The Marine Transport - Current Situation

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In the last six months the world of international marine transport has suffered important tensions on a world scale that has directly affected the main sectors of our economy.

Since last December the logistical problems and, fundamentally, the increase in marine freight, has penalized exports and imports of companies dedicated to natural stone.

The huge increase in imports of raw materials by China, the shortage of containers in countries such as Brazil, the lack of merchant navy in South Africa, India or Finland, or the reduction in fleet available in the Eastern Mediterranean due to the toughening of safety inspections, among many other factors, has led to a big and continuing increase in freight charges in the world marine transport.

These factors added to the spectacular increase in price of oil, has led to tensions in the market, made worse by the surprise effect. As a lesser evil, the most important consequence was not suffered by the existing traffic with the Iberian Peninsula but with a large part of the countries cited previously, therefore, one can affirm the increase in freight was in absolute terms, but decreased in relative terms.

This decrease in relative values is more evident in comparison with China which we will see later. With respect to the tendencies in the market of transport one must consider that the companies of this country no longer obtain government support as far is subsidies is considered for the transport for exports.

China currently has two marine lines with the greatest increase in the movement of tons in natural stone on a worldwide level. The imports this country does from Brazil and India have been increasing for the last three or four years at a rate greater than 8%, reaching 27% in some cases.

This traffic, specialized in the transport of rough granite blocks, went through a sharp increase between December 2003 and June 2004. The transport of a ton of granite from Vitoria (Espiritu Santo) to Hualien (Taiwan), Hong Kong or Xiamen (China) cost six months ago 55 US Dollars while currently is has become 105 US Dollars + 6% BAF (oil tax). Loading from Vitoria to Shanghai or Mawan now costs 110 US Dollars/ton + 6% BAF when just six months ago it was 57 US Dollars/ton.

In the case of India/China the situation is similar though the increase has not been so high. As compared to freight charge of 40 US Dollars/ton six months ago the Chinese importer is today paying 62 US Dollars/ton from Tuticorin to Qingdao for rough granite or marble blocks.

Brazil is also suffering from the imbalance in transport. A representative case is the problem still faced with respect to transport in containers. The lack of containers given the difficulty of replacement and lack of space in the ships because of their shortage due to the existing demand is creating serious problems in service.

The mess up between demand and supply is being sorted out in the majority of cases by an increase in freight. In the Brazilian case the most harmed have been the Americans who have had to assume in the first semester increases of 20 to 60% for containers between Brazil and USA.

The situation in South Africa, though not so problematic as in previous cases, coincided with the appreciation of its currency, the rand, last year, and which shook the exports and imports of the country and directly affected marine transport.

On another level, the imports and exports of natural stone in other countries were also affected by all these aspects. The traffic of imports from Norway and Finland supported the situation with small increases in freight but in both cases the number of ships that transported rough granite blocks from Scandinavia to the Iberian peninsula increased though the number of tons decreased.

The imports of marble from Turkey was made worse by not only lack of ships but by toughening of inspection in the Mediterranean ports and the wrecking of ships as substitute to iron and steel in the construction of ships given the scarcity and high price of these materials in these months. This situation was also faced by the specific shipping realized from Iran, Egypt and Morocco with destination Spain.

Respect to these imports the containers became a good option though they continue to be not advisable for big shipment for economic and logistical reasons.

With regard to oil, the majority of experts are of the opinion of abandoning once and for all the old theory of a range of oil prices that placed it between 22 to 28 US Dollars per barrel. According to Jorge Segrelles, President of the Association of Oil Products Operators (AOP), it is likely that the price of oil remains between 30 and 35 US Dollars, even though the current range is higher, above 40 US Dollars (end of August, 2004).

A clear example are the series of operations that were realized in June in the future markets in USA where the price of crude oil WTI (West Texas Intermediate), for delivery in the long term, was higher by 10 dollars, which shows that the analysts predict prices similar to now for the next two years. A similar example but nearer are the contracts signed by multinationals of Spanish capital who have closed contracts for freight between March and May with duration of between three and five years.

In consequence, though the panorama described corresponding to the last six months is circumstantial but not promising a priori, we can say that in many aspects it benefits in relative terms the Spanish companies of natural stone who depend on maritime transport for their exports and imports. On the other hand, there is already data which points to a slowing of demand soon in countries such as China and thus the possibility of increase in price of crude being neutralized. Logistics can and should be one more tool for competing in the global market for natural stone.