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Monday, 11 February 2013 00:00 - - {{hitsCtrl.values.hits}}
Reuters: Container shipping companies including industry leader Maersk Line are seeking spot freight rate hikes of around 16% on Asia to North America routes, aiming to set a benchmark for upcoming negotiations on key annual price contracts.
An industry group that includes the unit of A.P. Moeller Maersk and China COSCO’s COSCO Container Lines among its members has recommended general rate rises of $ 400 per 40-Foot Equivalent Unit (FEU) to the US West Coast, effective 1 April.
The 15-member Transpacific Stabilisation Agreement (TSA) said in a statement it has also recommended a $ 600 increase per FEU to all other destinations.
Whether the shipping firms, who have been hit hard by overcapacity, are able to successfully implement the spot rate hikes and base their annual contract talks on that price will have a significant bearing on their profitability for the year. Up to 70% of Asia-US container trade is governed by annual contracts.
“It’s positive news for the liners,” Moses Ma, an analyst at ICBC International, said of the TSA announcement, adding that some shipping companies have traditionally raised rates after the Chinese New Year holiday.
The Chinese New Year holiday runs from 10 to 15 February in the mainland this year. Talks on the annual contracts are expected to intensify in the coming weeks and the contracts are expected to take effect around 1 May.
As of Friday, rates tracked by the Shanghai Shipping Exchange were $ 2,475 per FEU for shipment to the US West Coast from Shanghai.
International container ship operators have already initiated several rounds of wholly or partially successful spot rate hikes as the industry has slowly recovered from the global economic slowdown of the past few years.
Not everyone thinks the latest hikes are a done deal.
Shipping companies may not be able to implement these rate hikes in full as the current Asia-US freight rates are already about 38% higher than those at the same period last year, said Geoffrey Chang, an analyst at BOCOM International.
And oversupply remains a concern. Container ship capacity is expected to grow 9% this year, exceeding projected demand growth of 3-6%, according to industry consultant Alphaliner.
“Liners are desperately looking for a rate hike but the supply and demand situation is still unfavourable,” said Sunny Ho, Executive Director of the Hong Kong Shippers Council, a group representing manufacturers and traders.
“At the end of the day it would very much depend on negotiations,” he said, referring to the contract prices.
