Ocean Freight Prices Anticipated to Lag

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According to a report by Macquarie Equities Analysis, rising container volume as the year progresses combined with weakened inventory restocking is not probably to inspire greater ocean freight prices. Macquarie Group is a major provider of banking, financial, advisory, investment and funds management solutions.

“Given the considerable amount of overcapacity at the moment seen on some trade lanes — in certain Asia-Europe — we contemplate it unlikely that peak season volumes will be sufficient to stimulate a meaningful upturn in freight prices,” the report stated.

They forecast a six.6 percent year-over-year boost in international container volume by the third quarter of 2011. The forecast for the fourth quarter 2011 was 9.8 %. They also stated that their predictions will “be helped by soft comparisons with weak volume in the final months of 2011.” In their final Counting Containers report they forecast an increase in worldwide container volume of 7 to eight % for the year, but are now forecasting an eight.1 % enhance.

International container volumes were high in the second quarter this year, and according to an article on the Journal of Commerce internet site, are “likely to set a record for worldwide volume”. However, a lagging in inventory restocking, which is not anticipated to enhance by much by means of the peak fall season, is most likely to hold freight rates close to flat. Macquarie is not expecting inventory restocking to increase by a lot in the second half of this year in spite of a “historically low inventory-sales ratio for US retailers”

“Contrary to the view of some industry observers, our analysis does not suggest that container volumes … will advantage from a meaningful improve in inventory levels,” the report stated. An additional cause for container volume development to be lower than anticipated was that volumes could be affected by enhanced container stuffing, which would increase the capacity of containers and for that reason decrease the number of boxes needed.

Macquarie mentioned that some organizations utilizing ocean shipping, such as Wal-Mart, had lately undertaken projects to maximize the amount of cargo it could match into an ocean freight container, partly by minimizing packaging. Wal-Mart also has “implemented a three percent penalty on suppliers whose items arrive at regional distribution centers outdoors a four-day delivery window”.

They report that US businesses have already restocked their inventories that had been depleted in 2009. They said that the manufacturers’ inventories are what they would take into account, excessive. Businesses are just getting much more careful about what they order and want to better manage their provide chains. The new trend of maintaining a tiny inventory may possibly be “an ongoing structural shift rather than transitory weakness”.

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