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Container freight rates are going to have to rise at some point: FMC chairman Cordero

Container freight rates are going to have to rise at some point: FMC chairman Cordero
As the container shipping industry goes through “generational changes” US Federal Maritime Commission (FMC) chairman Mario Cordero says shippers will have to accept that “rates will rise at some point”.

Speaking at the World Shipping Summit in Shanghai on Friday Cordero noted the multiple mergers of CMA CGM and APL, Hapag-Lloyd and United Arab Shipping Co (UASC), Cosco and China Shipping, the bankruptcy of top 10 carrier Hanjin Shipping, and most recently the plans by NYK, K Line and Mitsui OSK Lines to form a joint venture of their container lines.

“Any one of these developments in and of itself would have been impactful, but taken together, these represent generational changes that have the potential to significantly change the very structure of the shipping industry,” he said.

Noting that global shippers were uneasy about the new alliances he said that with the Ocean Alliance of CMA CGM, Cosco, Evergreen and Orient Overseas Container Line (OOCL), the FMC had worked hard to strike a balance between the concerns and the needs of carriers.

“At the end of the day the issue that should concern all of us is how to cooperate to stabilize an industry that is critical to the world’s economy,” Cordero stated.

He said that shippers had realise the obligation to allow conditions to allow shipping lines to move cargo.

“Rates are not only unhealthy, they are unrealistic and unsustainable. Shipping lines are businesses and they are supposed to at least break even, if not make a profit. Simply put, rates are going to have to rise at some point,” Cordero said.

“While the commission is always vigilant against anything that might be considered anticompetitive behavior, it is important for shippers to recognize that not every rate hike is a case of gouging or carriers engaging in price fixing.”

On the other side he said lines needed to install safeguards in case there should be another bankruptcy such as Hanjin. “Here, I suggest incorporation of basic corporate responsibility on the part of carriers.”

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