Los Angeles, America's two top ports, has fallen by 18pc year-on-year, a far more serious decline than
anything seen in recent recessions.

"This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade

http://www.telegraph.co.uk/finance/4229198/Shipping-rates-hit-zero-as-trade-sinks.html 1/21/2009
Shipping rates hit zero as trade sinks - Telegraph Page 2 of 2

consultant.

Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval
fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water,
indicating low cargoes.

It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the
autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say
this problem has been resolved, but the shipping industry has since been swamped by the global trade
contraction.

The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first
time since the Second World War. This appears increasingly certain with each new batch of data.

Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc –
possibly 12pc. Trade flows grow 8pc in an average year.

He said it was "illogical" for shippers to offer zero rates, but they do whatever they can to survive in a highly
cyclical market.

Offering slots for free is akin to an airline giving away spare seats for nothing in the hope of making something
from meals and fees.

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http://www.telegraph.co.uk/finance/4229198/Shipping-rates-hit-zero-as-trade-sinks.html 1/21/2009