STRUGGLING ASIA/EUROPE LINES say RATE HIKES ARE “ABSOLUTELY NECESSARY”
STRUGGLING ASIA/EUROPE LINES say RATE HIKES ARE “ABSOLUTELY NECESSARY”
The Far Eastern Freight Conference carriers said Wednesday that freight rates in the eastbound and westbound trades between Asia and Europe are uneconomic and must be restored to higher levels.
Hit by a 50-percent fall in prices over the last 12 months, executives of the FEFC carriers met Nov. 3 for a “crisis meeting” and adopted a joint plan to restore rates in January and March.
The plan includes a minimum price increase of $300 per TEU from Asia (except Japan) to Europe, effective Jan. 1. The conference expects to implement a similar increase from Japan to Europe, but probably at a later date.
From Europe to Asia, the FEFC said it will increase rates by $250 per container, irrespective of size, effective March 1.
Robert Woods, FEFC chairman, said the conference was seeking a partial restoration of rates after sharp decreases, not net increases.
Rates have decreased “to a level where they are uneconomic for the lines,” he said.
Tom Boardley, director of P&O Nedlloyd, said shipping lines in the Asia/Europe trade are facing a situation where rates are so low that they may lay up ships and save money not carrying some cargoes.
P&O Nedlloyd reported that the worst freight rates in the trade are $500 per TEU from Hong Kong to Europe, instead of about $1,100 a year ago. Eastbound, the lowest rates are about $200 per TEU for wastepaper.
Senior executives of FEFC member lines said the current situation is both unprecedented and unsustainable.
Carriers said that they will deal with the overcapacity issue individually, not as part of the conference.
“Some of the lines may have to seriously consider withdrawing tonnage,” a senior executive of NYK said. “This is a crisis.”
The carriers said the ship oversupply in the trade, estimated at 15 to 20 percent, resulted from the slump in traffic growth, not from “reckless levels” of vessel orders.
Speaking on behalf of the FEFC, Woods would not comment on the potential impact if the plan to restore freight rates fails. He said every carrier in the trade faces the same situation and must act “to stop what’s going on now.”
Shippers and carriers alike were surprised by the trade downturn, he added.