Container lines plan to boost westbound rates

PUBLISHED : Thursday, 05 November, 2009, 12:00am
UPDATED : Thursday, 05 November, 2009, 12:00am

Shipping lines including Orient Overseas Container Lines and Cosco Container Lines plan to raise rates on their westbound transpacific routes next month in an attempt to reverse hefty losses.

The freight rates for a 20-foot equivalent unit (teu) container shipped from the ports of Los Angeles and Long Beach would increase US$80 from December 1, according to a statement by the Westbound Transpacific Stabilisation Agreement dated Tuesday. The rates at other US west coast ports would be raised by US$120 per teu.

Cargo demand for the westbound route is much lower than the eastbound trade, which involves shipments from Asia to the United States.

Some shipping lines are offering very low freight rates on the 'back haul' to fill up the space and cover fuel costs.

The proposed increases come after the Transpacific Stabilisation Agreement suggested its 14 members restore the contract rates to near their levels last year by charging US$800 per 40-foot container on the US west coast and US$1,000 on the east coast routes next year.

The potential losses incurred on container lines worldwide are forecast by Drewry Shipping Consultants at US$20 billion this year.

However, the suggested restoration of freight rates is unlikely to happen, owing to lukewarm cargo demand from the US and Europe.

Retailers are not willing to build up inventory by placing long-term orders for seaborne transport since they are not confident of a sustained recovery in the economy. Instead, they are more willing to place ad hoc orders by airborne carriers when demand rises or their stock is empty.

Orient Overseas (International), the holding company of OOCL, posted a 42 per cent year-on-year drop in third-quarter sales, another factor that has thwarted attempts by the shipping lines to raise rates.

OOCL booked US$892 income per teu on average in the third quarter, up from US$852 in the second quarter, but the US$40 increase was less than the shipping lines had asked for.