This year shipping lines locked in negotiations with their customers are pushing to maintain, or even increase, the rates they charge to transport goods from Asia to North America, the world's busiest routes for containerized trade.

Trade with China continues to fuel demand for both container and bulk ocean freight heading into the second quarter, Purchasing magazine reported last month. According to a recent Bloomberg report, China's exports rose 27 percent last year while imports climbed 20 percent, "all of which translates into a lot of ocean freight in and out of the country."

Rates have been rising since the middle of last year on soaring Chinese demand for iron ore and increased coal imports to India, according to Philip Rogers, head of research at London shipbroker Galbraith's, in UK's The Telegraph this month.

"Freight [demand] is climbing so high in China because demand for commodities is not falling despite high prices," Purchasing quoted Helen Henton, head of commodity research at Standard Chartered Bank, as having said.

Shipping lines are working to "turn the tide" on freight rates this year, with potential implications for manufacturers, retailers and others heavily dependent on overseas cargo, reported The Wall Street Journal (sub. req'd) earlier this week:

Last year, overcapacity contributed to declining rates for containerized shipping […] That reduced costs for many importers but resulted in lower profits for many shipping lines, including market leader AP Moller-Maersk, and caused losses for others.

Higher fuel costs made things worse.

And shipping lines are "holding very firmly to their positions, without giving in to rate reductions," Sunny Ho, executive director of the Hong Kong Shippers' Council, told the WSJ this week.

Ho expects to see a cut of no more than 5 percent in rates.

Yet, as we noted in this month's "Shipping: What to Look For in 2007 and Beyond", James Hall of Galbraith's ship consultancy in London recently said "there is no reason [ocean rates] can't go up 20 percent or conversely down 20 percent" in the short-term. In a recent Reuters report (via TMCNet), Hall said rates could only hit record peaks for a short period before the enormous cost would slow demand.

Global container demand is forecast to reach 490 million 20-foot-equivalent units (TEU) by 2009, according to Abdulla Bin Damithan, DP World deputy director commercial, in a Logistics Today report earlier this year.

Traffic is on the rise and is expected to break an all-time record in July, according to the monthly Port Tracker Report by the National Retail Federation, a retail trade association, and Global Insight, a provider of economic and financial information. Monthly container volumes are predicted to grow each month from now through the summer, and if predictions hold true, July's all-time volume record will be followed by another record in August. Forecast is a volume of 1.55 million TEU for July, which would be up 11.4 percent from July 2006, and 1.59 million TEU for August, a 6.7 percent increase year over year.

Already, in the first week of May, new records have been set for both the Baltic Exchange's Dry Freight Index and the Dow Jones Transportation Index. These key measures of the real economy "show that the world is still humming, despite America's housing wobble, The Telegraph reported earlier this month:

If the global economy is slowing down, no one has bothered to tell the owners of the giant cargo ships plying the world's seaborne trade routes or shareholders in the rail, road and air freight groups that make up Wall Street's oldest stock market index. For these lucky beneficiaries of the explosion in world trade, things have never looked better.

According to Galbraith's Rogers, the cost of chartering a ship on the busy Brazil-to-China route has soared over the past six years from $10,000 a day to $130,000.

Fast-rising demand has run up against serious supply constraints this year. "On paper, there's no shortage of ships," Rogers said.

In fact, no one is sure how long the boom in freight rates will last because shipbuilders are working flat-out to meet demand.

Indeed, China's shipbuilding manufacturers last year yielded output of 14.52 billion deadweight tons, captured 42.51 billion deadweight tons of new orders and had a total of 68.72 billion deadweight tons on their order books, accounting respectively for 19 percent, 30 percent and 24 percent of the global market, according to Jin Zhuanglong, vice minister of the Commission of Science, Technology and Industry for National Defense, as reported by People's Daily Online. (An interesting note: Commission statistics show that of the nearly 3,000 Chinese shipbuilding enterprises in the country, only 431 are large ones. Booming market demand has boosted the growth of small and medium-sized firms.)

American shipbuilding companies, on the other hand, have repeatedly delayed projects and come in way over budget. In contrast, like the Chinese, the European shipbuilders have improved markedly, as we reported last month.

Moreover, "a great deal of capacity is tied up with congestion," Rogers went on to say. At an average seven voyages a year, world trade will have to rise by a quarter by 2010 to absorb the new capacity.

Warren Buffett, the third-richest person in the world, recently backed the transport boom by becoming the biggest shareholder in railway company Burlington Northern Santa Fe Corporation. He has also bought stakes in two other undisclosed railway stocks. Dow Jones Transport has argued that when manufacturing activity picks up, transport stocks get more business too. Buffett said an advance in the main Industrials index could only be sustained when it was confirmed by a rise in transport stocks.

The Index, which includes such stocks as FedEx, UPS, Southwest Airlines and Union Pacific, has been in the headlines recently when it hit an all-time high.