Shanghai: China Shipping Container Lines Co plans to almost double rates on Asia-Europe routes this month to help offset possible losses on weakening demand, writes Bloomberg.
"Companies will raise rates, not because the market has recovered, but because the shipping lines have the resolution to do this," md 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 $650 per teu, 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 $300 per teu 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 2.4bn yuan ($351m) deficit.
China Shipping will also raise rates on its Asia-South America routes by $300 per yeu, 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."
In other news, 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% 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 ceo Ulrich Stelling said. The affiliate of Cathay Pacific Airways has axed two round-the-world services and fired 200 workers.
The outlook for Asia-Europe and transpacific routes is "unfavourable" for as long as the next two years, Swire Shipping's Stelling said. The company will focus on shipping within the Asia-Pacific region. [20/07/09]
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