Shipping rates will come down soon, as shipping capacity is expected to go up by as much as 30 percent in the next 18 months. One source says Asia-Europe rates should be settled shortly after Chinese New Year (Jan. 29-31), while trans-Pacific rates will be negotiated around May. The drop could be as much as $800 per feu (40-foot equivalent unit). A Japanese shipper says rates will decline by about 5 percent.

Capacity is going up because huge new ships are coming on line and harbors are getting bigger to accommodate them. The latest port to upgrade its facilities is Shanghai, which opened a deepwater facility on Dec. 10. Called Yangshan, it can handle ships with 8,500 containers, the largest in the world at the moment.

Shanghai has always been a busy port, ranking third by containers in 2004, but shallow water has prevented ships with more than 5,000 containers from docking there. Yangshan is on a man-made island 20 miles east of the Chinese coast, connected by a bridge. There are only five berths now but four more are scheduled to open by the end of 2006, taking annual capacity from 3 to 5 million teus. The facility is to be completed in 2020.

Yangshan’s effect on shoe manufacturers should be minimal in the immediate future. Few companies have substantial operations in the Shanghai area, although one shoemaker with operations in the Pearl River Delta said the new infrastructure could make its port more attractive.

Hong Kong will still remain the major hub for Chinese and Vietnamese goods because of its operational superiority, but some containers have already started to move to Shenzhen, and Hong Kong is reportedly considering reducing anchorage and calling charges in an effort to retain business or to win it back.

Besides, manufacturing in China continues to move to lower-cost areas that are closer to Shanghai than to the southern port of Hong Kong. A Chinese shoemaker mentioned that discount operations like Payless ShoeSource, the American discount chain, were considering setting up their sourcing offices in Shanghai as they source more from northern China.