D-Day for container rate increases

Asia-Europe shippers 'paying $1,300', but for how long?

Controversial container freight rate increases – due to be implemented on the Asia-Europe trade today – appear to be taking effect, although market commentators are uncertain over how successful the price hikes will ultimately be.Shippers and freight forwarders have criticised the scale of the increases, some of which have been near 100%, as the major lines attempt to break even amid a glut of new containerships on the world’s major trade lanes. Analysts have suggested the industry will remain unprofitable until 2014, and point out that the lines have previously tried and failed to implement large price increases.Cherry Wang, a freight derivatives bnroker at GFI, said: “Today, in the spot market, people are paying $1,300 or they won’t get their goods moved. But it’s difficult to know how for long the increases will hold. “When they were first announced, people were very sceptical because they looked at the supply and demand and saw that a rate increase didn’t make sense – but this is not a rational market.“For 18 months, the carriers have been unsuccessful in getting a rate increase through – in September they only got half of the announced amount – but we’ve seen more of a concerted effort this time.“It’s hard to tell whether or not the increases will stick, because it’s so hard to tell what a carrier’s breakeven is, but what we do know is that there are going to be six more services introduced over the next few months, and measures such as slow-steaming can only help up to a point.”NOL and Maersk Line have both recently announced 2011 losses of around $500 million each, while the industry as a whole is expected to lose $5 billion this year.IFW has reported that Maersk, the world’s biggest container carrier, is to raise rates by $775 per teu today, and has also announced a further $400 increase to take effect on 1 April.MSC has announced similar increases, while Hapag-Lloyd says it will raise its Asia-Europe rates by $750 per teu and by $225 on the backhaul from 19 March.Steve Phillips, a broker at Freight Investor Services, said: “The lines will definitely get an increase, but it’s probably too early to say how successful they will be. “My gut feeling is that they will get some but not all of the GRI.”