Space at a premium as lines put rates and utilization first

China has long churned out whatever the world wants, its cheap and unlimited labour source enabling factories to produce goods far cheaper than anywhere else.

In January, China certainly lived up to its moniker as factory of the world, with manufacturing production increasing at a near-record rate, according to an HSBC report.

The report said growth at the beginning of 2010 was surpassed only by that seen in 2004 when the data was first released, and production growth has now been registered for 10 successive months.

The bank surveyed a bunch of companies who put this down to surging new orders and improving market conditions in China and overseas.

Export sales, especially, recorded tremendous growth in January, according to those polled. This was reflected in the demand for container slot space on container carriers and rapidly improving throughput at ports on both sides of the Pacific.

But shipping lines that expect booming exports to continue are ignoring the traditional slowdown that happens every year at this time. Factories will close their doors next week for the Chinese New Year holidays and the sharp increase in production has been to get orders out before that happens.

It is the period from then to the start of the peak season in the fourth quarter that should be giving carrier executives nightmares. Will demand from the US consumer continue and allow for decent freight rate increases in May? Who the heck knows.

But it looks like shippers are going to find it difficult to secure space on the transpacific this year because the lines will make doubly sure that capacity is tight whatever happens. The lines are quite prepared to roll customers’ cargo rather than risk low ship utilization, so expect that even a moderate rise in trade will quickly tie up all available space.