China Shipping to raise Asia-Europe rates

China Shipping Container Lines Co., the country's second-biggest box carrier, plans to almost double rates on Asia-Europe routes this month to help offset possible losses on weakening demand.

"Companies will raise rates, not because the market has recovered, but because the shipping lines have the resolution to do this," Managing Director Huang Xiaowen said. "We have found that if we cut rates, load factors don't increase."

The busiest season for sea-cargo box carriers traditionally starts July 1, when rates go up as European and U.S. retailers stock up for the back-to-school and holiday shopping periods. Costs for shipping goods have fallen in the past year, partly because retailers are paring orders on weak consumer spending. China Shipping will increase rates to as much as US$650 per twenty-foot container, Huang said.

"It's the only period when they have any chance of making money this year," said Jack Xu, an analyst at Sinopac Securities Asia Co. in Shanghai. "Still, rates are so low, I doubt that's going to happen."

China Shipping will raise prices by as much as US$300 per twenty-foot container from July 1, Huang said in an interview in Shanghai.

"This peak season is going to be very short," China Shipping Chairman Li Shaode said in an interview in Shanghai yesterday. All 20 of the analysts tracked by Bloomberg covering the shipping line expect it to make a full-year loss. The median estimate is a 2.4 billion yuan (US$351 million) deficit.

China Shipping will also raise rates on its Asia-South America routes by US$300 per twenty-foot equivalent unit, or TEU, Huang said. Rates on Middle East, Australia and Mediterranean routes will also go up, he added.

"It's considerably lower than before but getting closer to break-even levels," said Jimmy Lam, a Hong Kong-based analyst at BOC International Holdings Ltd. "Even so, I doubt the increase may hold for more than two weeks."

Yang Ming rates

Yang Ming Marine Transport Corp., Taiwan's second-largest container line, said rates dropped slightly in May after an increase in April. The company plans to start charging its peak-season surcharges on transpacific routes in August, Vice President Winsor Huang said.

Container freight rates have fallen as much as 40 percent in the second quarter from a year earlier as retailers import less clothing, furniture and other goods from factories in China and the rest of Asia, Swire Shipping Ltd. Chief Executive Officer Ulrich Stelling said. The affiliate of Cathay Pacific Airways Ltd. has axed two round-the-world services and fired 200 workers.

Saks Inc. expects to order 20 percent less from suppliers this year, Chief Executive Officer Stephen Sadove said June 22. VF Corp., maker of Wrangler jeans and JanSport backpacks, forecasts a drop of as much as 3 percent in deliveries this year, Chief Executive Officer Eric Wiseman said last month.

The outlook for Asia-Europe and transpacific routes is "unfavorable" for as long as the next two years, Swire Shipping's Stelling said. The company will focus on shipping within the Asia-Pacific region.

Capacity glut

Malaysia-based MISC Bhd., Asia's second-biggest shipping company, last month said it would stop operating Asia-Europe container shipping services from next year to focus on intra-Asian and Asia-Middle East services.

Container lines have parked ships and delayed deliveries of new vessels to curb excess capacity. Shipping lines are also trying to delay deliveries of new vessels to ease a capacity glut.

"Overcapacity damps the industry's overall recovery," said Li, China Shipping's chairman. "The industry will continue to suffer from overcapacity in the coming two to three years."

Shipyards are working through container-ship orders made during a trade boom that ended last year and rate increases have failed to stick in 2009 as competition allowed customers to shop for lower prices.

"It's darkest period before the dawn," Li said. "Global trade will recover in 2010 to 2011."


Source: etaiwannews.com

Publication date: 7/21/2009

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