Wednesday, March 18, 2009
Freight rates to rise by $500 from April 1
Wednesday, 18 March 2009
Ocean freight rates from Indian ports to major European ports are set to rise by $300-500 per twenty equivalent unit (TEU) from April 1. The rate increase comes after major shipping lines decided to implement general rate increase (GRI) with effect from April 1. Shipping companies’ representatives operating between Indian and European ports said the rates pre-vailing in the market were “unacceptable”. Companies were not able to meet their operating costs with the current rates, they added.
A senior official from a Germany-based shipping company said the current freight rate between Indian and European ports was around $300-350 per TEU, compared with $450 in January and $900 at the end of last year.
Exporters are currently paying only bunker adjustment factor (BAF), currency adjustment factor (CAF) and terminal handling charges. For instance, of the $350 freight, shipping lines get around $30-40 as freight, in some case it is “zero”.
He said till mid-2008 shipping lines were making record profits in this sector. In July, freight rates were around $1,695 per TEU, but from last summer, “rates have fallen to uncommercial levels”. This has resulted in shipping companies withdrawing their services.
S Mohankumar, a shipping consultant, said shipping companies operating between Asia and Europe, the world’s busiest container trade route, had reported losses to the tune of $5 billion due to the drop in freight rates.
This has resulted in withdrawal of services and ship owners are keeping their containerships idle. Worldwide the number of vessels that are idle has touched an historic high of 453 ships, that is 1.35 million TEU or 10.7 per cent of the world’s box tonnage, Mohankumar noted.
Shipping companies have now added extra port calls to increase the capacity. While this was mainly confined to the Asia-Europe trade, carriers are now desperately seeking any means to utilise capacity without laying up vessels, said Mohankumar.
The London-based India Pakistan Bangladesh Ceylon Conference (IPBCC), representing 19-shipping lines, said the new rate will be enforced from April 1. Though the quantum of increase was not announced publicly, one of the shipping companies senior representative said it will vary from $400 to $500 a TEU, depending on port calls.
Member of IPBCC include ANL, CMA CGM, Hamburg Sud, Hapag-Lloyd AG, K-Line, MacAndrews and Co Ltd, Maersk Line, MISC Berhad, CSAV Norasia Liner Services, Rickmers, Safmarine Container Lines NV, Shipping Corporation of India Ltd (SCI), United Arab Shipping Co, Yang Ming Line and Zim Integrated Shipping Services Ltd.
Meanwhile, the container throughput during the nine-month period ended December 2008 was at 51,40,000 TEUs showed a drop of more than 8 per cent from the target and a growth of about 5 per cent over the same period of last year. Major chunk of the containers are exported to European ports, which witnessed around 5 per cent drop.
Source: Business Standard
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