The Hindu Business Line : Shippers boxed in by rate hike

INDIAN shippers will have to pay more to send and receive containerised cargo following a freight rate increase across all sectors. The increase, which has taken effect in certain sectors, is in accordance with the rate restoration programme adopted by various shipping lines to recover the escalating cost in maintaining and running vessels, according to industry sources.

The increase ranged between $250 and $500 a TEU (twenty foot equivalent unit) for different regions, the sources said.

Shipping lines in the Westbound Transpacific Stabilisation Agreement (WTSA) increased their rate by $200 a FEU (forty-foot equivalent unit) and $160 per TEU for all US-Asia cargoes not covered under separate, commodity-specific rate programmes starting from March 1, 2005.

The commodities exempted by the increase were waste-paper, forest products, metal scrap, hay, soyabeans, peas, beans, lentils, dried fruit and nuts, hides, clay, cotton, chemicals and resins, onions in dry containers, refrigerated commodities and plastic scrap.

A WTSA statement explained that the scheduled increase represents the continuation of an overall rate programme that began in 2004 to address rising operating costs, equipment imbalances and system-wide infrastructure congestion outside carriers' control.

WTSA members are APL, `K' Line, China Shipping Group, MOL, COSCO, NYK, Evergreen Marine, OOCL, Hanjin, P&O Nedlloyd, Hapag Lloyd, Yangming Marine, and HMM.

In their business plan announced in October 2004, member lines of the Far Eastern Freight Conference (FEFC), which represents shipping lines operating between Asia and Europe, announced a rate restoration for Asia (excluding Japan) to North Europe and Mediterranean trades of $250 per TEU on April 1, 2005.

FEFC principals early this year concluded that in the face of unprecedented increases in operating costs, freight rates must continue to be restored in order to ensure continued quality of service levels. Similarly, feeder operators operating from Singapore/Port Klang to Chennai and in the reverse direction announced a rate restoration on April 15.

From Singapore/Port Klang to Chennai a minimum of $290 a TEU will be charged subject to prevailing surcharges and fuel additional.

Similarly, from Chennai to Singapore/Port Klang a minimum of $220 a TEU would be charged, says a notice issued by feeder operators Advance Container Lines, Bengal Tiger Line, RCL Feeder, Samudera Shipping and Simatech Shipping.

This will increase the freight cost to most sectors since Singapore and Port Klang are major transhipment ports used by Indian shippers to send cargo to most parts of the world, said an industry source.

According to the Transpacific Stabilisation Agreement (TSA), which is a voluntary discussion and research forum of major container shipping lines serving the trade from Asia to ports and inland points in the US, for the third year in a row the Asia-US container freight market has posted record cargo volumes.

The general trend since 2002, of increased contract manufacturing and direct global manufacturing investment in China, continues to drive export growth to the US, according to information available on the TSA Web site.

Asia-US container cargo has grown an average 15 per cent annually since 2002, and China-US cargo growth has averaged 34 per cent annually. China accounted for more than half — 3 million FEUs — of the total 5.2 million FEUs shipped from Asia during 2004. Overall, eastbound cargo demand grew by 14.8 per cent last year, led by China's 30 per cent increase in lifting, the TSA said.

TSA members are American President Lines Ltd., Kawasaki Kisen Kaisha, Ltd., CMA-CGMCOSCO Container Lines, Mitsui O.S.K. Lines, Evergreen Marine, Nippon Yusen Kaisha, Hanjin Shipping, Orient Overseas Container Line, Hapag Lloyd Container Line, P&O Nedlloyd, B.V.Hyundai Merchant Marine and Yangming Marine Transport Corp.

The final and largest phase of global textile and apparel quota elimination took effect on January 1, 2005. Some $360 billion in trade — more than 43 per cent of the global market in these goods — will be affected as 91 separate quotas are lifted from more than 40 countries under a process that began in 2002.

China and India stand to benefit most, as historically large producers of fabrics and clothing that are also major cotton growers (India is also a key polyester supplier), are capable of quality, vertically integrated manufacturing on a large scale, and have some of the lowest wage costs worldwide. In addition, fewer and larger buyers - mainly in Europe, the US and Canada - will be looking to simplify their sourcing: The quota system has led to some complex supply chains that potentially involve different countries to provide yarn, fabric, cutting, sewing, attaching s pockets, and labelling, the TSA said.

Says an official of a shipping line in Chennai, there is huge demand for space in ships from Asia towards all sectors, and especially to US and Europe.

China continues to dominate the Asian region, with India closely following it. Added to this is choking of US terminals, which are not well equipped to handle the surge in volume from Asia, the source said. "Ships need to wait at US ports, which is a loss for owners to keep their vessels idle."

Quoting industry analysts such as Drewry and Clarksons, the official said that 11-13 per cent cargo demand growth against 10-11 per cent capacity growth is expected in 2005, even as most of the new generation 8,000 plus TEU ships on order are delivered.

According to an industry source, the lines need to recover costs following increased operational expenditure, including higher charter rates. For instance, the rate for a 1,400 TEU could be around $30,000 a day, compared to $8,000 a day in 2002.

The future looks good for Indian and Chinese exports, especially in textiles and apparel. The World Trade Organisation estimates that India's share of the US textile and apparel market could grow from 4 per cent to 15 per cent without quotas in the next few years. More significantly, China's share could increase from 16 per cent to more than 50 per cent.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Air Force pilots opting for civil aviation sector

Indian airports cry out for new wings of flight

AI direct flight from Chennai to New York soon

Inland water transport: In dire straits

Shippers boxed in by rate hike

Tata Motors looks to Gujarat port for bus exports

A steely row

New waves of piracy