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Container giants join hands to end price war

Container giants join hands to end price war

Hong Kong: Neptune Orient Lines subsidiary APL, China Cosco Holdings and 12 other container lines agreed to raise rates on Asia-US routes, seeking to end a price war caused by slumping demand, overcapacity and "panic", writes Fresh Plaza. The lines decided on a $500 increase for carrying a 40-foot box from August 10 as a "voluntary guideline," the Transpacific Stabilization Agreement said in an e-mailed statement. The companies will also raise fuel levies and may add peak season surcharges, the group said.

Container lines will try to raise rates again after an April increase collapsed amid rising competition and a 20 percent drop in demand, the TSA said. Spot market Hong Kong-Los Angeles rates have slumped to as low as $900, according to Lloyd's List, as US retailers pare orders for Asian-made furniture and toys on weak consumer spending.

"The eastbound transpacific trade lane has been driven by panic," Lee Won Woo, chief executive of TSA member Hanjin Shipping Co.'s container unit, said in the statement. "Panic is difficult to stop once it has begun."
Resist pressure

Average revenue per container dropped as much as $1,200 from October to May, the TSA said. Container lines should have resisted pressure to cut rates covered by longterm contracts to match spot rates, it added. Hong Kong-Los Angeles spot rates have fallen about 56 percent over the past year, Drewry Shipping Consultants told media, adding that this was not indicative of a return in demand.

Container-shipping lines traditionally raise rates in July and August as shops stock up for the peak back-to-school and holiday shopping periods. China Shipping Container Lines, the country's second -biggest box carrier, has said it plans to almost double rates on Asia-Europe routes this month.

Shipping lines have laid up vessels, cancelled routes and fired staff as they battle plunging trade. Evergreen, Asia's biggest container line, said Wednesday that it plans to retire 31 ships. Yang Ming Marine Transport recently announced delivery delays of as long as 15 months for 14 new vessels. "The damage is serious," Lee said. "If current rates are extended out over 12 months, it is likely that the trade will encounter significant financial challenges."

Neptune Orient, which has announced 1,000 job cuts, posted its biggest quarterly loss in at least seven years in the three months ended April 3.
APL, China Shipping, CMA-CGM, Cosco Container, Evergreen Marine, Hanjin, Hapag-Lloyd AG, Hyundai Merchant Marine Co., Kawasaki Kisen Kaisha Ltd., Mediterranean Shipping Co., Nippon Yusen K.K., Orient Overseas, Yang Ming and Zim Integrated Shipping Services make up the 14 members of the Transpacific Stabilization Agreement.  [24/09/09]