Shipping body?calls for price rises in key lane

Container shipping lines face a "potential catastrophic event" if prices in a key trade lane are not increased, an industry organisation has warned, adding to the gloom surrounding the sector.

Brian Conrad, executive administrator of the Trans-Pacific Stabilisation Agreement, said shipping lines' financial survival now had to determine the rates they charged to move containers, rather than filling their ships or protecting their market share.

The TSA, which allows shipping lines to share information about cargo volumes and planned future capacity, called for a sharp increase in the rates charged to move containers from Asia to North America, saying many at present were unsustainably low. Its 14 members had all committed by the end of June to stop offering any low short-term, spot rates for moving containers introduced in the past few months, it added.

Shipping lines desperate to fill ships have cut spot rates on some routes to the lowest levels in the sector's 53-year history. On routes between Asia and Europe, some have been charging only the surcharges normally meant to cover fuel, currency changes and terminal handling costs. Between Asia and North America, overall charges have fallen to only a few hundred dollars for each standard container from more than $2,000 a year ago.

Volumes of containerised cargo have also been falling sharply. Earlier this month, Denmark's AP Moller-Maersk, whose Maersk Line is by far the largest container shipping line, said its volumes this January were 20 per cent lower than in 2008. London-based Drewry Shipping Consultants has forecast the industry's losses could total $32bn this year if conditions stay as they are.

"Moving to establish rates at least $500 to $600 above the levels to which the spot market has eroded is a desperately needed first step in the industry's efforts to move away from a potential catastrophic event," Mr Conrad said.

The TSA's warning came as Standard & Poor's, the credit ratings agency, warned it might cut the credit rating of France's CMA CGM, operator of the sector's third-largest fleet. The agency said the company would need to generate significant amounts of cash to support its high debt level. Two listed owners of container lines – Singapore's Neptune Orient Lines and Maersk – have already announced they expect their lines to be lossmaking for the whole of 2009.

Container shipping is suffering from declining traffic and excess capacity as huge new ships ordered during the sector's boom years are delivered from shipyards.

It remains to be seen whether the TSA's call for rate increases will be effective. In times of crisis, lines are often reluctant to stick to collective positions when negotiating with shippers.

© The Financial Times Limited 2009. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation