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To stay afloat, firms to hike India-Europe rates

To stay afloat, firms to hike India-Europe rates
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First Published: Fri, Feb 27 2009. 12 13 AM IST

Desperate measures: A file photo of a Hapag-Lloyd AG ship. The company will hike rates by between $1,000 and $2,000 from 1 April. Andrew Wheeler / Bloomberg
Desperate measures: A file photo of a Hapag-Lloyd AG ship. The company will hike rates by between $1,000 and $2,000 from 1 April. Andrew Wheeler / Bloomberg
Updated: Fri, Feb 27 2009. 12 13 AM IST
Bangalore: Cargo rates from India to Europe could rise from March as carriers make a desperate attempt to halt a fall that started in August.
German container shipping firm Hapag-Lloyd AG has issued a notice to hike rates by $1,000 (Rs50,400) for a 20ft container and by $2,000 for a 40ft container to Europe beginning 1 April. Japan’s Kawasaki Kisen Kaisha Ltd has announced a rate hike of $350 for a 20ft container and $700 for a 40ft container from mid-March. APL, the container shipping arm of Singapore’s state-owned Neptune Orient Lines Ltd, will also hike rates by $250 for a 20ft container and $500 for a 40ft container from 1 April.
Desperate measures: A file photo of a Hapag-Lloyd AG ship. The company will hike rates by between $1,000 and $2,000 from 1 April. Andrew Wheeler / Bloomberg
French firm CMA CGM SA, the world’s third biggest container shipping company, has also announced rate increases from 1 April on all its services including the India-Europe sector, without specifying the quantum of increase.
“Rates to Europe have deteriorated to a level which are no longer sustainable,” CMA CGM said in a statement.
Others likely to hike rates include Maersk Line, the world’s top container shipping firm.
“This is seen as an attempt by shipping firms to put brakes on further deterioration in freight rates and restore it to sustainable levels,” said Apurva Jasraj, partner at Mumbai-based freight broking firm M. Jasraj and Bros. “Other big carriers plying on the India-Europe sector are expected to make similar announcements in the next few days.”
The cost of sending a 20ft container from India to Europe has fallen almost 70% to $350 from about $1,050-1,100 in August. The cost of hauling a 40ft container to Europe is about $600, down from $2,500 inAugust.
The freight hike announcements, however, have surprised shippers since there is no significant increase in cargo volumes to Europe. The success of rate increases could be uncertain, a lobbyist said.
“This will not work because ships are going nearly 50% empty as the recession in Europe has affected the order position,” said S.R.L. Narasimhan, secretary at Western India Shippers Association, which represents exporters and importers in western India.
“Cargo volumes to Europe have dropped by 30-40% from a year ago. There is no let-up in that,” said R. Venkatesh, managing director of Mumbai-based logistics firm Clearship Forwarders Pvt. Ltd.
In spite of the fall in business, shipping firms seem determined to stick to their new positions. “If this kind of rates continue, container shipping firms will collapse because the rates are not enough to recover even the ship operating costs,” said an executive at Hapag Lloyd, on condition of anonymity because of company policy on speaking with the media.
Shipping firms have begun to withdraw ships as demand falls. Malaysia’s MISC Bhd and Israel’s Zim Integrated Shipping Services Ltd recently withdrew container ships from the weekly direct service to Europe run by a five-member consortium. The other three members—India’s state-run Shipping Corp. of India Ltd, K Line and Yang Ming Marine Transport Corp.—continue to run the service but with fewer ships, insufficient for a weekly service.
Other firms, such as Hanjin Shipping Co. Ltd and United Arab Shipping Co., are adding extra port calls to their service to soak up capacity. But it adds to transit times and affects quality of service. If more lines start withdrawing from Indian trade, exporters will suffer as fewer services will mean lesser options, said Jasraj.
p.manoj@livemint.com
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First Published: Fri, Feb 27 2009. 12 13 AM IST