- Pat Gallagher
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No Port in the Global Fiscal Storm
Shipping activity has plunged as much as one-third at U.S. ports most heavily invested in the once red-hot but now declining Asia trade.
Freight rates from South China to Europe have slid as much as 42 percent from some ports since November, leading shipping industry authority Drewry Container Freight Rate Insight Report to speculate that this once-robust market is in freefall.
As freight rates fall to record lows shipping companies are playing hardball to remain competitive, even though relatively little product is being shipped these days. According to Drewry, container lines could see a $68 billion plunge in global revenues this year, compared with 2008 revenues of $220 billion. Drewry notes that global all-in freight rates fell to $1,681 per 40-foot box, down from $2,098 in November. That’s a steep $400 drop per feu (forty-foot equivalent unit) or 20 percent in just two months.
The ports of Los Angeles and Long Beach are slashing cargo rates to retain old customers and attract whatever new business they can. Spanning 10,000 acres, these vast ports typically handle $357 billion in goods every year. The ripple effect of this year’s overall 18.1 percent downturn is evident in California’s vital Inland Empire logistics market, where higher vacancy rates – now approaching nine percent — are translating to cheaper rents.
Conditions are slightly better at the East Coast ports of New York and New Jersey, because their diverse mix of trading partners include Asia, Europe, Latin America and South America.