Carriers make a second bid to raise freight rates to Europe

Carriers make a second bid to raise freight rates to Europe
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First Published: Sun, Jun 14 2009. 09 24 PM IST

The new rates will be between $100 (Rs4,740) and $300 higher for a 20ft container and between $200 and $500 higher for a 40ft one. Ahmed Raza Khan / Mint
The new rates will be between $100 (Rs4,740) and $300 higher for a 20ft container and between $200 and $500 higher for a 40ft one. Ahmed Raza Khan / Mint
Updated: Sun, Jun 14 2009. 09 24 PM IST
Bangalore: Container carriers are raising freight rates between India and Europe beginning July in another attempt, the second in three months, to halt a free fall in freight rates amid the global economic downturn and decline in international trade.
Copenhagen-based Maersk Line, the world’s biggest container shipping firm, French firm CMA CGM SA, South Korea’s biggest container shipping firm Hanjin Shipping Co. Ltd, and APL, the container shipping arm of Singapore’s state-owned Neptune Orient Lines Ltd have all announced they will raise freight rates starting 1 July.
The new rates will be between $100 (Rs4,740) and $300 higher for a 20ft container and between $200 and $500 higher for a 40ft one. Ahmed Raza Khan / Mint
The rate increase on the India-Europe sector is part of an increase planned by carriers on the Asia-Europe trade lane where they have been losing money since August due to rock-bottom freight rates. The new rates will be between $100 (Rs4,740) and $300 higher for a 20ft container and between $200 and $500 higher for a 40ft one.
The cost of shipping a 20ft container from India to Europe has fallen more than 70% to $300 from about $1,100 in August, amid the decline in international trade. The cost of hauling a 40ft container to Europe is about $450, down from $2,500 in August.
In April, some carriers had made an abortive attempt to raise rates on the India-Europe sector. Maersk Line has also said that it would effect another rate hike in September.
“The trading conditions for carriers operating in these markets are still subject to unacceptable rate levels and the situation is unsustainable in the longer term,” the company said in a statement.
“In April, we implemented a rate hike, but had to withdraw it after a week because many other carriers did not increase their rates,” said an executive at German container shipping firm Hapag-Lloyd AG. He did not want to be named because of company policy that prevents him from speaking to the media.
“Container carriers are in a desperate situation,” said Apurva Jasraj, partner at Mumbai-based freight broking firm M Jasraj and Bros. “They are making one more attempt to raise rates. We will have to wait and watch how it will work out.” Another Mumbai-based freight broker said the success of rate increases could be uncertain because container volumes have not increased enough to justify them.
“Container volumes are still down; the capacity utilization of ships going to Europe is 50-60%. From the basic indicators of demand and supply, it would not seem as if this rate hike is going to work,” he said on condition of anonymity.
Some carriers, however, believe enough carrying capacity has been stripped to make the price hike stick. “We will be doing everything possible to ensure the latest rises are upheld,” said Detley Kerber, APL’s vice-president for Asia-Europe trade.
Data from the Indian Port Association (IPA) for the month of May showed a 10.5% decline in container volumes from the corresponding period in the pervious year. However, container volumes increased 3.8% month-on-month, suggesting that a recovery might be under way. The data is only for cargo passing through India’s 12 state-owned ports. IPA is an autonomous body that represents state-owned ports.
London-based ship broking firm Clarksons Plc. forecast a 5.5% contraction in global container trade this year, in a report earlier this month.
Globally, 48 container ships have been sold so far for demolition, removing about 70,000 20ft equivalent units, or TEUS, against 100,000 TEUS scrapped in 2008. A TEU is the standard size of a container and is a common measure of capacity in the container business. Currently, 533 container ships with a combined capacity of 1.3 million TEUS are out work, according to Paris-based container shipping industry database AXS-Alphaliner.
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First Published: Sun, Jun 14 2009. 09 24 PM IST