Far East players plead for rates sanity

Alan Peat FOUR MORE shipowners have joined last week's two commentators (FTW August 9, 2002) in complaining about the parlous state of rates on the SA-Far East trade. And they all agreed with what FTW said Ð that the route is now overtonnaged, lines are fighting for market share with price cuts, and the present level of the rates is a loss for all the players. They also support the call for all the lines to raise their rates to a "sane" level. At the same time, they accept that those at the bottom of the price pile can still retain lower rates. "But not," said one, "at the ludicrously low level prevailing at the moment." There are some as low as US$250-US$300 for a twenty-foot equivalent unit (TEU) out of SE Asian main ports, according to Jerry Hookins of NYK Ð while his line thinks that the "absolute minimum requirement" should be US$550. "It's a very unhealthy situation for all concerned and it's difficult to see how it can be sustained at below the break-even point," he said. Andrew Weiss of MOL agreed, pointing to "the 21 lines vying for business on the trade", making it seriously overtonnaged for the demand. "Our principals have been very strong on this, trying to get us to negotiate some increase in the very poor rates at this end. "We've managed to keep our rates up, and are certainly not at the lowest rate, but we're looking at a US$500-US$550 minimum out of Hong Kong. And it's something we desperately need to address, because we're not making money on the trade." Dave Everett, the import trade manager at Safmarine, reckons that all the lines should be looking at about US$200-US$300 above the current rates if sanity and company health is to prevail. "We've obviously talked to Maersk (our partner company)," he said. "We agree with the FTW views, and we're trying to get an improvement in these unrealistic rates." With all the revised consortia on the trade following the split-up of the "old Safari" having put new services on, Everett would like to see "about US$600 per 20-ft" out of SE Asian ports Ð with Japan in the Far East at about US$1 100. "The problem is that it's the middle of the year," he said, "and difficult for those with annual commitments. "It won't happen overnight, but it's where we should all be headed." Iain McIntosh of P&O Nedlloyd baldly stated that "we've reached the bottom" and that his line's intention is to get the rates pushed up. "The trade is too overtonnaged," he said. "And, with the rates levels out there, every carrier is running at a loss. "From our Hong Kong end, there's quite a bit of pressure to arrest this rates slide." You've only got to look at the rates about a year ago, McIntosh added, when rates ex Hong Kong, for example, were "easily" US$800-US$1 000. "A recovery to these levels last year would not be brilliant," he told FTW, "but certainly much better than the present ridiculous levels." And McIntosh doesn't feel that those lines with services running on to West Africa or South America are doing that much better than those purely on the SA-Far East leg. "The position overall in South America is not as healthy as it was a year ago," he said, "so it's shielding companies less than it was. "Also, on the West African trade others are coming in, and rates there are also falling."