Exporters brace for higher shipping costs

PUBLISHED : Monday, 03 January, 2011, 12:00am
UPDATED : Monday, 03 January, 2011, 12:00am

Asian exporters face higher charges for shipping their products and goods by sea and air to foreign markets this year as container shipping carriers and airlines increase freight rates and surcharges.

One shipping company said some lines had already increased the cost of transporting a 20-foot container from Asia to Europe by up to 10 per cent. A large number of shipping lines imposed increases from Saturday, while other carriers and airlines will implement the rises in the next few days.

Some 45 airlines also won approval from the Civil Aviation Department to increase a fuel surcharge on air cargo shipments this month. They include Cathay Pacific Airways, Air China, Air New Zealand, Air France-KLM, Qatar Airways, and Turkish Airlines, which were approved to lift surcharges to HK$5.60 per kilogram from tomorrow.

Other airlines won approval to lift fuel surcharges to HK$2.80. The rises come after the department allowed airlines to raise fuel surcharges to an average of HK$2.60 and HK$5.20 per kg in November and December.

Orient Overseas Container Line, Cosco Container Lines and Taiwan's Evergreen Marine are among the shipping lines which are raising charges for container shipments.

OOCL increased freight rates on shipments from Asia to northern Europe, the Mediterranean and Black Sea by US$300 per teu (20-foot equivalent unit) from yesterday. The increase was equivalent to a rise of about 10 per cent based on comments from other shipping lines that put the all-in rate, including freight transportation, terminal handling charges and other surcharges, at US$3,000 per teu.

The carrier also plans to increase rates on container shipments from northeast and southeast Asia to Australia by US$250 and US$200 per teu respectively from January 15.

The Tung family-controlled shipping line said the increases were necessary for it to continue providing high-quality services for customers in the current high-cost environment and to provide sufficient capacity to cater for customer requirements. The carrier is mulling plans to order a raft of new vessels including ships that could carry up to 13,000 teu in what could cost several billion US dollars.

By comparison, Cosco Container Lines plans to raise charges by a total of US$1,150 per teu in six instalments this year on all shipments from Asia to the Red Sea area of the Middle East. The rate rise programme started on Saturday with a US$200 per teu increase. Other carriers including Israel's Zim Integrated Shipping Services and Mediterranean Shipping implemented rate rises of between US$250 and US$300 per teu on shipments from Asia to Europe starting last Saturday.

Separately, all 30 members of the Intra-Asia Discussion Agreement, a cartel among shipping lines that includes OOCL, CMA CGM, China Shipping Container Lines and Singapore's Pacific International Lines, lifted their fuel surcharge by US$110 per teu and US$220 per feu (40-foot equivalent unit) from Saturday.

But the Hong Kong Shippers' Council, which represents manufacturers and cargo owners, has already voiced its concern about the increased surcharges which it said were 'unjust and unfair'.

There are also fears the higher rates for both sea freight and air cargo would unfairly impact those firms that ship smaller quantities, with larger companies being able to negotiate a smaller or even zero rate increase.

An assessment made after air cargo insurance surcharges were introduced nine years ago suggested a rise of 50 Hong Kong cents to HK$1 per kilo on air freight would increase operating costs for the city's trading sector by around 0.14 per cent.

The move to increase freight rates and surcharges followed a mixed 24 months for the ocean and air freight industries as both shipping lines and air carriers racked up billions of US dollars worth of losses in the wake of the global economic downturn from the third quarter in 2008.

But there was a strong rebound in 2010 as inventory restocking coupled with economic growth led to rising demand for products, resulting in ships and aircraft operating at near full capacity. As a result, shipping firms and airlines are on course to post record profits for 2010.

Shipping analysts estimated the top 20 lines lost US$15-20 billion in 2009. But, pointing to last year's recovery, European-based research house Alphaliner forecast the top 18, including OOCL and Cosco, could generate collective earnings of US$13 billion.

By comparison, the International Air Transport Association, which represents 93 per cent of the world's airlines, said carriers would make a total net profit in 2010 of US$15.1 billion against an US$11 billion net loss in 2009.

Based on traffic conditions in 2009, Iata forecast carriers would make a US$5.6 billion global net loss in 2010.

Fuel fees

Some 45 airlines were approved to lift the fuel surcharge on air cargo

Some of those carriers can increase their surcharge to this much, in HK dollars per kilogram, from tomorrow: $5.60