
Bulk freight rates have climbed more than 140 per cent in the past 11 months and container and tanker freight rates have shown a similar appreciation.
Chinese demand for raw material to meet its growing export trade in particular has fuelled the jump in prices and led to a shortage of ships.
The Baltic Dry Index, an industry benchmark for freight rates of dry bulk cargo, jumped by more than 140 per cent during the first ten months of this year and by 160 per cent between October last year and October this year.
The price hike has had a huge knock-on effect among Gulf states and traders. In Dubai — a major transit point for international shipping in the Middle East — the shortage of ships to transport goods has even led to some traders seeing their goods stranded abroad.
Steel traders in the Middle East and Europe in particular have borne the brunt of the shortage of vessels and some based in Dubai have had cargoes stuck abroad due to the non-availability of vessels.
Bharat Bhatia, the managing director of Conres Metal Supply which is based in the Jebel Ali Free Zone, told Gulf News: "More than 60,000 tonnes of hot rolled coils, mostly belonging to traders in the Middle East, is lying stranded at Black Sea ports due to the scarcity of vessels.
"This has also led to a rise in steel prices during the past three months. The nearly 40 to 50 per cent price rise in steel can be attributed almost solely to the freight rate jump.
"China offers single point loading and offloading to shipping companies, which is another major reason why most shipping companies in Europe and other parts of the world have turned to China.
"Most China-bound vessels come back with return cargo. This helps shipping companies make more trips to Chinese ports compared with other destinations elsewhere in the world."
Castern Rholing, the managing director of German shipping company Mar Trade, said prices may continue to rise as there are not enough vessels to cater to the demand for shipping freight worldwide. Many CIS and Russian steel manufacturers are Mar Trade clients, exporting goods to Middle East-based consumers and traders. Rholing said the dry cargo vessel fleet is growing at a rate of 2 per cent a year while demand for these vessels jumped by over 6 per cent in the past year.
Similarly, Chinese demand for more crude pushed up freight rates for very large crude carriers (VLCC) worldwide.
A report from Allied Shipbroking of Greece said the rise in demand for VLCCs has pushed up the prices of old VLCCs about to be scrapped.
In fact, higher freight rates have prompted many vessel owners to press back into service their old, outdated vessels.
Some shipping companies have even put back into service ships that are more than 30 years old, Rholing said.
PLAN
Raising rates to Asia
Evergreen Marine Corp, P&O Nedlloyd and 11 other shipping lines plan to raise freight rates for carrying non-refrigerated container cargo to Asia from the US because of rising costs and increased demand from Asian factories.
The shipping lines, members of a group called the Westbound Transpacific Stabilization Agreement, want to raise charges by $200 per 40-foot container from February.