JACOBS BACKS FEFC RATE HIKES
Flemming R. Jacobs, president of the Neptune Orient Lines group and chief executive officer of APL Liner, has backed the Far Eastern Freight Conference’s plan to increase freight rates in the container trade linking Asia and Europe, saying that they are necessary to allow carriers to continue to run services.
APL is a member of the Far Eastern Freight Conference, as are most shipping lines in the Asia/Europe trade.
During a press conference in Singapore, he said that the Asia/Europe trade is weak for all transportation service providers, and if routes become commercially non-viable, nobody benefits in the long run.
“The transportation industry and its shareholders must have an acceptable and sustained return on its capital, otherwise the availability of capacity and frequencies of sailings will be severely impaired,” Neptune Orient Lines
said in a supporting statement.
“Importers and exporters need transportation,” it added. “But for that to happen, we must maintain rate levels that can and will justify both presence and continued capital and shareholder’s support.”
NOL said that the downturn of the Asia/Europe trade was caused by more than one reason, not just by ship over-capacity. Other factors were the downturn in various economies and the competitive environment. These factors
“have led to rates in this trade now being at unsustainably unprofitable levels,” the company said.
Trade volumes between Asia and Europe are forecast to decrease this year, for the first time in a decade.
On Wednesday, the Far Eastern Freight Conference announced rate hikes of $300 per TEU from Asia (except Japan) to Europe, effective Jan. 1, and $250 per container from Europe to Asia, effective March 1.
Besides lifting freight rates, NOL said that it is adjusting the frequency of its sailings on the Asia/Europe route, as part of the New World Alliance, to ensure they are in line with the reduced market demand. The company added that it is also reducing costs.
However, APL has so far not announced any significant cutbacks in its Asia/Europe services, except for the adjustment of one service, added as recently as June, from a weekly to a fortnightly frequency.
“While it could be argued that over-capacity is one of the causes of the current problems facing carriers in the Asia/Europe trade, it is important to note that in the medium and long term, international trade will continue
to grow,” NOL commented.