Caradonna ponders illogical Pacific prices
Frank Caradonna, consultant with Pegasus Ltd. and a former Sea-Land Service and OOCL executive, said freight rates bear little relation with supply and demand trends, as shown this year in the transpacific trade.
“What has been the trend is for prices to sporadically increase dramatically and then over a period of time decline, until a level of unacceptable loss is reached, at which time another dramatic increase is taken,” Caradonna said.
He told the Containerization International conference in London that rate stability is “virtually non-existent” in liner shipping.
“This, beyond the obvious financial implications, works to the detriment of the enhancement of 'partnership' between customer and service provider, and fosters an atmosphere of skepticism, distrust, and in some cases, hostility,” Caradonna added.
In the transpacific trade, “significant increases” in eastbound Pacific rates for the 2004-2005 contract season were announced late last year, due to become effective May 1.
Caradonna described many successive, contradictory attempts by ocean carriers to implement planned transpacific rate rises or hold on to previous price levels. There were “reductions in rates as short term demand slipped below expectations” after Chinese New Year at the beginning of the year. Later on, a number of major service contracts were concluded “with little or no increase either in rate or assessorial,” he added. The next phase of the cycle this year was “a renewed resolve to obtain increases from mid to smaller importers,” followed by “the current scramble to hold and recover whatever is possible of the failed general rate increase,” the consultant said.
“If pricing is indeed an 'art' and not a 'science,' then this year's efforts must be considered 'abstract' art,” Caradonna quipped.
He noted shippers now “are a little less concerned” about freight rate increases than earlier this year.