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NYK raises rates on North American routes

NYK raises rates on North American routes

Tokyo: Nippon Yusen K.K., Japan's largest shipping line, raised rates on container services to the U.S. from Asia after slashing its supply of ships, writes Bloomberg. The carrier reduced service on the routes by about 25% in the past year and is now filling about 90% of capacity on North America routes, Mikitoshi Kai, head of investor relations at the company, said in an interview in Tokyo. NYK started boosting rates last month, he said.

"We've been able to raise rates by a certain amount," he said, declining to give detailed figures. "We currently have about the right amount of ships. Still, we need to increase rates by a lot more to make a profit."

NYK is forecasting its first loss in 23 years as the global recession cuts demand for containers carrying construction materials, furniture, electronics and other goods to the U.S. and Europe. The Tokyo-based shipping line, along with Evergreen Marine Corp.,Neptune Orient Lines Ltd.'s APL Ltd. and 11 others, agreed to try to raise Asia-U.S. container rates by $500 per 40-foot box from last month.

NYK is also trying to raise rates on containers to Asia from North America, Kai said on Sept. 11.

The company has dropped 29% this year on the Tokyo Stock Exchange, compared with an 18% gain in the Nikkei 225 Stock Average. Rival Mitsui O.S.K. Lines Ltd., which forecasts a profit this year, has gained 9% while Kawasaki Kisen Kaisha Ltd. has declined 3.6%.

NYK predicts a loss of 5bn yen ($55m) for the year ending March 31, including a pretax loss of 34bn yen at its container shipping business.

The shipping line is cutting costs to compensate for a drop in demand. NYK will reduce 100bn yen in costs this fiscal year, with 80bn yen in reductions in the container business, Kai said.

"It's our biggest cost-cutting plan ever," he said. "We're negotiating lower loading fees, cheaper rates for transporting cargo inland by train, and reducing costs by mooring ships."

The Transpacific Stabilization Agreement, a group of 14 shipping lines which operate half the world's container vessels, issued a "voluntary guideline" in July to raise rates on Asia- U.S. services by $500 per 40-foot container. Even that increase would leave rates at unprofitable levels and 30% lower than a year earlier, according to CMA CGM SA, one of the members and the world's third-biggest container carrier.

A similar attempt in April failed as lines competed for volume to avoid costly ship lay-ups amid a roughly 20% drop in Asia-U.S. volumes.

Container shipments to the U.S. from Asia fell for a 21st month in June, tumbling 18% to 900,600 boxes, according to the Japan Maritime Center. Shipments are down 20% this year.  [15/09/09]