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Rate increase in container lines

Rate increase in container lines
Container lines are managing to squeeze some small rate increases out of their customers in the Asia to Europe trades.

Container lines are managing to squeeze some small rate increases out of their customers in the Asia to Europe trades.

Container lines are managing to squeeze some small rate increases out of their customers in the Asia to Europe trades, the first positive news for the industry in months.

But prospects on the Pacific, where ocean carriers and their customers are now negotiating annual 2009/2010 contracts, continue to look bleak with spot rates still under severe pressure.

After driving Asia-Europe ocean rates down to almost zero in the early weeks of the year, container lines finally appear to have called a halt to their self-destructing price war with rate restoration efforts that are showing some modest success.

?The Asia-Europe westbound trade is very gradually starting to turn the corner and stabilize,? said NYK Group Europe"s Jeremy Nixon.

The Japanese line, a member of the Grand Alliance, was one of many carriers that announced planned rate hikes effective April 1 after seeing their revenues plummet so far that some could be driven out of business.

Mr Nixon, managing director of NYK Europe"s liner division, said the line was seeing increases of over $100 per teu in tandem with a slight improvement in volumes after three months of steep decline.

Although acknowledging that the April 1 increases were ?not significant,? Mr Nixon nevertheless said NYK was sufficiently encouraged to prepare for another round of rate rises in July.

Utilisation rates are now back above 80%, having shrunk to around 60% over the Chinese new year period. Higher load factors follow a huge reduction in capacity, with the number of Asia-Europe loops down from 60 to 45.

There is still a very long way to go before rates recover to viable levels that would justify the return of some of these suspended loops, Mr Nixon continued.

All-in Asia-Europe rates, that had plunged to around $250 per teu including fuel and currency surcharges, are now back to $400-$500, he said. But that compares with a 2007 peak of about $1,800 per teu, although that figure included a higher bunker recovery element.

Neptune Orient Lines chief executive Ron Widdows also said last week he expected the Asia-Europe rate restorations to show some success ?as a level of desperation begins to take hold.?

An indication of what had been achieved should become clear in the coming week or two, he anticipates.

Global shippers are not averse to paying more, with some expressing concern about the risk that certain trades will no longer be serviced if freight rates remain at current unsustainable levels for any length of time.

Mr Widdows, who also chairs the Transpacific Stabilization Agreement, has already said that eastbound transpacific rates in 2009/2010 contracts will be lower than those of a year ago after the recent collapse in spot rates, a view shared by most others.

TSA lines have advised they will be looking for contract rates about $500-$600 per feu above current spot rates. But the early signs are not good, with industry sources indicating that lines are fearing the worst.

Meanwhile, Mediterranean Shipping Co said today it planned to increase Europe-Asia rates by at least $100 per 20 ft and $200 per 40 ft box, effective May 1.


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