News
- Lines push for huge rate hikes
- 8/19/2009
Shippers on the Asia-Europe trade are facing a stunning barrage of general rate increases from carriers on the route, with one line seeking GRI hikes of US$1,275 per TEU between April and September.
The series of rate restoration moves have been coming in hard and fast since April as shipping lines try to find revenue on a trade route that is suffering from a chronic imbalance in supply and demand.
According to data compiled by PR News Service, GRIs being sought on the westbound Asia-Europe route since April will total over $10,000 per TEU by the end of September, with the average per line equating to around $700 a TEU. "K" Line wants $1,275 more per TEU spread out over six months.
The financial abyss into which lines have fallen can be seen in the dismal first half results of some of the larger carriers. Average losses in net profit at OOIL, Hanjin and NOL Group were around $300 million, a clear indication of the depth of the problem facing the container shipping industry.
Rates on the transpacific trade also appear to be on the rise, according to an index of average spot prices compiled by Drewry Shipping Consultants. The index rose above $1,000 per FEU for the first time since May, signalling an increase in the average rate per 40-foot box.
In addition to the Asia-Europe freight rate increases, lines have started imposing Peak Season Surcharges (PSS) effective from August through October, which some customers believe are being disguised to address the seasonal upturn in demand but are more likely increases to cover shortfalls in the acceptance of the GRIs. Lines are generally able to get 60-70 percent of the asked for increases.
Peak surcharges already kicking in across the Asia-Europe trade range between $150 and $200 per TEU for August alone, and the world's second largest shipping line, Mediterranean Shipping Co (MSC), has already initiated two surcharge levels totalling $400 a TEU for August and September with October increases waiting for the go- ahead.
Several shipping line executives interviewed by Cargonews Asia were frank with the reasons behind the peak season surcharges, although wise enough not to have their names published.
"There is no reason why the peak surcharge increases cannot be considered as purely disguising the inability of some lines to achieve their GRI levels from the effective dates," one executive said.
"Those who have experienced this problem have searched other routes to claw back this 'lost' revenue by disguising their increases under different banners."
Alarmingly, in the pre-conference days prior to October 2008, such details seldom came to light in the closed shop scenario whereby one line was "obliged" to follow the pricing levels of the others within the same conference.
"Today the situation is entirely different and the industry has moved into a more transparent environment whereby some lines, if they wish, can publish their rates and surcharge intentions, while others play their cards closer to their chests," commented another shipping line source.
Interestingly, lines are also confirming that the "all-in rates" system, where surcharges such as the Bunker Adjustment and Currency Adjustment factors (BAFs and CAFs) were all part of the overall rate charge, is moving back to a more segmented product. This has been fuelled by the ability of some lines to gain their GRIs and peak surcharge asking levels, thus adversely affecting those lines unable to achieve the levels of their peers.
Such moves are suggesting that those who charge their rates and surcharges at separate quantum levels are proving more successful and logically more adaptable to the continuing market slump than those who combine everything into one overall charge.
http://www.cargonewsasia.com/secured/print_view.aspx?article=20313&issue=2009-08-17