from the ground Up

by Jessica Cheam, The Straits Times, December 16 2008

1.5% fall, the first since 2001, reflects slowdown in world export markets

CONTAINER traffic through Singapore ports turned negative last month for the first time in recent years, as stark a sign as any of the plunge in global trade.
November’s container throughput was down 1.5 per cent year-on-year – a rude shock for a sector that could boast growth rates as healthy as 11 per cent just four months ago.
The last time the numbers were this bad was in 2001, when 15.5 million containers – called twenty-foot equivalent units in industry jargon – were handled, well below the 17 million figure racked up in 2000.
At first glance, some of the preliminary numbers released by the Maritime and Port Authority of Singapore (MPA) yesterday do not look so bad.
Container throughput still grew at 5 per cent year on year in October to 2.5 million before nosediving to 2.28 million containers in November.
Although PSA’s year-to-date figure shows that 26.86 million containers have been handled to the end of November – up 8.8 per cent on the same period last year – the decline in monthly growth began in July and have steadily worsened to November’s result.
Jurong Port did not provide monthly figures on its website but said it handled 903,000 containers from January to November this year, up from 832,000 for the whole of last year.
November’s sharp drop came sooner than economists expected, but was no surprise as exports worldwide are tumbling.
“The latest figures tell us what we already know – that Singapore exports are extremely soft and contracting heavily at the moment,” said HSBC economist Robert Prior-Wandesforde.
But Singapore can take some comfort in the fact that other economies are showing similar statistics – a reflection of the contraction in world trade, he added.
The slump has also sent shipping rates plummeting by as much as 90 per cent: from about US$1,100 ($1,690) to US$100 for a standard-size shipping container on the Asia-Europe route. Analysts say break-even rates are at least US$550.
Many vessels now lie idle in shipping channels while firms are left with excess capacity. Singapore company Neptune Orient Lines has already slashed 1,000 jobs worldwide.
The downturn – and fear of major job losses – has prompted plans by industry body Singapore Shipping Association to train more than 1,100 workers next year under its Skills Programme for Upgrading and Resilience (Spur).
This is a $600 million government programme that aims to encourage companies to upgrade the capabilities of their workers during the economic slump.
Economists expect container numbers to keep shrinking until the middle of next year before any recovery signs are seen.
CIMB-GK economist Song Seng Wun fears the contractions will deepen into next year, given the sharp decline in external demand since the collapse of United States banking giant Lehman Brothers in September.
“The last time we experienced a sharp slowdown in external demand was during the dot.com crash in 2001,” he said.
The difference is the fall in demand the world faces now will be longer than the dot.com crash, he added. “These latest figures are just the beginning of a dismal set of numbers to come.”
However, HSBC’s Mr Prior-Wandesforde sees light at the end of the tunnel.
“There are brighter longer-term prospects going into the end of next year into 2010,” he said.
The silver lining emerging from the synchronised global downturn is the easing of policy conditions throughout Asia. Central banks in the region have taken measures such as cutting interest rates, reducing reserve ratios and pumping liquidity into markets, he said.